When a person owes a debt, he has the legal responsibility to repay the debt, failing which he may be contacted by a debt collector or independent collection agency engaged by the creditor to recover the debt.
If and when contacted by a debt collector, the best thing a debtor can do is to cooperate. He should not be defensive or aggressive towards the debt collector. He should also be expected to be treated professionally from the debt collector.
A Debtor’s Legal Rights
Though debt collectors’ job is to recover debts, they must act within the law, which has been developed to protect debtors from misconduct. Here are some examples of unacceptable conduct by debt collectors.
- Using force or intimidation. Debt collectors cannot use force or intimidation towards the debtor or his family, threaten to damage his property or block access to the debtor’s property. If the debt collectors refuse to leave and behave in threatening manners, report this to the police immediately.
- Harassing and being abusive. Debt collectors must not shout at debtors or use demeaning (racist or sexist) remarks. They also should not keep calling or knocking at a debtor’s door at unreasonable times to further intimidate the debtor. In Australia, debt collectors can only contact a debtor for a maximum of three phone calls or letters a week. No contact is allowed on national public holidays.
- Making misleading claims. Debtors must not try to mislead or deceive a debtor or his family by making false statements. These include stating a bigger amount of debt than it actually is, saying the spouse is also responsible for the debt repayment, claiming having unpaid debts is a crime or threatening to take the children away.
- Taking unfair advantage of a debtor. Debt collectors cannot take unfair advantage of debtors who are ill, disabled, illiterate or ignorant of the law and proper debt collection procedures.
The Australian Securities and Investments Commission (ASIC) website has more information on proper debt recovery processes.
Negotiating a Debt Repayment Plan
Creditors are often open to the idea of an extended period for debt repayment. They may even be willing to settle the whole debt if the debtor can make a lump sum payment of part of the entire debt. Try to negotiate such debt repayment plans through the debt collector.
Be realistic and honest about how much can be paid within what time period. Even if the debt collector or creditor disagrees with a proposed repayment plan, there is still hope. Write to them and explain the situation and clearly state how much can be paid and how often the repayment will occur. If an agreement is reached between the debtor and the debt collector, ask for a confirmation letter. Keep all exchange of letters and related documents safely. Then strictly stick to the agreement.
If nothing seems to work, get help from a financial counselor. A financial counselor can negotiate with debt collectors and look at other options available. In Australia, free and independent financial counseling services are available in every state. Visit the Australian Financial Counseling and Credit Reform Association (AFCCRA) website for more details.
Nobody wants or likes to deal with debt collectors. But if debt collectors start calling, debtors should know what debt collectors can or cannot do to protect themselves. They should also try to work out a debt repayment plan to settle the debt. Consulting a financial counselor can help ease the problem considerably.
Those who find this article useful may also like to read Understanding Debt and Tips for Disputing Debts.
 |
