Protocol for Collecting a Debt

Debt collecting is a tightly regulated practice that benefits both the debtor and the collector. If the person to whom you loaned money does not pay up, you have multiple avenues in which to pursue the person while still following the law. Failure to follow debt protocol could work against you if a debtor files a civil suit.

Purpose

The purpose for debt collection protocol is to protect both the debtor and the lender. If you are the lender, the procedure for debt collection gives you multiple avenues for getting your money and holding the debtor responsible for her actions. A debtor is protected because collection protocol gives the person chances to negotiate payments and pay the sum without fear of harassment.

Methods

Debts are collected from debtors through collection agencies, arbitration or small claims court. Collection agencies buy the debt from you for a fee that is usually deducted from the money that they pay you.

If you choose to use arbitration, an arbitrator must be hired to serve as the "judge" between you and the debtor. Whatever the arbitrator decides, you and the debtor must follow.

Small-claims court is used as a civil option for collecting your debt. Both sides must hire a lawyer to represent their interests. A judge decides payment options and possible wage garnishment.

Rules

There are rules in debt collection protocol that you must follow to avoid breaking laws set by the Federal Trade Commission. According to the FTC, you cannot harass, misrepresent yourself or pursue the debt beyond business hours. For example, you could not call the debtor at 10 p.m. posing as a sheriff in order to scare the debtor into paying the debt. You must also make multiple attempts to contact and inform the debtor of her obligations. You must have the attempts as proof if you pursue the debtor in a court of law.

Consequences

Following debt collection protocol may not always make the debtor pay the total amount owed to you. If you choose arbitration, debt collection or small claims court, the fees and charges associated with those methods takes away from your total collection. For example, a debt collector may only buy your debt if you give up 50 percent of the debt's value. Obtaining the debt amount before using a third-party yields the highest return.

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Can an Ex-Wife's Legal Fees Be Garnished From a Husband's Paycheck?

Legal fees are like any other bill in that the person who incurred them is legally obligated to pay them. If a lawyer is not paid what he is owed, he may take legal action against his former client. However, the lawyer will know that he can only sue the person who incurred the debt or who took it on. A husband cannot, therefore, be made to pay his ex-wife's debt.

Debts

A personal is only legally responsible for a debt to which they agreed to pay. Although debts are transferable, a debt will only be assigned to someone if the person agrees to take responsibility for it. A husband is not responsible for his wife's debts if he did not co-sign for the debts himself. After a divorce, a husband is no longer responsible for debts his former wife incurred on her own, even if she did so while they were still married.

Debt Collection

Debt collectors are forbidden by federal law from pressuring family members or acquaintances of a debtor about the debtor's payments. A debt collector would therefore be legally forbidden from seeking payment from a woman's former husband. The fact that the bills are legal bills will make no difference. This would also prohibit the creditors from attempting to garnish the former husband's wages.

Garnishments

Before a garnishment can be executed, it must first be approved by a judge. A judge can only legally grant a garnishment order if the garnishment complies with all federal, state and local laws. Ordering the garnishment of the wages of someone who does not knowingly owe money on a debt would violate federal law. If a lawyer attempted to garnish wages without a judge's permission, he would be acting in violation of the law.

Considerations

An ex-wife's legal fees can only be garnished from a husband's paycheck if the husband is legally obligated to pay them. For example, if the husband agrees, as part of a divorce settlement, to pay for the legal fees his ex-wife incurred in the divorce, then he could be held liable for the money and his wages could be garnished by creditors if the fees became delinquent.

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Certificate of Deposit Safety

For new investors, any kind of investment may seem unsafe because the amount of information online, in books and on television regarding the wealth of options available is overwhelming. Certificates of deposit are one of the safest ways to invest your money, but the variations in the types of CDs are numerous, and it's important to understand the differences before jumping into an account. With any CD you choose, it's vital to read the fine print so that you understand exactly what to expect over the course of your investment's maturity.

Definition

Certificates of deposit are generally thought of as safe investments for those who don't want to take risks on their money. They are essentially savings accounts with high interest rates, but once you put your money into the account, you have to be willing to keep it there for a specified period of time. Minimum deposits vary by financial institution, so it's wise to contact your bank or credit union to ask about their specific requirements. Withdrawing before the predetermined time usually means you have to pay fees or give up some interest. However, there are a variety of types of CDs to choose from -- some riskier than others.

Safe CDs

The three safest types of CDs are traditional, bump-up and liquid accounts. With these accounts, you understand how much interest you will accrue over the course of your CD's maturation, and there's no possibility of receiving less interest unless you withdraw early. With traditional CDs, you deposit money and accept a specific interest rate, which accumulates over the course of the agreed-upon time period. Bump-up accounts are slightly different, in that you are allowed to take advantage of a higher interest rate if one comes along while you have the CD -- however, the bump-up CDs generally come with lower initial interest rates. Liquid CDs allow you to withdraw money from your account; however, most banks limit the number of withdrawals and may require you to keep a certain minimum balance. For the convenience of accessing your money, liquid CDs usually have lower interest rates than traditional CDs, but still earn higher interest rates than money market and savings accounts.

Riskier CDs

Callable, brokerage, zero-coupon and high-yield CDs are slightly riskier than the previous three CDs, simply because the interest rates may change over time or, in the case of zero-coupon CDs, because you may have to pay taxes on money you don't receive until the account matures. Callable CDs usually have a period during which they are protected from interest rate fluctuations; however, after that period of time they may be "called" and reissued for a lower interest rate. The incentive for choosing a callable CD is that they are often offered at higher interest rates than traditional CDs. Brokerage and high-yield CDs are also generally callable. Brokerage CDs may be offered at higher interest rates because they compete nationally, rather than locally, through brokers rather than banks. It's important to be aware of where your broker is investing your money at all times -- while investments made with FDIC-insured banks are protected up to $100,000, you'll lose any money invested with banks that are not insured. Make sure to request that your investments are made only through FDIC-insured institutions, and get the documentation of the bank's insurance in writing. High-yield CDs may be advertised at very high interest rates, but then be called and reissued at much lower rates. Zero-coupon CDs are those sold at a discount, which grow to face value by the date of maturity. However, with zero-coupon CDs, you are charged taxes on the income you receive on interest, but you don't receive that money until after the CD matures.

Laddering

The biggest drawback to using CDs is that your money is locked into the account for a certain period of time. Investors often alleviate this problem by laddering their CDs, rather than investing all their money in one account. Laddering works by dividing your money up among several accounts with staggered dates of maturity. Let's say you have $15,000 to invest -- you could have three $5,000 accounts that mature at six months, one year and 18 months, respectively. Once the six-month account matures, you may withdraw the money if you need it or roll it over into an 18-month account. By that point, the one year account is down to six months, and the original 18-month account is down to one year. That means that every six months, you can count on accessing your funds if necessary.

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Can I Have a Collection Debt Removed From My Credit Report?

A person who has encountered financial difficulties may have multiple accounts listed for collections on their credit report. Each of these collections accounts has a negative effect on the consumer's credit rating and may make it difficult to obtain new credit at a reasonable price. A person owing money on collections accounts may look for a way to eliminate these listings from his credit report to see if he can quickly improve his credit score.

Reporting the Past

A credit report is intended to be an accurate report of history and should detail the good and the bad records of how a consumer has used or abused debt. Banks depend on accurate information to make good credit decisions that are risk-appropriate and priced according to that risk. For this reason, many creditors and collectors will not remove accurate collections information from a consumer's record under any circumstances. Larger creditors tend to take this stance more often.

Positive Entries

If you are successful in getting someone from a collection agency or a creditor to talk with you about a past-due or collections account, how you negotiate the reporting will be important. You want collections accounts to report as "paid as agreed" or "paid and closed." Anything other than this is a negative entry on the credit report. Experts cannot agree on if it is better to have an account in collections that is listed as either "paid in full" or "settled in full." Still, either of these entries expressing that the debt has been paid will be better than an active collection that shows as unpaid.

Negotiate From Strength

If you pay off a collection account, you have no basis to negotiate with the creditor about eliminating or deleting the account. The creditor or collection agent is interested in collecting money and will make a deal only if it looks like it is the only way it will get paid. Do not pay any money on the account until the terms of the agreement have been completely negotiated, including how the creditor will show the account on the credit report.

Get it in Writing

Perhaps the most important rule about negotiating with a creditor for a lower payoff amount or elimination of debt notations from the credit report is to get any agreements in writing before you send money. The creditor or collections agency should be willing to give you a letter saying the amount it will accept as a settlement in full and should note any details of how it will report the debt in this document as well. Once you receive the confirmation, send in a cashier's check or money order; do not give the creditor access to your bank account information for an electronic draft. Keep proof of this payment with the letter from the creditor in case you need to prove the debt has been paid.

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How to Prevent Garnishment From a Collection Agency

If you fail to settle your unpaid debt with a collection agency, a judge may order a garnishment against you. A garnishment is a legal proceeding that allows a creditor or collection agency to collect money that is owed to them, usually through wage garnishment---a portion of your paycheck is withheld by your employer to repay the debt---or through a bank account levy---your bank account is frozen and the funds are seized. Learn how to avoid having your wages, bank account or other financial assets garnished.

Instructions

1

Contact the collection agency to negotiate a payment plan. Perhaps the collection agency will allow you to make monthly payments on your account until the debt is paid in full. Be sure to agree to a payment plan that is both reasonable and affordable for your budget.

2

Ask the collection agency to send you a confirmation letter. It is a good idea to have your payment plan arrangement in writing just in case you need it for future reference. Simply ask the collection agency representative to send you a confirmation letter outlining the terms of the agreement.

3

Submit your monthly payments on time. It is important that you make all of your payments to the collection agency in a timely manner. Even if you miss a couple of payments, the collection agency may decide to move forward with a garnishment.

4

Pay your balance in full. Once you make your final payment to the collection agency, your balance is paid in full and you no longer have to worry about a garnishment. Be sure to ask the collection agency to send you a letter stating that you made all of the required payments on your account and you have a zero balance.

5

Verify that your account status has been updated with the credit bureaus. You will need to order a copy of your credit report from all three major credit bureaus, in order to confirm your account status. Please note that although you paid your balance in full, the credit bureaus will not delete your account information from your file. They will simply update your status and show that your balance is paid in full on that particular account.

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Can Social Security Wages Be Garnished?

Garnishment is the tool of last resort for creditors who want to collect money owed to them. The general rule is that Social Security income cannot be garnished. However, though Section 207 of the Social Security Act bar garnishment, it does provide for exceptions to this rule.

Child Support and Alimony

If the person receiving Social Security benefits owes back child support or alimony to an ex-spouse, wages can be garnished until the person is current. This exception is found in Section 459 of the Social Security Act.

Back Taxes

If you owe the federal government back taxes whether income or another type, Section 6334 of the Internal Revenue Code allows for Social Security benefits to be garnished to collect those overdue taxes. Up to 15 percent of your monthly benefit can be garnished to pay the debt un the Tax Payer Relief Act of 1997.

Voluntary Garnishment

If you want to keep current on your income taxes, you can voluntarily elect to have your Social Security benefits garnished. Section 3402 (P) of the Internal Revenue Code allows you to select a percentage of your benefits that will be withheld for taxes during the current tax year. This is similar to an individual paying quarterly estimated taxes.

Federal Debt

Other than taxes, if you owe other federal agencies money, your Social Security benefits can be garnished under the Debt Collection Act of 1996. In these instances, the Social Security Administration will directly transfer the garnishment to the agency requesting it.

Other Creditors

If creditors other than those mentioned previously attempt to garnish your Social Security check, you can stop them. Tell them the garnishment would violate Section 207 of the Social Security Act. The act states, "The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law." These exceptions also only apply to Social Security benefits. If the beneficiary is receiving Supplemental Security Income, these payments cannot be garnished at all.

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How Do I Correct a Credit Report?

Americans are entitled to a free copy of their credit report every 12 months. Take advantage of this opportunity to ensure that your credit history is being reported accurately. In the event of an error, there are several ways you can correct your report. Documentation of your efforts to resolve the dispute with your creditor, as well as with the agency whose credit report reflects the error, is essential to the success of your case.

Contact the agency

Contact the credit reporting agency that made the reporting error. This agency must contact the other credit agencies, investigate the error and get in touch with the creditor. The information must be confirmed or disputed by the creditor within 30 days. Sending a certified letter is the slowest but most thorough approach, since it leaves a paper trail. The three agencies, Equifax, Experian and TransUnion, also have online forms for credit reporting disputes. You can also dispute the information by phone.

Contact the Creditor

Send a certified letter to the creditor that reported the erroneous information to the credit ageny. Follow up with a phone call, and request a letter confirming any attempts made by the creditor to resolve the issue. Keep at least one copy of the letter you sent to the creditor.

Keep Records

Make a file for all the correspondence between yourself and both the creditor and the credit agency. This includes certified letters you have sent, letters you have received in response to your inquiries, printed screen shots of any online dispute attempts, and tapes or digital recordings of any phone conversations. Of course, you must have notified the person with whom you spoke that you were recording the call.

Get Help

If you are unable to achieve results on your own, hire a professional. Although there are some reputable credit repair companies, many are not legitimate. Even legitimate credit repair companies basically do the same things you can do in attempting to repair your credit. If you have filed disputes with the creditor and credit agency, and the error has not been repaired, you may want to hire an attorney. The last resort is a lawsuit, but you will have legal grounds to file one only if you have gone through all the necessary steps to dispute the error.

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