If Your Creditors Come Calling – Don’t Be An Ostrich
Survival Tips for Debtors:
Have you ever been so far behind on your credit card debt that you find collection letters in your mailbox most mornings or collection agents are harassing you constantly? If so, here are some quick survival tips.
Consumers overloaded with credit card debt are often overwhelmed by their inability to make the minimum payments on time. Once these debtors learn that their lenders are about to take even more drastic actions, fear can lead to emotional paralysis and induce people to behave like the fabled ostrich with its head in the sand.
While facing unpleasant realities can be painful, taking no action at all in these particular circumstances is almost always the worst course of action.
Steps in the Collection Process
Even if you have failed to make the monthly minimum payments that were due on your credit card, banks are required to continue to send you monthly statements for 90 days notifying you of your past due debt. These past due bills will likely ask you to pay up in full or at least get back on track with payments. However, your account will likely be frozen and no additional credit will be made available to you. After 90 days of non-payment you will generally be deemed to be in default under your loan agreement and the entire balance, including any accrued and unpaid interest, will be immediately due and payable. This “acceleration” of your loan also results in your account being deemed “non-current” or a “non performing loan” on the bank’s balance sheet.
Once the initial 90 day period has passed and your account has been closed, a credit card lender will still often try to work with you by suggesting a new direct payment arrangement with a lower interest rate and extended terms all in an effort to clear up the debt in hopes they will recover some or all of their money. If you don’t enter into an agreement to pay back what they claim you owe, your account can be turned over to the bank’s own “collections department.” More often, however, lenders will hire an independent company that specializes in debt collection. These firms will often try to contact you by phone or by mail in an effort to convince you to start paying back the debt.
Hiding from Your Creditors
If you have moved or the bank’s records are out of date, collection agents can and will attempt to locate you by calling your relatives or your employer. As discussed in other blogs, Congress long ago concluded that debt collectors can be tempted to engage in some rather unscrupulous practices, and as a result; there are strong federal laws designed to deter egregious behaviors. That said, debt collectors are permitted to make telephone calls to try and obtain location information. So trying to simply physically hide from your creditors is often not a particularly successful strategy.
Collection agents are notorious for the shear volume of demand letters they send to debtors. These letters try to play on the guilt or fear of the debtor and convince you to pick up the phone and work out a payment plan. However, debt collectors are restricted by federal law in what they can say in these letters (including threats and demands). They are also required to notify you of certain rights, including your right to demand that they “validate” (i.e. provide evidence supporting) their claim that you owe on a debt.
If a credit card lender believes that they have a valid claim against you for unpaid credit card debt and also thinks you have or the capacity to pay off the debt, they may ultimately simply decide that they want to bring a legal action against you. Filing a lawsuit in Connecticut to collect on a debt can be done in Connecticut Small Claims Court – if the debt is $5500.00 or less – or in Connecticut Superior Court if the claim is larger. While individual defendants can (and do) represent themselves when a creditor sues to recover on an alleged debt, this practice (called appearing “pro se” in a case) is much more common in small claims matters.
After your creditor has filed with the court to initiate the lawsuit, you will receive the “complaint” in the mail or you may be physically served directly at your home address. The complaint outlines the case against you, who is filing the action and identifies the court where the lawsuit will take place. The “answer date” on the complaint gives you notice of the day on which the legal action begins. If you decide to defend yourself without an attorney you will be considered a “pro se” party in the lawsuit. In Connecticut, you are required to file an “appearance” with the court that identifies your legal address within 30 days of the answer date. More information on small claims court can be found at the Connecticut Judicial Branch web site: https://www.jud.ct.gov/faq/smallclaims.html
How an Attorney Can Help
Your creditor has the burden of proof in any credit card collections lawsuit. This means that an attorney can often provide significant benefits as they can challenge the creditors specific claims, force the other side to provide evidence of the debt and generally raise arguments that can result in a more favorable payments and/or settlement terms or, in extraordinary circumstances, the case being thrown-out altogether. They often get these results by making sure that you really owe the entire debt that is alleged as well as determining if the creditor or their collection agent has violated your legal rights. Your attorney can also try and negotiate with your creditor and possibly help you avoid having to come to court or testify altogether.
This informational blog post was brought to you by Attorney Eric L. Foster, an experienced Hartford County, Connecticut Consumer Credit Lawyer.