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What Creditors Can And Cannot Do In NYS

Creditors can be sharks — but so can the recipient of a loan. That’s why both parties have legal obligations, responsibilities, and protections. Regardless of whether you’re a creditor or the recipient of a loan, you should retain legal counsel. This is because knowing what rights and protections the “opposition” enjoys is important, especially if you believe a particular case will result in a courtroom appearance.

Your creditors rights include the legal option to sue to recoup monies owed, selling debt to a third party, or turning over evidence to prosecutors during criminal proceedings if a fraudulent loan was taken out. Creditors have the right to contact someone directly when owed a debt, both through the mail or over the phone. But what are some laws with which they must comply?

Before obtaining a judgment in court, a creditor must always first speak with your employer. A creditor cannot make illegal threats or lie to obtain monies owed. A creditor cannot imply or ask for more money than owed. A creditor is also barred from speaking or communicating in such a way that would make it seem like a judicial entity. For example, your creditor cannot misrepresent themselves by suggesting that a court judgment will be rendered. Creditors are also barred from communicating too often or at strange hours — because this is harassment

Although a creditor must notify your employer that you haven’t paid what you owe before proceeding to court, they cannot actually appear at your workplace to ask for payment. They can call. They cannot show up to harass.

If a debt collector threatens to become violent, calls repeatedly in a single day, uses abusive language, or threatens to have you arrested — then they are acting outside of the law. You can’t be arrested for debt unless you fail to appear in court (and then you may be arrested for failure to appear in court, but that’s a separate infraction). They do have the right to pressure you in other ways. This means frequent mail, or threats of a lawsuit.  

Did you know that unpaid debt has a statute of limitations? That’s right: debt actually expires. After this length of time, you can no longer be sued by a creditor who wants that debt repaid. But they still have the right to seek repayment — even if they cannot do it in court. Of course, before that debt expires, the creditor does have the right to sue. Lawsuits can lead to the garnishment of wages. Keep in mind that failure to appear in court (in addition to an unlikely arrest warrant being placed against you) will almost always result in a default verdict against you.

Both creditors or debtors have the right to renegotiate what is owed. Collectors want to be paid — and if they realize that full repayment is becoming less and less likely, they might want to renegotiate a lower payment. This often works in the best interest of both parties.