If you owe money to creditors and bill collectors have begun calling, you may be worried about what's going to happen next. Debt collectors cannot take your property without a court order; however, they may sue you for the amount of the debt and then garnishee your wages or, in some cases, repossess your property. Even if you are in default, you can still contact creditors to make payment arrangements to stop them from taking more serious collection actions.
Secured Debt
If a debt is secured by property--for example, an auto loan--the creditor or collection agency can repossess it if you do not make arrangements to repay the debt. In most cases, the collection agency must go to court and get a judgment before it can repossess the property. Depending on state law, the creditor may repossess your vehicle without a court order if you consent to the repossession.
Credit Card Purchases
Credit card purchases are unsecured debts. When you use a credit card, you are taking out a loan to pay for goods or services. Thus, you owe credit card debt to your credit card company, not to the company you purchased goods from. If you do not pay your credit card bill, your creditor has the right to collect the money it lent you. It does not usually have the right to repossess your goods, as they have already been paid for.
Illegality of Threats
It is against the law as of 2011 for creditors or collection agencies to issue empty threats to pressure debtors into paying back debts. If a debt collector threatens to take your property, ask for a copy of the court order allowing him to do so. If the debt collector cannot provide a copy or continues making empty threats, report him to the Federal Trade Commission and your state's attorney general for unfair debt collection practices.
Avoiding Repossession
The best way to avoid having your property repossessed is to pay all secured debts on time or make payment arrangements if you cannot pay your debts. If a collection agency goes to court and gets an order of repossession, you may be able to halt the repossession by paying the balance you owe on the property in full plus the creditor's repossession fees.
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