Your money is tight and you’re struggling to pay rent or mortgage, food, gas, utilities, car insurance and all of your other monthly necessities. You definitely don’t have any money left over at the end of the month to pay your credit card debt. You’ll just have to deal with the phone calls, threatening letters and damage to your credit report.
About a year after you stopped making credit card payments, you receive notice that you’ve been sued by one of the credit card companies. Your financial situation hasn’t improved and you still don’t have the money to pay the debt. You decide that you will ignore the lawsuit, because it’s just credit card debt. It’s not like they can do anything to you, right?
It is wrong to underestimate the collection abilities of credit card companies or the collection agencies that collect credit card debt. Many of my clients have incorrectly assumed that credit card debt collectors are all bark and no bite. I’m not sure where this misconception comes from. The reality is that credit card debt collectors have the ability to forcibly collect money and take your property from you if they sue you and win.
The National Consumer Law Center recently reviewed the laws in all 50 states to determine how well the laws protect people from debt collectors. Each state received a letter grade from A to F. The higher the grade, the more the state’s law limits a debt collector’s ability to forcibly take money or assets. Pennsylvania received a D-, which was 5th worst in the nation.
There are exceptions, but here are some examples of the ways a debt collector can collect from you if they have sued you and won:
- Freeze your bank account – Without notice, a creditor that has won a lawsuit against you can freeze the money in your bank account. You will only be able to access $300 from your account. The rest will go to the creditor to repay the debt. Not only will the creditor get to keep the money that is in the account at the time the account is frozen, the creditor will continue to keep any money that comes into the account until the debt is paid off! This is especially a problem for people that have their paychecks direct deposited into their bank account.
- Sell your personal property – It sounds ridiculous, but a creditor can send the sheriff to your house, the sheriff will take an inventory of all of your personal property (furniture, appliances, electronics, vehicles, jewelry, etc.) and the sheriff will set a date to sell your personal property. The money from the sale will go to repay your debt. Pennsylvania state law only allows you to save your clothing, family bible, military uniform, school books and sewing machine from being sold. Can you tell that these laws were written a long time ago?
- Put a lien against your house – If your house is paid off, this means that the debt collector could force the sale of your house to get their money. If you have a mortgage against your house, the creditor will not try to sell your house, but you will have to pay off the debt when you sell the house someday. That may not seem like a big deal, but you have to remember that even a small debt can grow to be very large if it accrues interest at a high rate over the course of years. If you sell your house, thinking that you will make money and a debt collector has a lien against the house, you could get a nasty surprise when the debt collector gets to keep all of your profit.
While the Pennsylvania state laws may not provide much protection from debt collectors, the Federal bankruptcy laws do. Filing for bankruptcy immediately stops all collection actions against you. Your creditors cannot call you, send you letters, start lawsuits, continue lawsuits, freeze your bank accounts or take your property. The bankruptcy can even help reverse some of the damage that the creditors have done. It is possible for a bankruptcy to release the money in your bank account and remove a lien from your house.
If you have been sued or think you might get sued, give us a call at 800-360-9392. One of our experienced attorneys can explain how the bankruptcy laws can protect you. While the debt collectors have a lot of powers under Pennsylvania law most of the time, they are no match for the powers of bankruptcy.