What Can a Creditor Or Debt Collector Do?

Where is the line you may ask, what are the limits?  What can a creditor or debt collector do if you’re behind on payments?  Their options are actually pretty limited but frightening nonetheless.  If you’re behind on payments on unsecured debt, meaning you didn’t put down collateral or otherwise give a lien or a deed of trust as in purchasing vehicles and real estate, are debts from loans they simply offered to you with a promise to pay.  They are not secured by anything other than your word at the time. Creditors and debt collectors can be ruthless about collecting money on these accounts and the more ruthless they are, the more they collect.  It’s an art form to them studied and perfected over decades.

Here’s the list of what they actually do

1.  They Stop Doing Business With You

Basically, they can say “We don’t want you here no more, you’re not my friend”.  A bank can cancel your credit card, a dog groomer may refuse to cut Rover’s hair, and your dentist might refuse to pull any more teeth. There are other dentists, dog groomers, and banks out there, however, so it’s not that big a loss on this point.

2.  They Call And Send Letters

Creditors and debt collectors do calls and letters quite well, especially the debt collectors.  Not only can the original creditor call you and send you letters, but so too can the debt collectors the creditors turn the account over to, it gets monotonous.  If letters and calls don’t get you, some will even try text or social media, they’ll call friends and relatives and potentially even your work, and because they basically own those who write the laws, they can get away with most of it, but not all.

Want to stop them?  There are ways, but most are temporary solutions to a more permanent problem.  The law does protect you for a bit from these communications, mostly forcing the collectors to choose different routes to collect such as filing lawsuits.  Sending certain letters tailored to the situation can help.

3.  They Report The Delinquent Payments to a Credit Bureau

Yes, this is what we fear, the dreaded scarlet letter on our permanent record, though it’s not that permanent. It is however important, and you are rather powerless to stop them from reporting it to the credit bureaus. Face it, like in grade school, they’re going to tell on you, and rather than report you to the teacher, they’re going to go to a privately owned business called a credit reporting agency that makes millions of dollars a year telling others what someone told on you.

Here’s a kick in the pants, if that creditor turns the account over to a collection agency, they will likely report it as well if they’ve tried to contact you.  Hence, not only is one kid reporting you to the teacher, that kid also told another kid who reported you. By this time, your credit score has taken a huge hit, and forking over piles of cash isn’t going to do much to fix that.  That said, not paying will likely damage that score more.

4.  Lawsuits Buy a Debt Collector or Creditor

Will they actually sue?  Probably.  It cost them money to sue you but in the end, if they win you’ll pay that in the outcome.  Debt collection agencies file millions of cases a year.  It’s a numbers game to them because they know that in many cases, they’ll not collect a dime.  In many others, they’ll collect a lot of money and the pros outweigh the cons to them.

If you do get sued, there’s a lot you can do about it, especially if the one suing you is a debt collector, not the original creditor.  There are several defenses that can stop these debt collection suits in their tracks and there’s still plenty of room for negotiation after the filing of the suit.  Some will settle with a payment plan, others will settle for less than the full amount owed, and still, others fight the case altogether.  The law is on your side should you decide to fight the case, you just have to know how to work within the system.

Keep in mind, if you are sued and you do nothing, you do not respond to the lawsuit with the court, they win by default.  If they win by default, any defense you likely had is gone waived, and now you owe the debt regardless of your “side of the story”.  The lesson of the day, fight the case, don’t wait for fairness and justice, it doesn’t show up if you do not ask.  If you do not answer the case, the creditor will now have a judgment.