What Can a Creditor Do to Collect a Debt?
The Fair Debt Collection Practices Act (FDCPA) protects consumers from abusive or overly-aggressive debt collection practices. While the FDCPA imposes some limitations on what creditors and debt collectors can do to try to collect if a debt is not paid, creditors still have many legal remedies available. Both debtors and creditors need to know the rules for debt collection so they can make informed choices regarding their financial interests.
A Las Vegas business lawyer at Pintar Albiston, LLP can provide legal representation and assistance throughout the debt collection process. Our attorneys have an in-depth understanding of the steps a creditor can take to collect a debt. Call today to learn how we can put our legal knowledge and experience to work on your behalf.
How Can a Creditor Collect a Debt?
The methods a creditor will used to collect a debt vary depending upon whether the debt is secured by collateral, or is unsecured. A home mortgage loan and a car loan are both secured by collateral (the home and vehicle respectively) so a creditor can seize the asset if the loans are not paid.
The creditor will need to go through the full process of formally foreclosing or repossessing in order to remain in compliance with the law. The asset can subsequently be seized and sold, with proceeds used to repay the outstanding balance due on the loan. If there are remaining funds left over after a loan is repaid and the fees and costs of foreclosure or repossession are charged to the debtor, the debtor can receive the remainder of the proceeds. If the sale of the asset is not sufficient to repay the debt in full, the creditor may be able to pursue additional debt collection methods.
For unsecured debt, such as credit cards, there is no collateral that a creditor may take to try to collect a debt. The creditor can post negative or derogatory marks on the debtor’s credit report, can assess late fees and other costs, and can call the debtor to make a reasonable effort to collect (although restrictions on calls prohibit early morning or late evening calls as well as imposing the limits).
The creditor can also pursue legal action to collect a debt. The creditor can seek to obtain a judgment in court and can get a judgment against the plaintiff by proving that the debt is owed. The judgment will show up on the debtor’s credit report and the court will order the debtor to pay.
If a debtor neglects to pay the money the court ordered as part of a judgment, the creditor can go back to court and seek help with enforcement. In these cases, the debtor will sometimes end up having wages garnished so the money can be taken out of a paycheck and paid directly to the creditor. The debtor could also have a lien placed on his or her property, which would give the creditor a claim to be repaid out of the balance from the property sale.