As a consumer, it is important to understand your rights and responsibilities. This is particularly true if you fall behind on debt payments.

The Fair Debt Collection Practices Act (FDCPA) outlines some hard and fast rules that apply no matter where you live in the U.S. For example, the FDCPA states that a collector may contact you only between 8 a.m. and 9 p.m. Collectors are also forbidden from lying or engaging in unfair practices, such as communicating with you by postcard.

In addition to the Federal laws, each state sets laws as to what, and how, a creditor can collect on a delinquent account. Some states permit a creditor to garnish a debtor’s wages; others don’t (like Texas). Some states exempt just about all assets a debtor has from seizure by a creditor to satisfy the payment of a debt. Other states can force you to sell some of your assets to satisfy a judgment.

While I don’t recommend packing your bags and moving to Texas to avoid potential wage garnishment, I do recommend knowing what is and is not possible in your state of residence. Unfortunately, learning about your state collection laws is not as easy as it sounds. There are a few law firm Web sites that offer a breakdown of state laws; however, most have disclaimers stating that the information may not be accurate or complete. Laws change constantly making it hard for anyone to maintain a list that is up-to-date.

The Federal Reserve has the role of protecting consumers (though Congress is currently considering the creation of a new Consumer Financial Protection Agency) and their Consumer Help Web site contains some good general information about consumer issues. For more specific information about your state laws, you can research state statutes related to debt collection or you can contact your local consumer protection office. A list of state and county consumer protection offices can be found on the Federal Citizen Information Center’s Web site.

For more on this topic, also see:

Consumers ask about debt collection & their rights
Dealing with someone else’s collection calls
How to resolve three common consumer complaints

My turn for a disclaimer: I am not an attorney. For legal advice, it is always best to seek legal counsel.

Our Advice Team answers thousands of consumer questions each year. Writers most often ask about their rights when it comes to debt collection. In case you are struggling with debt collection and your rights, following are a few of the common questions received and answered.

Dear Advice Team: I am behind on payments and a collector is now calling my sister. Not only is he harassing me, but he’s harassing innocent people. It’s humiliating! Someone told me that it is illegal for a collection agency to do this. Is it? -Charles, Iowa

Charles: It may be hard to swallow; however, your collector is permitted to contact other people. They are only supposed to do this to find out where you live, what your phone number is, and where you work. Fortunately, in most cases, the collector may not divulge the reason for the call to anyone other than you or your attorney. To learn more about your rights, I recommend you read the Fair Debt Collection Practices Act at FTC.gov.

•••

Advice Team: I am working on repaying a debt owed to a home-based fitness trainer. To get a commitment, she requested six post-dated checks. I’m not sure I’m comfortable with that. What are your thoughts? -Michael, Colorado

Michael: In my opinion, post-dating a check is a bad idea. Most people believe that a post-dated check may not be paid until the date that is shown on the check. Unfortunately, a bank can pay a post-dated check even if the check is given to the bank prior to the date posted on the check.  Instead, write to the trainer explaining when and how you plan to repay the debt.  Then, stick to your plan!

•••

Dear Advice Team: I owe a debt to a collection agency. I offered them a payment plan, but they refused it. The collector said, “That’s too little, we have to have at least $50 dollars a month.” If a collector refuses a payment plan, does debt become void? –Cheryl, New Mexico

Cheryl: Even if the creditor refuses your payment plan, you still owe the debt. That being said, many collectors will apply partial payments if you send them. I highly recommend that you begin communicating with the creditor in writing. Keep copies of all correspondence for your files.

•••

Dear Advice Team: A credit collections agency calls every day. I can’t talk to them about the account because it is in my wife’s name. I have explained that my wife is dealing with the issue. In the meantime, what can I do to stop the calls? -Jim, Texas

Jim: Under the Fair Debt Collection Practices Act (FDCPA), your wife has the right to stop the calls. To do this, she will need to write to the collection agency asking them to cease further communication. Once the letter is received, the collector is not permitted to call unless they plan to terminate collection efforts or they intend to “invoke a specified remedy.” Just be aware that stopping the calls does not mean that she no longer owes the debt; in fact, it could even escalate the collection process. To get your finances back on track, you might both benefit from working with a reputable credit counseling agency.

•••

Advice Team: I am 26 and have NEVER been late on my credit card. Recently, the credit card company (that I worked with for years) changed my rate from 7.99% to 28.99%. When I contacted them, I was told about a notice I received and that the rate was raised based on my credit report. I do not get how a company could do this. –Elizabeth, Maine

Jeri: One of the most common triggers of a rate increase lies in what is called the Universal Default clause. Basically, this clause permits your creditor to raise your interest rate, or even close your account, based on your overall credit situation. You should have the opportunity to close the account and keep your current interest rate. Contact your creditor for information.

If you have a question for the Advice Team, please don’t hesitate to ask!  It’s free and confidential; however, please do keep in mind that we are not attorneys.  For legal advice, it is always best to seek legal counsel.

More senior citizens are taking on excessive credit card debt, leaving them financially vulnerable. Reduced retirement savings due to the stock market, increased medical costs, and fixed incomes leave many seniors no choice but to rely on credit cards to survive. In fact, a recent study by Demos found that the average self-reported credit card debt among low- and middle-income consumers 65 and older increased 26% from 2005 to 2008, to $10,235.  Debt for all borrowers surveyed only increased 3% during that time. Unfortunately, financial problems of seniors are so serious that the number of older Americans filing for bankruptcy has increased at alarming rates, making them the fastest growing age group in the bankruptcy courts.

While debt problems plague people of all ages, they are particularly difficult for senior citizens to handle. For example, many older Americans must forgo medical treatment and exhaust savings accounts in effort to repay debt. Following are some suggestions to consider if you or someone you know is experiencing financial trouble.

Prioritize your debts. Some debts are more important pay promptly than others. For example, you must continue to make mortgage or rent payments so that you do not lose your home. You must also pay utilities and provide food. Please do not be tempted to let your insurance coverage expire.

Know your rights. Do not feel “bullied” by collectors into making payments you cannot afford or paying debts that may not be yours. Visit FTC.gov and read the Fair Debt Collection Practices Act (FDCPA) to learn your rights when dealing with collectors.

Make a plan. Determine how you are going to repay your debts and present that plan to your creditors. Many creditors, particularly doctors and hospitals, may be willing to reduce your required monthly payments. If you are able to negotiate a revised payment schedule, get all of the details in writing to avoid future problems.

Be realistic. You may be used to caring for others rather than having others care for you. A 2007 study by HSBC Group, the Oxford Institute of Aging, and Harris Interactive, found that older people are much more likely to give care to younger generations than to receive it themselves. However, a 2009 survey of adult children revealed that the majority (67%) were more willing to give financial help than their parents think they would be.

Tap avaiable resources. You may have more resources than you realize. According to the AARP, a reverse mortgage can turn the value of your home into cash without having to move or to repay the loan each month. In addition, you have a whole-life insurance policy, you may be able to cash-out. You might also consider taking on a part-time job or selling unneeded assets.

Finally, don’t be afraid to ask for help. Research any and all assistance offered by local city and county government offices; you may also get help from your local United Way. 

Children of aging parents should read the blog post on Consumerism Commentary titled Helping your parents with their finances.