Good Debt, Bad Debt
It is widely acknowledged that the only thing more certain in life than death is taxes. One could confidently add a third refrain to that adage, and that is debt. For many, this debt is a natural part of life, necessary in order to progress towards certain unimpeachable goals, like owning a house or getting an education. Since most people in the country will undertake loans that will put them in a debtor-creditor relationship with a bank, this type of debt can be planned for and regular payments made. But there is, of course, a dark side to consumer debt — one that can quickly snowball from an inconvenience to an insurmountable obstacle.
As of September 2020, there was about $4.16 trillion in total outstanding consumer debt in the United States. Naturally, this staggering amount is accompanied by predictions that personal bankruptcy filings may reach record levels in 2021. According to statistics, the breakdown of consumer credit participation in the US is as follows:
- Revolving credit card debt
- Credit cards with no month-to-month balance
- Mortgages
- Auto loans
- Student loans
Here we see a mixture of that “good debt, bad debt,” mentioned above. Unfortunately, as the ceiling continues to rise on money owed in America, the natural reaction will be to see bankruptcy enter into millions of homes, ceasing to be a concept, and becoming a very real problem.
The Truth About Debt Collectors
Typically, a debt collector comes knocking once a certain amount of payments on the debt have been missed — usually six. For those who have been in contact with a debt collector, or anticipate that they may get in contact, it’s important to remember that collection agencies have rules they have to follow, just like anyone else. These rules are set forth by the Fair Debt Collection Practices Act (FDCPA).
In accordance with the FDCPA, debt collectors:
- May only conduct business within a certain timeframe of the day. That timeframe is 8 AM – 9 PM, so no banging on your door at midnight demanding money.
- Must work through your attorney. This is one of the best reasons to hire a bankruptcy attorney. Not only do they have the experience of helping individuals and businesses get through this process while hanging on to as much of their assets as possible, but they often have relationships with the collection agencies in the area.
- Must respect your wishes to cease contact. This isn’t a “get out of collections free” card, but is designed to funnel the collections process through an avenue other than directly through you. The debt must always be paid.
- Have the autonomy to contact your close relations. In order to make good on your debt, collectors may contact your friends, family, work colleagues, church associates, and anyone else who may have regular contact with you. There are a lot of freedoms afforded to collection agencies to make sure they have resolved the outstanding balance.
- Must cease effort to collect if you dispute the debt. There is a 30-day period after a debt collector confirms your identity and informs you of your debt, that you can contest the existence or amount of the balance through official channels. If you do that, then the collections agency must launch an investigation to confirm the validity of your claims.
Bankruptcy Filings and Collections
As has been mentioned above, a bankruptcy lawyer is often the best way to deal with a collections agent. In Utah, Chapter 7 bankruptcy is a common way to handle debt, in that it eliminates the need for direct contact with collections, and instead works through the court. A list of the most common bankruptcy filings in Utah include:
- Chapter 7: A court agrees to eliminate your outstanding debt by recouping the cost through the elimination of your property. You can work with the judge to determine what constitutes “exempt” property, but once that’s done, the court takes care of the rest until the debt is paid.
- Chapter 11: This type of bankruptcy is often filed by businesses and allows the debtor to come into control of the business until the debt is paid.
- Chapter 13: For individuals with a steady income, this filing may prove more beneficial than Utah’s Chapter 7 bankruptcy. In this filing, you are to enter into a payment plan over the next 3-5 years and remain in a more structured environment than just being left to collectors while still eliminating most of your debt..
A Friend Through It All
Whether you choose to file for Utah’s Chapter 7 bankruptcy or any other, this can be a delicate and frightening time in your life. Even with all the FDCPA guidelines in place to protect you (and the collectors), dealing with an agency whose sole purpose is to hound you until the debt is paid is a stressful concept.
The right attorney by your side can help mitigate a lot of these issues and help you utilize your time and energies in the right way, so as to quickly and efficiently pay off your debt without losing everything you own. If bankruptcy is in your future, you can request to speak to an attorney in a free consultation today.