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How Lawyers Handle Debt Collections

Debts are increasing across the country, both for businesses and individuals. As your own situation starts to get out of hand, know that you have some options to bring your finances back in order.

Fair Debt Collection Practices Act

When you’re being hounded by creditors to pay bills that are now beyond your ability to pay on time, you still have rights. Knowing what your rights are, and when they are violated, can result in getting your debts reduced or even having the opportunity to sue a creditor. Under this act, creditors:

  • Can only contact you at certain times of the day
  • Must contact your lawyer if you have informed them that you are working with one
  • Are required to be honest about their identity and actions
  • May not threaten you or use disrespectful language

Each state has their own additional laws regarding debt collections, so speak with your lawyer about what you should consider as fair where you live. Keep in mind that these laws only apply to actual debt collectors, such as for debts on credit cards, student loans, medical bills, and mortgages.

Collection Lawsuit

Utilizing a lawyer, like a bankruptcy lawyer in Memphis, TN, is recommended if you are being sued by one of your creditors. They will ask you questions regarding your debt and how the creditors have treated you to determine if any laws within the FDCPA in your state or on the federal level have been broken. If the attorney can prove that your rights have been violated or that the creditor has treated you disrespectfully, you might have grounds to reduce the amount you owe or even drop the lawsuit altogether.

Bankruptcy

If your attorney finds that you have too much debt in comparison to your assets or income, they might suggest filing for bankruptcy as a last resort. By filing for bankruptcy, debt collectors are usually required to stop their collection actions while your case is being settled. Depending on which type you and your lawyer determine is best for your situation, you will either be selling your assets and investments to pay off your debts, negotiating a smaller sum to pay, or developing a payment plan with new terms that will work for your financial situation.

You might not like this option, as it will show up on your credit report for a long time and it can be challenging to reestablish your good credit score, but sometimes it provides the best solution so you can finally eliminate most — if not all — of your outstanding bills and move on with a clean start.

Thanks to Darrell Castle and Associates, PLLC for their insight into how lawyers handle debt collections.