What You Need to Know About Debt

The creditor may:

• Stop doing business with you
• Report your debt to a credit reporting agency
• Retain debt collection agencies to attempt to collect the debt
• Sell your debt to a debt buying company
• Bring a lawsuit to collect the debt

If the creditors sues you for the debt, you can defend yourself and dispute the debt. Do not ignore the legal action. Seek legal assistance for a Summons or any legal papers you receive.

A creditor may or may not be able to enforce a judgment and collect money from you. If the debt is “secured” by collateral such as your home (as in the case of a mortgage), the creditor may take back (“repossess”) the collateral to satisfy the debt. If the debt is not secured, such as a hospital bill or credit card debt, the creditor may freeze and subsequently seize funds in your bank account, garnish your wages within certain limits, take personal property, or put a lien on real property.

Judgment creditors cannot enforce judgment awards against certain individuals. These litigants either have minimal income to garnish or have an income derived from public funds. Under Federal and New York State laws, some assets and sources of income are exempt from collection. Funds that are exempt from collection include:

• Social Security
• SSI
• Disability
• Pensions
• Child support
• Spousal maintenance
• Unemployment insurance
• Veterans benefits
• Workers compensation
• Public assistance

The first $2,850 in your bank account is exempt from collection, if it contains any directly deposited exempt benefits listed above (even if your account also contains income from other sources, such as wages). If the bank account contains no exempt benefits, the first $3,120 is exempt from collections.

If you receive PA or SSI, all of your earned income is exempt from debt collection.

Your earned income is exempt from collection if your weekly take-home pay is less than 30 times the minimum wage per week, after taxes. Currently, the minimum wage in New York City is $12.00 per hour for businesses with 10 or fewer employees ($12.00 x 30 = $360.00), and $13.00 per hour for businesses with 11 or more employees ($13.00 x 30 = $390.00). In Nassau, Suffolk and Westchester counties, it is $11.00 per hour ($11.00 x 30 = $330.00). In the remainder of the state, it is $10.40 per hour ($10.40 x 30 = $312.00).

Debt collectors work for a company or an attorney who is paid to collect debt. Some debt collectors use abusive and unlawful methods such as repeated threatening phone calls. Debt collectors are regulated by a federal law, called the Fair Debt Collection Practices Act (FDCPA), and New York State laws that requires them to deal fairly with debtors.

Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe, the name of the creditor to whom you owe the money, and what action you can take if you believe you do not owe the money.

If you believe that you do not owe the money, you must write a letter to the debt collector to dispute the debt and request verification of the debt. Once a debt collector receives your dispute letter, the debt collector must stop all collection activities, get verification of the debt from the creditor, and send you the proof. Until the requested proof is provided, the debt collector may not attempt to collect on the debt, or even start a lawsuit against you.

Yes. You can write a letter called a “Cease Letter,” asking the debt collector to stop. Once the debt collector receives your letter, the debt collector may not contact you except to confirm that there will be no further contact, or to tell you that the debt collector will take specific action to collect the debt, such as bringing a lawsuit.

The FDCPA prohibits harassing and deceptive collection practices. Specifically, the debt collector may not:

• Tell third parties like your neighbors, friends or relatives about your debt
• Contact you if you have an attorney
• Contact you after you write a “cease” letter (except to acknowledge the letter)
• Telephone repeatedly and frequently
• Call you at inconvenient times, usually before 8 am and after 9 pm
• Contact you in any manner that make it public that you owe money, such as a postcard or publishing your name.

The debt collector may not use false or misleading statements or threaten or harass you when collecting a debt. For example, they may not misrepresent the amount you owe. The debt collector must not falsely claim:

• To represent a governmental agency
• To be an attorney or a law firm
• To be working for a credit bureau
• That you have committed a crime
• That you will be arrested if you do not pay your debt
• That the collector will seize your property, levy your bank account or garnish your salary without first being awarded a judgment by a court

The debt collector may not threaten or harass you by:

• Using obscene, derogatory or insulting remarks
• Making threats against you or your relatives

Debt collectors may not engage in unfair practices such as:

• Imposing charges or fees not authorized by a court or state laws
• Collecting more than the amount owed
• Deposit a post-dated check before date

If the debt collector used harassing or misleading methods in violation of the FDCPA, you have a right to sue the collector in state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered plus an amount up to $ 1,000 as well as court costs and attorney’s fees. If a debt collector fails to give you information required by law, or unlawfully threatens or harasses, call 311 or go here to file a complaint with DCA online.

• NYC Department of Consumer Affairs

The information in this document has been prepared by The Legal Aid Society for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon any information without retaining professional legal counsel.