If You Don't Pay Your Bills

If you miss a payment, you will be faced with increasing pressure to pay. First you will receive a letter reminding you that you missed a payment and asking you to pay promptly. After that, you may receive a more direct letter demanding payment, or you may get a phone call. If the bills are still not paid, they will probably be turned over to an independent collection agency. While the agency will try to get you to pay, the law protects you from certain actions. They can't use abusive language or threaten you with violence. They can't call you at unusual hours or threaten criminal prosecution. And they can't discuss your financial situation with others.

Here's what to do if you receive a call from a creditor or a collection agency:

• Identify the caller. Ask their name and get the name of the creditor. Ask the name, address and telephone number of the collection agency. Get the exact amount of the account that is claimed to be due. Write down the date and time of each call.

• Don't get angry. Remain calm. Arguments don't settle anything. When you become angry, you may forget to obtain important information. Remember, creditors accused of being angry or abusive may say it was the customer who was angry and abusive.

• Dispute debts in writing. If you believe you do not owe the amount claimed or disagree in other ways, make your reasons known promptly in writing to both the creditor and the collection agency. Request a written statement of your account. Always keep copies of your correspondence for future reference.

Creditors' Options

Creditors can take several kinds of legal action against you. These actions are often written into the sales contract you signed. If you fail to make payments, you will receive letters from a creditor's attorney warning you of the intended action.

What a creditor can do if you fail to pay your bills:

• Acceleration - The entire debt is payable at once if you miss a payment. The courts can force you to pay by seizing your property and selling it.

• Repossession - The creditor can seize the item you bought or the property you used as collateral. If the sale of the property brings less than the amount you owe, you must pay the difference.

• Wage garnishment - In Texas, wage garnishment is allowed only for collection of taxes or penalties owed to the Internal Revenue Service or for child support. Out-of-state collection agencies may not recognize this limitation on their collection options. Do not sign documents to agree to wage garnishment.

• Foreclosure - If you fail to make a mortgage payment or fail to pay the taxes or insurance on your house or other property, you have defaulted on your contract and the lender may start proceedings to take possession of your home/business and sell it to recover the remaining balance of the loan. You are responsible for the legal fees of foreclosure and the difference between the selling price of the property and the amount owed on the loan.

All of these actions are very serious and could jeopardize your ability to get credit in the future. You can reduce your chances of being harassed by creditors or collection agencies by working out solutions for debt repayment early.

References

Boelter, Linda. Managing Between Jobs - Deciding Which Bills to Pay First. University of Wisconsin - Extension and Oneida County UW 1994.

Collection Calls - Consumer Tips - Prohibited Practices, Office of the Commissioner of Banking, Madison, WI.

Dealing With Creditors When Income Is Reduced. Cornell University. Cooperative Extension Service. 1983.

Maddox, Esther. How to Get Out of Debt. University of Georgia. Cooperative Extension Service. 1985.

Thomas, Natali. Coping With Creditors. University of Alaska. Cooperative Extension Service. 1986.

Thomas, Natali. When Bills Aren't Paid. University of Alaska. Cooperative Extension Service. 1986.

Information in the section of the manual was reproduced from Getting Through Tough Times - Talking with Creditors, by Charlotte Crawford and Lois E. Smith, University of Illinois Cooperative Extension Service. 1994.

Contact your local Texas Agricultural Extension Agents' office for copies of other sections of this manual. The address and phone number can be found in the yellow pages of your phone book under "governmental offices - county."