Debt Collection

A debt arises when one party (the creditor) loans money to another party (the debtor) with an expectation of being paid back at a later date (usually with interest). At times a person will find himself burdened with more debt than he can handle; however, all debts must be repaid according to the terms of the loan contract, even if economic hardships or other problems arise for the debtor! This means that a debtor who finds himself in an economic tough time should immediately:

• Contact each of his creditors and explain the situation.
• Try to work out a payment plan that, while different from the one originally agreed upon, will be feasible for the debtor and satisfactory for the creditor.
• Stick to it! Although creditors are usually eager to work with their debtors to solve problems, they may lose patience if a debtor often reneges on newly formed payment plans.
• Consider contacting a credit counseling service. This service works out a payment plan for the debtor, and distributes the actual payments to the creditors.

Other methods of dealing with debt include consolidating debt through loans or declaration of bankruptcy. These are steps with serious consequences and should be taken only after consultation with an attorney.
Although working toward a solution is advantageous for both sides, if a debtor (person who owes the money) fails to pay back the creditor (person who has lent the money), the creditor will likely take action to try to get his or her money back.
Dunning is the creditor’s practice of trying to encourage the debtor to pay back debts. This practice is entirely legal, except when the creditor:

• Calls the debtor at home more than two times in each 7-day period or at any other place in each 30-day period for each debt.
• Calls the debtor and does not identify himself or that he is calling on behalf of the creditor.
• Sends collection notices to the debtor that openly indicate/imply that the person is in debt.
• Tells anyone about the debt in hopes of intimidating the debtor into paying.
• Contacts the debtor directly when the creditor has been notified to communicate only with the debtor’s attorney.
• Calls the debtor outside of normal waking hours (approximately 8am to 9pm).
• Causes the debtor to be charged for long distance phone calls.
• Falsely threatens to take legal action.
• Threatens to use violence.
• Uses obscene language.

For telephone, gas and electric utility companies, however, some exceptions are made.

By: hcs harvard edu