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What Bill Collectors Can and Cannot Do

When You Can't Pay Your Bills -

What Bill Collectors Can't Do


Perhaps it's happened to you. You've lost your job and the bills are starting to pile up. Or you've had some unexpected medical expenses that your paycheck just won't cover. Suddenly you are in debt and worried about what's going to happen to you and your family.

What can happen to you when you owe money? Can you end up in jail? Can you be sued? What about those late night calls from the furniture store -  can you stop them?


There are laws in New York State that protect you from being harassed by bill collectors. And you can't be thrown in jail because you owe money to a furniture store or your dentist. In fact, the only time you might go to jail for a debt is if you owe child support (see below).


What can creditors do to me if I don't pay my debts?

A creditor is someone to whom you owe money. There are many kinds of creditors. For instance, a bank may be a creditor for a credit card or a car loan.


Your landlord is a creditor and so is you utility company. Even the government may be a creditor if you have taken out a government student loan.


What a creditor can do to collect debts depends on the kind of debt it is. For instance, if you are behind on the rent, your landlord can take legal action to have you evicted. Your utility company (gas and electric) can shut off your service if you don't pay. Your phone company can shut off your phone.


Some debts are called "secured debts". Secured debts have something that is collateral for the loan - that is, something that the creditor can take if you don't pay back the loan. For example, most car loans are secured loans. The car is the collateral for the loan. Your creditor can take back or repossess the car if you don't keep up with your payments. Loans for furniture are another example of secured loans. The furniture can be repossessed if you don't pay back the loan.


If an item such as a car or furniture is repossessed, the creditor can then sell it. The money from selling the item is applied toward the money you owe. The creditor can still try to get any money you owe after the sale of the item. Let's say that you have a $5,000 car loan and you can't make the payments. The creditor can repossess the car. Suppose the creditor sells the car for $4,500. The creditor applies the $4,500 to the $5,000 you owe. That leaves $500. The creditor can still try to get the $500 from you. They could sue you and get a “deficiency judgment”. The terms of your contract might even add charges for the costs of repossession and sale.



A judgment is a legal paper that says that one person owes another person money. Your creditor must sue you (take you to court) to get a judgment. You will get a saying where and why your creditor is taking you to court. These papers are called a "Notice of Petition" and "Petition"(or called "summons and complaint"). In court, you will have a chance to prove that you do not owe the money, or that you already paid it.


If you do not go to court, or do not send a written  response to a “summons” that has no court date, then the judge will sign a judgment saying that you owe the money. Or, if you go to court and lose, the judge will sign an order saying that you owe the money.


Once your creditor has a judgment against you, he or she can take other action to try and get the money from you.


After a judgment is "entered" in the County Clerk's office, it collects interest of 9% per year. You will owe more money if you wait a long time to pay. Judgments last for at least ten years. If you make payments on the judgment, be sure to save your receipts. When you have paid all you owe, the creditor must give you a "satisfaction” to record.


Protected Income and Property

The law says that there are only certain ways that your creditor can collect money you owe. Some kinds of income and property are protected. A creditor cannot take money from a source of income that is protected by the law. Your creditors cannot garnish these types of income. Protected income and property cannot be taken from you by a creditor to pay a debt. (Unless you pledged the property as collateral).


Some kinds of protected income are:

  • Your welfare check (ADC, Home Relief or Temporary Assistance)
  • Your Social Security check or Pension
  • Your SSI check
  • Your unemployment check
  • Your veteran's check
  • Court ordered child support or spousal maintenance(you must have a court order).


There are also some kinds of property that the law says are too important to be taken away from you. Some examples of exempt property include:

  • An IRA or 401K Retirement Fund.
  • Clothing
  • Rental or Utility Security Deposits
  • Most (but not all) furniture and appliances
  • Equity in your home of up to $75,000 per owner (Western & Central NY amount)      NOTE: The amount is higher if you live in some Counties in the Eastern part of NY.
  • Wedding rings
  • Burial plots
  • School books.
  • In most cases, the first $1,716 of a judgment debtor’s bank account.
  • One motor vehicle valued at $4,000 or less, above liens against it.


Remember - if you used any of these items as collateral to get a loan, a creditor can take them if you don't pay back the loan. For instance, if you purchased a refrigerator and don't make the payments on the loan, your creditor can take the refrigerator back. If you used your valuable wedding ring as collateral to get a loan for vacation, your creditor can take the ring if you don't pay back the money.   Your car can still be repossessed, if you don’t pay your car loan.


Wage Garnishment

If you are working, your creditor may be able to take part of your paycheck to collect a debt. This is called wage garnishment. Your wages can only be garnished if your creditor sues you and wins a judgment against you. You cannot be garnished if your “disposable” weekly wages are less than 30 times the Federal minimum hourly wage. Disposable earnings are what is left after deducting taxes required by law).  As of July 2009, that amount is $217.50 per week.  Only one creditor can garnish you at a time, no matter how many people you owe. Generally, your creditor can only take 10% of your gross pay. If you owe back child support, more can be taken out (see below).


Child Support is Different

The rules are different for child support or spousal maintenance. As much as 60% of your pay can be taken out if you owe child support. An automatic Income execution (garnishment) can be taken. Some property exemptions don’t apply if your debt is for support.   And, you can even end up in jail, if you had the ability to pay and deliberately refused or neglected doing so.


What Else Can a Creditor Do?

If you own a house, your creditor may be able to place a lien on the house. A lien means that a creditor has the right to get your house sold to get the money you owe. Or, if you sell the house, the creditor will get part of the sale price.


Before placing a lien on your house, your creditor must sue you to get a judgment against you saying that you owe a certain amount.


Your creditor can not enforce a lien on your house if your equity in the house is $75,000 or less. The equity is the value of the house after the outstanding mortgage is subtracted.  Also, when a husband and wife jointly own a home, the creditor of only one of them cannot force the home to be sold.  But if the couple both decide to sell, the lien would be enforced when the property was transferred.


If you have a bank account, it can be seized. If you deposit exempt income in your bank account (Social Security, Support, Welfare, etc.) it stays exempt. New York State law changed significantly on January 1, 2009 regarding creditor’s power to freeze or restrain bank accounts. In most cases, the first $1,716 or less of a judgment debtor’s bank account can no longer be restrained.



What About Phone Calls and Letters?

Sometimes creditors will turn your bills over to another agency (a collection bureau or credit agency) or an attorney, so that they can try to get the money from you. Collection bureaus or attorneys cannot harass you to get you to pay a debt. The law has specific rules about what such bill collectors can and cant do. The rules do not apply to the creditors themselves.


Bill Collectors Cannot:


  • Contact other people such as neighbors, relatives, or employers about the debt except to get your address and phone number.
  • Contact you before 8:00 A.M. or after 9:00 P.M.
  • Contact you at work if the collector is told that your employer prohibits this kind of communication;
  • Contact you directly if you have an attorney;
  • Continue to try to collect the debt if you dispute that you owe the money;
  • Be harassing and abusive.


Most importantly, if you tell the collector in writing to stop further contact, the collector may not communicate (in writing, on the phone or in person) with you again except to tell you that a specific legal action such as filing a law suit is being taken.


If you are being harassed by a debt collector, send a letter to the agency that is bothering you telling them not to contact you again. Send the letter "return receipt requested" and keep a copy for yourself. The debt collector will not be able to contact you and hassle you about paying after you send the letter.  If they do, you may be able to sue them for damages.


If you are having problems with debt collectors, or are being sued, contact your local legal services office. Keep in mind that many legal services offices do not handle this type of problem but they may be able to refer you to another agency that can help you.



(c) Legal Assistance of Western New York, Inc.

This article provides general information about this subject. Laws about this subject may have changed since this article was written. For specific legal advice about a problem you are having, get the advice of a lawyer. Receiving this information does not make you a client of our office.

rev: 1/2011 Elizabeth Hendy

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