Dealing with Debt Collectors

Can they sue you? Can they take your house or your car? Can you go to jail?

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 debt collectors--can you stop them?

There are federal and state laws that protect you from being harassed by debt collectors. And you can't be thrown in jail because you owe money on a credit card or dentist bill. Practically, the only time you might go to jail for not paying a debt is if you fail to pay your child support. In some rare cases, you may go to jail if you fail to pay your taxes or fail to respond to a court order or subpoena, but again these are very rare cases. Please read below for more information about your rights. If you have questions, call our office or your local legal services office.

What are creditors and what can they do if I don’t pay my debts?

A creditor is someone who has given you something in exchange for a promise to pay them back at a later date. Anyone who gives your credit or a loan is a creditor. Banks, landlords, utility companies, department stores, and even the government can be creditors.

If you can’t pay a creditor, what a creditor can do to collect the debt depends what kind of debt it is. For instance, if you are behind on the rent, your landlord can take you to court to have you evicted. Your utility company can shut off your gas and electric service if you don't pay. Your phone company can shut off your phone. The bank can repossess your car if you fail to pay on a car loan. Other creditors may have to sue you to collect on debts.

What is the difference between secured debts and unsecured debts?

Some debts are called "secured debts.” Secured debts have something that you agreed to offer as collateral for the loan. Collateral 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. Sometimes loans for furniture are secured loans. If the loan is secured, the furniture can be repossessed if you don't pay on time. A mortgage is also a type of secured loan. If you miss mortgage payments, the lender can foreclose on your home.

If the collateral is repossessed, the creditor can sell it. The money from selling the collateral is applied toward the money you owe. The creditor can still try to get any money you owe after the sale of the collateral. 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 $3,000. The creditor applies the $3,000 to the $5,000 you owe. That leaves $2,000 still owed on the debt. The creditor can still try to get the $2,000 from you. They could sue you and get a “deficiency judgment.” A deficiency judgment is a judgment for the amount still owed on a secured loan after any credits given to you for sale of the collateral. The terms of your contract might even add charges for the costs of repossession and sale.

What happens if my debt has been turned over to debt collectors?

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

Debt 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 does not allow this;
  • Contact you directly if you have an attorney;
  • Continue to try to collect the debt if you properly dispute that you owe the money;
  • Be harassing and abusive.

These rules only apply to debt collectors and attorneys collecting debts for creditors--they do not apply to the creditors themselves.

How do I stop debt collectors from contacting me?

If you tell the debt collector in writing to stop contacting you, the debt collector cannot contact you again (in writing, on the phone or in person). The only time the debt collector can contact you after this is to tell you that a specific legal action is being taken, such as filing a lawsuit or forgiving or selling your debt.

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.

Again, this rule only applies to debt collectors and attorneys collecting debts for creditors. This rule does not apply to the original creditor. This letter also does not stop the debt collector or creditor from suing you.

The debt does not go away with this letter, it only makes the annoying phone calls from debt collectors stop. DO NOT IGNORE ANY LETTERS REGARDING LAWSUITS! If you get anything in the mail or served on you regarding a lawsuit, contact our office or your local legal aid office right away.

What happens if I have been sued by a debt collector or creditor?

If you can’t pay your debts, the creditors or debt collectors may file a lawsuit against you. To start a lawsuit, the creditors or debt collectors have to file court papers. Usually these papers are called a summons and complaint. You need to be served with a copy with court papers.

Do the court papers need to be served by the Sheriff?

No. You do not have to be served by a Sheriff. There are a few different ways you could be served. The most common way to be served is in person. This means that someone, other than the person suing you, hands you the court papers at your home or place of business. If you are not home, the person serving you can leave the court papers with someone at your house as long as they are of “suitable age and discretion” (for example, your six-year-old son is not of suitable age and discretion). This is called substituted service. For this type of service, you also have to be mailed a copy of the court papers. If the person serving you has not been able to serve you in person or through substituted service after a few attempts, the person can serve you by nailing a copy of the court papers to your door and mailing a copy to you in the mail. This is called “Nail and Mail” service and is usually a last resort.  If you get court papers, don’t ignore them--no matter how you are served.

What do I do if I am served with court papers?

There are very short time deadlines to respond to court papers. Usually the deadline to respond is only 20 days from the date you are served. For debt collection cases, you are not usually given a court date to appear. In order to respond to the court papers, you have to file an answer. In an answer, you list any defenses you may have to the court case. After you file an answer, a hearing may be scheduled. In court, you will have a chance to prove that you do not owe the money, or that you already paid it, or any other defenses that you put in your answer.

If you do not file an answer within the time deadline to do so, then the judge will sign a default judgment saying that you owe the money. If you file an answer and ultimately lose in court, the judge will sign a judgment 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.

Do not ignore any court papers. Contact our office or your local legal services office for help responding to court papers.

Should I bother responding to court papers if I owe the money?

Even if you think you owe the debt, you should talk to a lawyer. There are a lot of defenses that you may have to prevent a judgment from being entered against you, even if you agree you owe some of the money. For example, the debt could be beyond the statute of limitations, meaning the debt is so old that the debt collector cannot get a judgment against you. For a list of common defenses in debt collection cases, see the court’s website here:


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. 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 in New York are valid for twenty years. This means a judgment can be collected for twenty years or until you pay it off. If you make payments on the judgment, be sure to save your receipts. When you have paid all you owe, the creditor must file a “satisfaction of judgment” with the court and give you a copy. After you have made your last payment, be sure to check with the court that the satisfaction of judgment has been filed.  

I just learned a default judgment was entered against me, can I challenge it?

Yes, though it can be very difficult to overturn a default judgment. If you want to overturn a default judgment, you have to ask the court to vacate the judgment. This is usually done by filing a “Motion to Vacate a Default Judgment”. You can ask the court to vacate the judgment if you were never served with the original court papers. If you were served and failed to file an answer, you have to show the court that you had a good reason for not filing an answer and that you have a defense to the debt. There may be time deadlines for vacating default judgments. Contact our office or your local legal services agency for more assistance with this. 

What can a creditor do with a judgment?

Once a creditor or debt collector has a judgment against you, they can use that judgment to garnish your wages and seize your assets. Certain types of income and assets are protected by the law and cannot be seized to pay back most kinds of debt.

What is an Information Subpoena?

If you were served with an Information Subpoena, a judgment has likely been entered against you. Once a judgment has been entered, a creditor or debt collector can from time to time serve you with an Information Subpoena to get information about your income and assets. The Information Subpoena is usually several pages long and asks you several questions about you make and what you own. You have to fill out the Information Subpoena to the best of your ability and send it back to the creditor, even if you have nothing the creditor can take. If you refuse to complete the Information Subpoena, you may be held in contempt of court.

Protected income and property

Some kinds of income and property are protected and exempt from most types of collection. In most cases, protected income and property cannot be taken from you by a creditor to pay a debt. 

Some kinds of income protected from garnishment are:

  • Most welfare benefits (public assistance, TANF, food stamps, etc.)
  • Social Security
  • Social Security Disability
  • SSI
  • Pensions
  • Unemployment benefits
  • Veterans benefits
  • Worker’s compensation
  • Child support and alimony

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

  • An IRA or 401K Retirement Fund.
  • Clothing
  • Rental or Utility Security Deposits
  • Most furniture and appliances
  • Equity in your home of up to $82,775 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 $2,160 of a bank account (this may be higher if your income is protected)
  • Equity in your car up to $4,425 

Remember - if you used any of these items as collateral to get a loan, a creditor can still 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 may be able to take the refrigerator back if the refrigerator was collateral for the loan. 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 too can be repossessed, if you don’t pay your car loan.

What does it mean to be judgment proof?

If you are judgment proof, this means that even if a debt collector sues you and gets a judgment against you, you have nothing that the debt collector could take to satisfy the judgment. Usually this means that your income and assets are protected and exempt from collection. The debt collector can still sue you and get a judgment against you. They just would not be able to take anything from you. Many creditors and debt collectors will insist on getting a judgment against you even if you are judgment proof. They do this in case your income situation changes, such as you go back to work, win the lottery, or inherit money.

If a judgment is entered against you and you are served with an information subpoena, you still have to respond to it even if you have nothing the debt collector can take. If you are judgment proof, you may be able to negotiate a lower settlement with the debt collectors or see if they will forgive the debt. There may be tax implications for any debts that are forgiven.

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. As of June 2016, that amount is $270 per week. Disposable earnings are what is left after deducting taxes. If you make less than $270 per week after taxes are taken out, your wages cannot be garnished. If you make $270 per week or more after taxes are taken out, your wages can be garnished. 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). If a creditor garnishes your wages, you will be served with a paper called an Income Execution.

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 child support.  And, you can even end up in jail, if you had the ability to pay and deliberately refused or neglected to pay your support.

What about debts I owe to the government?

If you owe a debt to the government, such as a tax bill, student loan, or overpayment of government benefits, the rules are also different. The government may be able to seize your tax refund or take from your government benefits (such as your Social Security check) to pay back your debt without suing you. This is called an offset. There are some limitations on what the government can take. Contact your local legal services agency for more help with government debts.

Can a creditor or debt collector take my house?

If you own a house, your creditor may be able to place a lien on the house. A lien gives the creditor the right to sell the home to get the money you owe. Before placing a lien on your house, a creditor must sue you to get a judgment against you saying that you owe a certain amount. If you have a mortgage on the house, the mortgage holder will already have a lien on the house. There can be multiple liens on one house. Also, if you sell the house, any liens will get paid first.

Your creditor cannot enforce a lien on your house if your equity in the house is $82,775 or less (maybe more depending on where you live and if you are married). The equity is the value of the house after what you owe on the home is subtracted. Most creditors will not force the sale of your house to collect on a judgment. The creditor will likely wait until you sell or refinance the home to collect on the lien.

Can a creditor or debt collector take the money in my bank account?

If you have a bank account, it may be seized. If you only have exempt income in your bank account (such as Social Security, SSI, child support, public assistance, etc.) the first $2,750 is exempt from collection. In all other cases, the first $2,160 or less of your bank account is exempt from collection.If you have both exempt and non-exempt income in your account (such as money from your work and Social Security income), the lower limit applies.

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.

Where can I go if I need help or have questions?

If you are being sued or having problems with debt collectors, contact our office or 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.

If you are having difficulty paying your debts, talk with your creditors.  They may be willing to work out a modified payment plan.  If you can work out a payment plan, be sure to get it in writing.  However, if you cannot truly afford a repayment plan, entering into one may not be in your best interest because you can be sued for failing to make payments. 

You can also contact a credit counseling service. Credit counseling services may be able to advise you on how to manage your debt. You can find a list of some credit counseling services on the United State’s Trustee’s website here:

Be careful about starting to pay on really old debts

Remember, that some debts may be too old for debt collectors to get a judgment against you. But the debt collectors may still try to get you to pay on these really old debts even when they are beyond the Statute of Limitations. In many credit and debt cases, the New York Statute of Limitations is six years. This may be longer or shorter depending on what type of debt you have. The debt collectors are supposed to tell you that the debt is beyond the Statute of Limitations, but often times they don’t do this. If you start paying on an old debt again, the Statute of Limitations is renewed. This means that the debt collector can sue you and get a judgment if you have a credit card debt that is 20 years old, as long as you made a payment on the debt within the last six years.

Should I file for bankruptcy?

Filing for bankruptcy is a last resort option. It can be expensive and is not right for everyone. For more information, see our article on bankruptcy. Although you are not required to have an attorney to file for bankruptcy, talking with an experienced bankruptcy attorney will help you to fully understand your options and avoid potential pitfalls.



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

This article provides general information about this subject. Laws affecting 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.


Last Review Date: June 2016


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