Bankruptcy 101: The Difference Between Creditors and Debt Collectors
If a bill arrives in the mail marked “final notice,” you may want to try to work out some kind of payment plan before that loan or bill gets purchased by a debt collector. A creditor is the entity that initially extended credit and owns the original debt, such as a hospital, a credit card company, the bank that loaned you money for home improvements, or some other business.
Creditors are more likely to work with you over your debt. (At least they will if you respond to the unmanageable bill when you receive it rather than bury it at the bottom of the bill pile and hope it disappears for good. They don’t.) Creditors will allow a certain amount of time for those who owe a debt to pay before they sell the debt to a third-party debt collector. Once they have bought the debt, often for pennies on the dollar, they will do whatever they must in order to collect on that debt, sometimes resorting to illegal tactics.
A debt collector or collection agency can approach your debt like a loan shark might approach a chronic borrower with a gambling debt, despite the Fair Debt Collection Practices Act (FDCPA). While you might think that the FDCPA applies to creditors, it only applies to debt collectors – and the two are entirely different entities. You have no protection from original creditors, but as we mentioned, they are usually open to negotiation.
Debt collectors will call your work, before 8am or after 9pm, and they can call every hour on the hour – at least until you tell them not to call you anymore. The FDCPA gives you the right to put a stop to the harassment.
Worst debt collector practices
Debt collectors have been known to play hardball, especially with those who don’t know that they can stop the harassment. Some of the tactics they may use include:
- Threats of jail. While there once was a debtor’s prison for those who owed money, they were banned in the United States in 1833 and police will not haul you to jail for any debt you owe, no matter what collection agencies say. You also cannot be threatened with deportation or the loss of your children.
- Threats of physical violence. While there were plenty of guns in the movie “Get Shorty,” which starred John Travolta as a loan shark, your debt collector cannot threaten you with physical violence. That’s a crime. You may owe a bill, but it’s not to the Chicago mafia.
- Threats to take your property. You may have allowed a credit card to become unmanageable, but the debt collector that has taken over the loan cannot take your home in exchange, no matter how convincing they seem when they make the threat.
One important thing to note: There are time limits for a debt to be pursued in court, and in Michigan, if a debt has been on your record for six years or more, you cannot be taken to court. That doesn’t mean you still won’t get letters or phone calls reminding you of the loan or receive notices that offer a great deal to pay only a portion of what you owe. But if you respond or make a small payment, a debt that is officially dead will be brought back to life, and you could again be taken to court to be forced to pay.
An attorney can help you determine how to proceed
Being in debt can be stressful enough, with the calls from collection agencies weighing heavily on your mind. If you’re dealing with debt, you need an experienced attorney to help you determine the best approach to take to ease your mind and protect your financial security. For more information, contact Maxwell Dunn’s team at 248-246-1166.