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Frequently Asked Questions
& General Information Sources
What You Need to Know About
Managing Your Debts
by: Texas RioGrande
Legal Aid
If you are in debt,
here is some basic information about how to get
out from under or manage those debts:
- The first step is to stop spending money
you don’t have. For example, stop using
credit cards if you cannot make the required
monthly payments.
- The next step is to assess where your money
is going. By finding out where you spend most
of your money, you will be able to better understand
your debt. After you figure out your major expenditures,
you can make a plan for cutting out some expenses.
Basic living expenses, such as food, shelter,
medicine, electricity, and water should not
be sacrificed. However, the money you pay for
satellite or cable TV, cellular telephones,
or car notes you can’t afford could be
better used to pay down your debt.
- Once you have examined your spending habits,
you should make a list of all of your debts.
Make a list of debts owed in order of interest
percentage. For example, a credit card with
19% interest would come before a card with 12%
interest on the list. The debts with the highest
interest rates should be your priority for payment.
Determine the maximum you can pay on that debt
while still paying the minimum on your other
debts.
- NEVER take out a home equity loan to pay
off debt. In doing this, you only jeopardize
your home. While creditors cannot take your
home to pay off debts, they can foreclose on
your home if you have a home equity loan that
you cannot pay.
Additional information about debt, creditors,
or credit counseling can be found at the Texas
Rural Legal Aid, Inc., website, www.trla.org.
When you are in
debt, you will most definitely have to deal with
creditors. A good strategy in this situation is
to contact the creditor personally instead of waiting
for them to contact you or before the creditor hands
the matter over to a collection agency. In some
cases, the creditor will refinance or modify the
payment agreement rather than pay a debt collector.
Remember: the creditor does not want to HAVE to
hire an outside party. Dealing directly with the
creditor could save you time, money and hassle.
If the creditor
does turn the debt over to a collection agency,
you have certain rights of which you should be aware:
- The debt collector is prohibited by law from
attempting to collect more than the amount originally
agreed upon – whether the agreement was
in writing or not. However, you might also be
responsible for attorney’s fees, investigation
fees, service fees, collection fees, or other
charges.
- You have the right to dispute an item concerning
your debt in the debt collector’s file.
The debt collector has a responsibility to alert
anyone who has already received a report containing
the incorrect item. If, at the end of 30 days,
the debt collector has not been able to determine
whether or not the item is correct, the collector
must make the change you requested and notify
anyone who received a report containing the
incorrect item. If it is later determined that
the item was initially correct, you must be
notified and collection efforts may be continued.
- Under state law, the collection agency may
not use harassing or abusive collection tactics.
It is illegal for any debt collector to threaten
violence or other criminal acts, use profane
or obscene language, falsely accuse you of fraud
or other crimes, threaten you with arrest or
repossession or other seizure of property without
proper court proceedings. Additionally, the
debt collector cannot use the telephone to harass
you by calling anonymously or making repeated
or continuous calls. If the debt collector calls
you collect, he or she must disclose his or
her true name before charges are accepted.
- Federal law- the Fair Debt Collection Practices
Act- only applies to third-party debt collectors,
i.e. those working for professional debt collection
agencies and attorneys hired to collect a debt.
Under this law, you are protected from calls
at work if the collector has reason to know
your employer does not permit such calls, calls
before 8 a.m. or after 9 p.m. unless the collector
knows such times are more convenient for you,
any "unfair or unconscionable means to
collect or attempt to collect a debt;"
and any conduct to harass, oppress, or abuse.
If you write a letter to a collector
that is harassing you demanding that he/she stop
contacting you, the debt collector must cease all
correspondence. After receiving the letter from
you, the debt collector has only three things he/she
can do:
- Stop doing business with you.
- Report your default to a credit bureau.
- Sue you in court. (This course of action may
be upsetting to you. However, the threat is
not as serious as the debt collector might make
it sound. If you are sued, you can represent
yourself in court and explain why you are unable
or should not pay the debt.)
IMPORTANT:
No matter what a debt collector might tell you,
your wages and home are protected. In Texas, a homestead
cannot be taken to pay an unsecured debt except
for debts incurred for the purchase of the home,
for home improvements, for home equity loans, or
payment of certain taxes. In regard to your wages,
they may be garnished to pay court-ordered child
support, back taxes, and defaulted student loans.
For more information about the
difference between unsecured and secured debt, refer
to the Texas Rural Legal Aid, Inc. website, www.trla.org.
If you feel you have been a victim
of illegal debt collection practices, contact the
Attorney General of Texas. For contact information
or further information about fraudulent debt collection
or abusive collection tactics, refer to the Web
site, www.oag.state.tx.us.
This information was compiled
and is a public service by the Attorney General’s
Office of Texas.
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