Justia Legal Resources: Debt Relief & Management Legal Center

If you’re facing pressure from mounting debts, you probably want to explore the full range of options available to you. A free resource in the Justia Legal Guides helps consumers understand some legal and practical considerations.

Approximate Read Time: 5 Minutes

Many Americans sink deep into debt, often for reasons beyond their control. Managing these financial burdens can cause serious stress, and it’s not always easy to see the best way out. People in debt can benefit from understanding the implications of the options available to them. They may have certain rights and protections of which they’re not fully aware. The Debt Relief & Management Legal Center in the Justia Legal Guides explains the law in this area while offering some practical insights. It aims to provide a starting point for consumers considering their next steps. Here are some common questions to which this resource provides basic answers.

How Long Does Information Stay on a Credit Report?

Negative information generally stays on a consumer’s credit report for seven years. However, Chapter 7 bankruptcies usually remain on the report for 10 years. Under the Fair Credit Reporting Act, you can challenge negative information on your credit report if it’s not accurate. Each of the main credit bureaus (Experian, Equifax, and TransUnion) allows a consumer to check their credit report each week for free.

Which Debts Should I Pay First?

You probably should focus on paying off debts that are attached to a certain asset, since you could lose the asset if you don’t pay off the debt. For example, you might lose your home or your car if you don’t pay off the mortgage or the car loan. Certain other types of debts may have serious consequences if they go unpaid, even though they may not be attached to a particular asset. These include child support debts, utilities debts, and tax debts. Among your other debts, you might want to prioritize debts for which the creditor has a judgment against you.

Should I Consolidate My Debts?

Consolidating debts simply means that you’re compiling various small debts into one large debt. This type of restructuring can have some advantages, potentially including a lower interest rate. It’s important to remember that this doesn’t eliminate the underlying debts, though. You’ll still need to pay off the consolidated amount. If you consolidate your debts with a secured loan and don’t pay it off, you’ll lose the asset attached to that loan.

What Is a Debt Management Plan?

A debt management plan involves adjusting the terms of your debt obligation with the creditor or collector so that you can more easily pay off the debt. For example, you might get lower interest rates and monthly payments. These plans often last for three to five years. You’ll probably need the help of a credit counseling service or a similar entity to set up a plan.

How Can I Fight a Debt Collection Lawsuit?

Some common defenses to debt collection lawsuits involve procedural rather than substantive arguments. For example, you might be able to argue that the debt wasn’t properly documented or verified. If you incurred the debt a long time ago, you might have a defense based on the statute of limitations, which sets a deadline for bringing a debt collection lawsuit. (Certain actions may renew or restart the statute of limitations, though.) Some other defenses might include arguing that someone else incurred the debt, the contract creating the debt was canceled, or you never got what you incurred the debt to get. Certain specific types of defenses may apply if you’re facing a lawsuit from a debt buyer rather than the original creditor.

What If I’m “Judgment Proof?”

Being judgment proof means that a creditor gets a judgment against a debtor, but they don’t have the money or assets to satisfy the judgment. For example, perhaps they don’t have a job and get their income mostly from government benefits. However, your inability to pay a debt at the time of the judgment doesn’t mean that the debt goes away. You still will have an obligation to repay the debt once your finances stabilize. The creditor may be able to garnish your wages once you get a job, for example. Thus, if you think that you might have a defense to a lawsuit, you shouldn’t ignore it just because you think that you’re judgment proof.

What Happens at a Debtor Examination?

In a debtor examination, a creditor asks a debtor about their finances after receiving a judgment based on the debt. This allows the creditor to figure out whether and how it can collect on the judgment. Some of these questions may involve the job or other income sources of the debtor, as well as any assets that they own and the debts that they owe to other parties. A debtor can’t refuse to participate in the debtor examination or refuse to answer questions. They respond under penalty of perjury, meaning that deliberate falsehoods could lead to jail time.

How Can Creditors Collect Debts After a Judgment?

One of the most common methods of debt collection involves wage garnishment, which means that the employer of a debtor will take a certain percentage of the debtor’s paycheck (subject to legal limits) and send it directly to a creditor. A creditor also might put a lien on an asset like a home or vehicle. The debtor likely couldn’t sell or refinance the asset without paying off the debt. A creditor also might seize money in a bank account through a levy.

Can a Debt Collector Threaten or Harass Me?

The federal Fair Debt Collection Practices Act prohibits a collector from engaging in various forms of harassment or abuse, such as the use of obscene language, constant phone calls, threatening to do something that is illegal, or threatening to publicly announce that you don’t pay your bills. The FDCPA also limits communications between the collector and third parties, among other restrictions. However, this law doesn’t cover collection activities by the original creditor. Some states have fair debt collection laws that may provide broader or different protections. Justia offers a 50-state survey on those laws.

How Can I Get My Car Back After Repossession?

Redemption and reinstatement are likely your main options. Redemption involves buying your car before the lender sells it by paying off the loan and any costs that the lender incurred during the repossession process. Reinstatement involves reviving the loan on the vehicle by catching up with missed payments and late fees. Not all agreements between a lender and a consumer provide a right to reinstatement, although some state laws provide this right if the agreement doesn’t. Options beyond redemption and reinstatement may include buying the vehicle at the auction or negotiating a plan to catch up on missed payments. (It’s usually best to do this before repossession, but you can continue negotiating afterward as well.)

Final Thoughts

Debts of any type can weigh heavily on your shoulders. Understanding your options and devising a plan can lighten that burden and help you chart a course toward a brighter financial future. If you’re facing a lawsuit involving a debt, concerned that a creditor or debt collector is violating your rights, or otherwise looking for guidance about a particular legal issue, you should talk to a consumer lawyer about the details of your situation. They can help protect your interests and advise you on your next steps. In the meantime, the Debt Relief & Management Legal Center offers a readable overview of some key concepts in this area. Like the other Justia Legal Guides, it furthers our mission of making the law free and accessible to all.

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