Credit Laws And Your Rights
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Dealing with collection companies can be exasperating. Knowing your rights can help you negotiate better interest rates and settlement offers on your debt.
Every state has laws that dictate how long a debtor can collect on a debt. These laws are called the statutes of limitation. In most states, a credit card debt is viable for three to 10 years. After the statute of limitations has run out, a debtor is no longer legally entitled to collect on the debt. Also, the law provides that a creditor must provide you with written proof of the debt upon your request. If the creditor cannot provide you with proof of the debt, you may not be liable for the charges.
One of the most important credit laws for consumers is the Federal Fair Debt Collection Act (FDCA). The FDCA statutes define the government restrictions placed on debt collectors' actions when they attempt to contact debtors. The FDCA determines the venue of creditor lawsuits when the creditor and debtor are not in the same jurisdiction. Furthermore, the FDCA authorizes fines and penalties for any credit collector who threatens, harasses, or invades the property of a debtor.
Do not be intimidated by creditors who threaten to garnish your wages or threaten to inform your employer of the outstanding debt. Under the FDCA, a debtor can only collect information in regards to the debt. This means the creditor can verify your employment but he cannot inform your co-worker or boss about the amount you allegedly owe. If a creditor has informed your employer, an attorney can help you file a federal complaint against the creditor. A successful FDCA claim carries a minimum penalty of $1000. Secondly, in order to garnish your wages, a creditor must have obtained a court judgment declaring that you owe them. Without a valid court judgment against you, a creditor does not have the legal authority to garnish your wages or levy against any of your assets.
The Credit Card Reform Act regulates the rising interest rates of credit cards. For instance, by law, a credit card company must provide you with notice of any impending interest hikes. The law is designed to give you notice about interest rate hikes so that you can choose to pay off the card and close the account or dispute the raise.
Knowing your rights under the law can be very helpful when dealing with credit collectors. Collection companies often buy old debts from credit card companies and then attempt to collect the outstanding account balance from you. You are in a better position to negotiate a settlement if you know how old the debt is and what the statute of limitations is on the debt. Secondly, knowledge of the FDCA can protect you from creditor harassment. If you ask a creditor to cease from contacting you at work and then provide an alternate contact number, the creditor must stop contacting you at work. In fact, if the creditor persists contacting you, in violation of the FDCA, the company is subject to fines and penalties.
Lastly, the most common form of consumer protection from debt collectors is filing for bankruptcy. The two most commonly used consumer bankruptcies are Chapter 7 and 13. As of 2006, the United States Congress passed sweeping legislation regarding the filing of Chapter 7 and 13. Chapter 7 bankruptcy allows a debtor to discharge unsecured debts in Federal Court. There are income restrictions on Chapter 7 bankruptcy, however, and the court can reject any filing where the debtor's income is higher than the median state income. Chapter 13 bankruptcy allows a debtor to reorganize his finance. A debtor in Chapter 13 can renegotiate the amount of the debt or restructure the monthly payments of his debt. One of the benefits of Chapter 13 bankruptcy is that all collection actions are halted even against 3rd parties of the contract. The Courts now require that any debtor filing bankruptcy receive credit counseling.
An attorney can help you understand all of your rights under the law. A lawyer will also help you decide whether you should attempt debt settlement negotiations or file for bankruptcy.
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