Debt Management Services
Property and Income Protected From Creditors
Your Rights When a Creditor Goes After Your Bank Account
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This fact sheet talks about how to protect yourself in debt collection and the laws that debt collectors have to follow.
Federal and state laws protect you from abuse or harassment by debt collectors. All debt collectors and all of the people who work for them at a collection agency have to follow the laws. If a lawyer regularly collects debts, they must also follow these laws.
For legal advice about your debts, call a lawyer or your legal aid office. For help with your budget or making a payment plan, call a non-profit debt counseling service, like the National Foundation for Credit Counseling (NFCC) at 1(800) 388-2227. They will connect you with a local office. They charge a small fee. They can also help you set up payment plans with your creditors and may get them to take lower payments as part of the plan
Watch Out for companies that charge money to “repair” your credit. Many of these are rip-offs!
When you are in debt you can become a target for people who want to take advantage of you or scam you. The Consumer Finance Protection Bureau has good information on how to tell if a debt collector is legitimate. Go to www.consumerfinance.gov
If someone contacts you and you are not sure who it is, OR if someone is asking you for financial information over the phone, you should check that they are who they say they are.
Most debt collectors must have a state license to collect debts. They are regulated by the Minnesota Department of Commerce. Also, the federal Fair Debt Collection Practices Act gives consumers many rights.
Within 5 days of the first call or letter to you, the debt collector has to send you a written notice. The notice has to state the amount of the debt and the name of the creditor you owe. The collector assumes you owe the debt unless you send a written letter within 30 days to the creditor about why you disagree.
Make sure your letter explains why you think the debt is wrong. Does the collector have the wrong person? Is the amount wrong? Give them enough information to investigate the dispute. Sign and date the letter and keep a copy for yourself.
When you send this letter, the debt collector must stop trying to collect the debt until they investigate whether you owe the debt or not.
You can still send a dispute letter after 30 days – the difference is that the collector doesn’t have to respond. They don’t have to investigate or stop collection.
Before you make any payments or set up any payment plans, find out if your income is protected from collection. See our fact sheet Garnishment and Your Rights. If all your money is protected, the creditor can’t make you pay anything.
If your income is not protected, you may be able to set up a payment plan to pay off the debt. Some creditors may settle for less than the total amount of the debt. Many creditors take small payments, as long as the payments are made regularly. Some creditors will freeze or reduce interest charges if you start making payments.
If you make any kind of deal, try to get it in writing. If they won’t sign an agreement, write the terms down in a letter and send it to the agency or creditor. Sign and date the letter and keep a copy for yourself.
If you want a payment plan, you need to ask for it. Creditors and debt collectors try to get payment in full. You have to speak up to get a plan. Get help from Consumer Credit Counseling at 1(800) 388-2227.
If you make a payment agreement, the creditor may ask you to let them take automatic payments from your bank account. Be very careful anytime you give permission to anyone over the phone. Also, remember that the creditor can keep taking payments until you tell your bank to stop letting them.
Sometimes a debt collector is collecting on more than one debt from you. When you make a payment, you can choose which debt to pay it on. However, you can’t choose a debt you are disputing. On your check or money order, write which debt the payment is for. Keep a copy.
Never give anyone a post-dated check. This is a check that you write on a certain day, but put a later date on it. If it’s cashed before the date on it, you may end up bouncing the check and paying more fees.
NOTE: if you do this with a debt collector they can’t deposit or threaten to deposit the postdated check before the date you put on it. If the collector cashes the check early and doesn’t notify you, it is probably a violation of the Fair Debt Collections Practices Act. Talk to a lawyer.
You can stop the debt collector from calling or writing to you . You must send them a letter that says, “Stop contacting me about this debt.” Put the name of the debt and the account number in your letter, date and sign it. Keep a copy.
After they get your no-contact letter, the collector can only call or write to you to tell you what legal action they plan to take. Remember, sending a no-contact letter doesn’t give you the right to ignore court papers. For example, if you get an Order for Disclosure telling you to state what money and assets you have, you must send the disclosure to the collector. If you don’t you could face fines or jail time for contempt of court. See our fact sheet, Can I Go to Jail if I Don’t Pay my Debts? .
NOTE: If you don’t pay a bill, a creditor or debt collector can sue you in court and get a judgment. See our fact sheet What to do if You are Sued.
If you don’t answer the lawsuit or if the creditor has a judgment against you, they can try to garnish you. This means they take money from your wages or bank account or force the sale of your property.
The law does protect some of your money and property:
All of your wages are protected if you were on any of these programs in the last 6 months. BUT, your wages may only be protected for 60 days if they are in your bank account.
Usually, your wages can only be garnished up to 25% of your after-tax wages.
If all your money is protected, like if your only income is SSI, tell the creditor or debt collector and they may stop trying to collect.
Houses
Vehicles
Debt collectors can’t contact other people to tell them about your debt, like your employer, co-workers, neighbors, relatives, or friends.
They can call people to get your home or work address, or phone number, but they can’t say that you owe money.
They can’t tell other people that they are a debt collector unless they are asked. If you have a lawyer, they can’t contact you or anyone except your lawyer.
