Helping Low-Income Seniors with Debt Collection

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A senior citizen living on Social Security can be devastated by the threat of debt collection. Whether they’ve been forced to use a credit card to fend off the rising cost of living or accrued debt from past loans, nobody should face this alone. A guardianship attorney can help provide sound legal advice.

When one reaches retirement age, it should imply a period free of financial worries. However, many senior citizens find themselves without the financial peace they deserve in their golden years.

In an ideal retirement situation, a senior would have the financial resources to maintain a lifestyle similar to the one they had during their working years. Unfortunately, almost one-third of Americans over 50 carry non-mortgage debt. According to the Consumer Financial Protection Bureau, debt collection was the top complaint of older Americans. This can quickly erode a seniors’ credit report and the capacity to live in peace during retirement.

The Woes of Debt

When the majority of individuals find themselves in debt, they have several options available to them. They can usually enter a debt repayment program and eventually work their way out of debt.

Unfortunately, this is not an option for low-income seniors. They can find themselves trapped by unpaid debt and continuously harassed by debt collectors. According to the Kaiser Family Foundation, almost half of all seniors over 65 have incomes within 20 percent of the poverty line. This classifies them as being economically vulnerable.

While seniors may desire to pay off their debts, they can end up depleting their bank account and a portion of their fixed incomes to do so. However, many don’t realize that federal benefits from Social Security, pensions, retirement, VA benefits, and disability income are protected from federal law.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is a federal law enacted in 1977. Its primary objective is to eliminate unfair practices that are deemed abusive, deceptive, and unfair. It aims to protect consumers from harassment by debt collection agencies and to promote fair debt collection.

The FDCPA sets guidelines and limits on how a debt collection agency can interact with consumers, such as restricting the times they can call, prohibiting the use of threats or obscene language, and banning false representations of the amount owed. It applies to personal, family, and household debts, including money owed on personal credit cards, auto loans, medical bills, and mortgage.

Under the FDCPA, debt collectors are required to provide consumers with specific information about the debt, including the amount owed, the name of the creditor, and a statement that the consumer has the right to dispute the debt within 30 days. If the consumer submits a dispute letter in writing within this period, the debt collector must cease collection activities until they provide verification of the debt and the exact amount of money owed.

The law also grants consumers the right to request that a debt collector stop contacting them. The debt collector must cease further contact, but they can still pursue other legal avenues to collect the outstanding debts.

Enforcement of the FDCPA falls under the jurisdiction of the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). Consumers can report violations to these agencies and may also file lawsuits against debt collectors for violations, potentially recovering damages and attorney fees.

The FDCPA has been instrumental in promoting ethical debt collection practices and providing consumers with the means to address and rectify abusive collection tactics. Over the years, these federal protections have been revised to adapt to changing financial landscapes and to reinforce consumer protections in an evolving economy.

Original Creditors vs Collection Agencies

An “Original Creditor” is the first source of the money loaned. They are the person or entity that extended credit in the first place. A debt collector is a third party engaged in the practice of collecting debts. When an original creditor doesn’t receive the debt owed to them, they can turn it over to a collection agency. They are called “Debt Buyers” and pay a percentage of the debt owed.

Original Creditors

Original creditors are the entities that initially extend credit to a borrower, such as banks, credit unions, or retail companies. They provide the initial loan or credit line and are responsible for maintaining the account and handling payments. This can range from loans with assets as collateral for the loan, to fully unsecured debt, without collateral.

If the borrower fails to make timely payments, the original creditor may try to collect the debt directly or, after a period of delinquency, may sell the debt to a collection agency.

Collection Agencies

Collection agencies are third parties that specialize in recovering debts that have become delinquent. When original creditors cannot collect overdue payments, they may sell the debt to a collection agency or hire one to recover the funds on their behalf. Collection agencies then attempt to collect the outstanding amount from the debtor, often using various methods such as phone calls, letters, and, in some cases, legal action. Their goal is to obtain payment and close the debt account.

It is usually better to deal with original creditors than it is with collection agencies. A collection agency can be far more aggressive in their attempts. However, regardless of the situation, it’s possible to deal successfully with both. A family law attorney can help get debt back on track.

debt collection protection for senior citizens
Courtesy Unsplash

Legal Action

What can a American seniors do when faced with debt collectors?

A guardianship attorney can intervene on behalf of our country’s older adults. They can protect the debtor by providing the collector a written notice that counsel now represents them. When this happens, the collectors can no longer contact the debtors.

Since the retirement income from government pensions and Social Security benefits cannot be garnished, this may dissuade some collectors. If these retirement benefits are the primary sources of income for a senior, they can ignore collectors and still receive their full pension.

Lawsuits and Liens

If a senior happens to own a home, a debt collector can obtain a judgment and record a lien against it. If this happens, a family law attorney is the best defense. The foreclosure process is cumbersome and complicated. Since most creditors prefer to let the lien sit and accrue interest, the quicker a settlement is reached, the better it is.

Additionally, federal and state laws can protect a senior from losing their home. For example, a homestead exemption can prevent any sale due to a lien on a house. And these exemptions extend beyond a home. A car can be protected for up to $5,000, and valuable items such as antiques and jewelry can be protected for up to $5,000. These amounts may vary by state.

These are just some of the options available to protect a senior against abusive debt practices. For example, an experienced family law attorney can prepare a showing that demonstrates a senior needs all of their income to meet their basic needs and is judgment proof.

Next Steps: Getting Legal and Financial Assistance

debt collection protection for senior citizens
Courtesy Unsplash

As always, when considering steps to take in your own situation, it is a good idea to seek competent advice to help you avoid the legal problems associated with debt. Sometimes, bankruptcy attorneys can help advise ways to avoid needing their services.

Become knowledgable about the various types of debt, pay attention to collection notices if you receive them, confirm there is no inaccurate information or misleading statements, and seek appropriate legal advice to help you understand your debt collection rights.