Your Debt Collection Rights
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This fact sheet talks about how to protect yourself in debt collection and the laws that debt collectors have to follow.
Are there laws about debt collection?
Federal and state laws protect you from abuse or harassment by debt collectors. All debt collectors and all of the people who work for them at a collection agency have to follow the laws. If a lawyer regularly collects debts, they must also follow these laws.
For legal advice about your debts, call a lawyer or your legal aid office. For help with your budget or making a payment plan, call a non-profit debt counseling service, like the National Foundation for Credit Counseling (NFCC) at 1(800) 388-2227. They will connect you with a local office. They charge a small fee. They can also help you set up payment plans with your creditors and may get them to take lower payments as part of the plan
Watch Out for companies that charge money to “repair” your credit. Many of these are rip-offs!
When you are in debt you can become a target for people who want to take advantage of you or scam you. The Consumer Finance Protection Bureau has good information on how to tell if a debt collector is legitimate. Go to www.consumerfinance.gov
- Click on “Consumer Education Tools” then “Debt Collection”
- Click on “Explore Basics” at the bottom of the “Get Started” section
- Look for the “Narrow your results” box and type in “How can I verify whether or not a debt collector is legitimate?”
If you are ever not sure who you are talking to or if someone is asking you for financial information over the phone, you may want to check out that they are who they say they are.
How does debt collection work?
Most debt collectors must have a state license to collect debts. They are regulated by the Minnesota Department of Commerce. Also, the federal Fair Debt Collection Practices Act gives consumers many rights.
Disputing A Debt
Within 5 days of the first call or letter to you, the debt collector has to send you a written notice. The notice has to state the amount of the debt and the name of the creditor you owe. The collector assumes you owe the debt unless you send a written letter within 30 days to the creditor about why you disagree.
Make sure your letter explains why you think the debt is wrong. Does the collector have the wrong person? Is the amount wrong? Give them enough information to investigate the dispute. Sign and date the letter and keep a copy for yourself.
When you send this letter, the debt collector must stop trying to collect the debt until they investigate whether you owe the debt or not.
You can still send a dispute letter after 30 days – the difference is that the collector doesn’t have to respond. They don’t have to investigate or stop collection.
Before you make any payments or set up any payment plans, find out if your income is protected from collection. See our fact sheet Garnishment and Your Rights. If all your money is protected, the creditor can’t make you pay anything.
If your income is not protected, you may be able to set up a payment plan to pay off the debt. Some creditors may settle for less than the total amount of the debt. Many creditors take small payments, as long as the payments are made regularly. Some creditors will freeze or reduce interest charges if you start making payments.
If you make any kind of deal, try to get it in writing. If they won’t sign an agreement, write the terms down in a letter and send it to the agency or creditor. Sign and date the letter and keep a copy for yourself.
If you want a payment plan, you need to ask for it. Creditors and debt collectors try to get payment in full. You have to speak up to get a plan. Get help from Consumer Credit Counseling at 1(800) 388-2227.
Authorizing Withdrawals from Your Bank Account
If you make a payment agreement, the creditor may ask you to authorize them to take payments from your bank account. Be very careful anytime you give authorization to anyone over the phone. Also, remember that the creditor can keep taking payments until you tell your bank to stop letting them.
Paying on Multiple Debts
Sometimes a debt collector is collecting on more than one debt from you. When you make a payment, you can choose which debt to pay it on. However, you can’t choose a debt you are disputing. On your check or money order, write which debt the payment is for. Keep a copy.
Never give anyone a post-dated check. This is a check that you write on a certain day, but put a later date on it. If it’s cashed before the date on it, you may end up bouncing the check and paying more fees.
Stopping the Calls and Letters
You can stop the debt collector from calling or writing you. Send them a letter that says, “Stop contacting me about this debt.” Put the name of the debt and the account number in your letter, date and sign it. Keep a copy.
Create a Stop Contact letter online. Go to www.lawhelpmn.org/forms
- Look under Debts, Fees & Deposits
- Click on Stop Contacting Me About This Debt - Letter to Creditors
After they get your no-contact letter, the collector can only call or write you to tell you what legal action they plan to take. Remember, sending a no-contact letter doesn’t give you the right to ignore court papers. For example, if you get an Order for Disclosure, telling you to state what money and assets you have, you must send the disclosure to the collector or you may face fines or jail time for contempt of court. See our fact sheet, Can I Go to Jail if I Don’t Pay my Debts?
NOTE: If you don’t pay a bill, a creditor or debt collector can sue you in court and get a judgment. See our fact sheet What to do if You are Sued.
If you don’t answer the lawsuit or if the creditor has a judgment against you, they can try to garnish (take money from) your wages or bank account or force the sale of your property.
See our fact sheet Garnishment and Your Rights.
The law does protect some of your money and property:
You have protection for Social Security, pensions, or veteran’s benefits. You also have protection for SSI, MFIP, GA or other funds you get from a program based on need.
If you work, your net wages are protected up to 40 times the state minimum wage. About $1,520 a month ($380 a week).
All of your wages are protected if you get SSI, MFIP, GA, MA (Medical Assistance), Earned Income Tax Credit (EITC), or any other government program based on need.
All of your wages are protected if you were on any of these programs in the last 6 months. BUT, your wages may only be protected for 60 days if they are in your bank account.
4. Usually your wages can only be garnished up to 25% of your after tax wages.
If all your money is protected, like if your only income is SSI, tell the creditor or debt collector and they may stop trying to collect.
Can my house or vehicles be taken to pay a debt?
- Your house can be taken to pay a mortgage (foreclosure) but it is protected from most other debts. This is because your house has a Homestead Exemption. This means it is protected if you have less than $450,000 in in equity. Equity is the value of your house minus any mortgage you owe.
- The Homestead Exemption does not stop a foreclosure on certain liens that are put on your home, like mortgages, tax liens, townhouse or condo association liens, and mechanics liens.
- If someone has a judgment lien against you, your house is protected unless you sell it or it passes through your estate after you die.
- You can only claim a homestead exemption for the main house you live in.
- You can keep furniture and appliances worth up to $11,250.
You can keep your car that has up to $5,000 in equity. Equity is the value of your car minus the amount you owe on the loan.
But, your vehicle can be repossessed if you do not make payments on the car loan that you used to buy the vehicle. See our fact sheet Your Rights in Repossession.
If your vehicle is modified for your disability, then you can keep it if it worth less than $50,000 in equity.
What is abuse and harassment?
Debt collectors can’t contact other people to tell them about your debt, like your employer, co-workers, neighbors, relatives, or friends.
They can call people to get your home or work address, or phone number, but they can’t say that you owe money.
They can’t tell other people that they are a debt collector unless they are asked. If you have a lawyer, they can’t contact you or anyone except your lawyer.
It Is Illegal for Debt Collectors To:
- Use obscene or abusive language
- Call before 8:00 a.m. or after 9:00 p.m.
- Call you at work if they know your employer doesn’t allow personal or creditor calls
- Take cash without giving you a receipt
- Threaten you with arrest or criminal charges
- Contact you directly if they know you have a lawyer
- Bill you for the debt of a deceased person (unless you are that person’s personal representative)
- Send you a letter that pretends to be from the government, the court, or a lawyer
- Fail to give you the name of their agency
- Threaten to take any legal action that they do not really plan to take
- Give you legal advice, like: “You have no legal defense to this debt.”
Enforcing Your Rights
If a debt collector does any of the things above, keep a careful record of it. When they call, write down the date and time, the name of the caller, and what was said.
If you have questions, call your lawyer, your legal aid office at 1(877) 696-6529, or the Minnesota Department of Commerce at (651) 539-1500 or 1(800) 657-3602.
You can look for help from other programs at www.lawhelpmn.org/providers-and-clinics.
If a debt collector breaks these rules, you can sue. You need to start the lawsuit within 1 year.
To make complaints about debt collectors:
Minnesota Dept. of Commerce
85 7th Place East, Suite 280
St. Paul, MN 55101-2198
Office of Minnesota Attorney General
445 Minnesota St, Suite 1400
St. Paul, MN 55101
(651) 296-3353 (Twin Cities area)
(800) 657-3787 (Outside the Twin Cities)
(800) 627-3529 (Minnesota Relay)
The Federal Trade Commission
Bureau of Consumer Protection
600 Pennsylvania Avenue, NW
Washington, D.C. 20580
Give details about the things that you think violated your rights. Sign and date the letter and keep a copy for yourself.
You can also file complaints online.
Go to https://mn.gov/commerce/. Click on “Consumers” then on “File a Complaint.” Print out a copy of the complaint to keep for yourself.