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What are Creditor's Rights?

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  • Written By: Sheri Cyprus
  • Edited By: Heather Bailey
  • Last Modified Date: 26 October 2016
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Creditors who are owed money by debtors have the right to collect what is owed them under creditor's rights law. When a debtor doesn't pay what they owe, due to bankruptcy or for any other reason, a creditor may choose to deal with it inside or outside the courts. A creditor may hire a creditor's rights attorney that specializes in lawsuits against debtors. Most creditors try to contact debtors through notices asking for payment and then hire a collection agency to try to collect the debt through both letters and phone calls.

Collection agencies are governed under the Fair Debt Collection Practices Act (FDCPA). They must follow specific laws when collecting debt for their creditor clients and this includes not abusing or harassing debtors. Under the FDCPA, collection agencies may repeatedly telephone and send demand letters for payment to debtors. The letters must be in envelopes that don't mention a collection agency and phone calls by collectors that are answered by someone other than the debtor can not mention any information about the debt. Rather, the collector must only say that he or she is calling about an important business matter.

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Creditors have the right to file a lawsuit against a debtor and they have specific bankruptcy creditor's rights. For example, creditors have the right to share in the debtor's bankruptcy estate and this may include tax refunds and stock options. Creditors don't have the right to 401(k) plans and some retirement savings plans. A creditor's rights attorney can advise creditors in each state or country because exact bankruptcy laws and rights of creditors vary.

Exact creditor's rights also depend on whether the debt is secured or unsecured. Basically, secured debt always involves property, whereas unsecured debt doesn't. Secured debt means that a loan included collateral to secure it. For instance, a car loan agreement may specify that the creditor has the right to take back the rights to the vehicle if the debtor doesn't make the agreed payments. Unsecured debt refers to monies owing that included no collateral to secure it such as credit card debt.

Creditor's rights in secured debts are well exemplified by mortgages. A mortgage secures the home loan because if it's not paid by the debtor, the creditor can take back the house. Unsecured debt is often more difficult to collect. This type usually involves the creditor sending notices, hiring collection agencies or choosing to file a lawsuit.

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bluespirit
Post 5

@snickerish - I do not know the answer to your question, but I would guess that if they don't have the right to tell others what the phone call is about, they might not be able to ask about what your sister's address is?!

I would just suggest them gaining caller id, and an answering machine so they can begin to recognize the numbers of the creditors that are calling for your sister that no longer lives there.

snickerish
Post 4

My parents get so so many calls from creditors but not because of anything they have done but because my sister lived with them when she became unable to pay some of her debt.

Now she has moved out, but my parents still sometimes pick up the phone when the creditors call. The creditors ask for her address. Is this allowed?

Tomislav
Post 3

I have had my fair share of annoying credit card practices, but I have *never* had a credit card company raise my rate without me knowing either via mail or because of a part of my contract with them such as paying late or missing a payment.

Plus credit cards are known to be different than say a home loan or car loan, they knowingly come with rules and regulations that can change but at least have to change with your knowledge.

With that being said, I am glad that they cannot tell others about the reason for their call; but from some of the stories that I have heard from people actually being bullied by callers I feel that there probably needs to be more details written about what creditors are allowed to say on the phone!

SZapper
Post 2

@JaneAir - I really don't think it's fair to call anyone who works for a debt collection agency scum. To be fair, the job market is rough. I wouldn't blame anyone for taking any job they can get.

Besides, creditors do have a right to be paid back. Despite the fact that their business practices are less than fair, when someone lends you money you need to pay it back.

JaneAir
Post 1

I really don't think creditors should have all these rights. Especially the right to continually call and harass people who are in debt.

We all know credit card companies engage in some seriously shady practices, such as raising the interest rates again and again. They make it impossible to ever pay off your debt by just paying the minimum. Then if you miss one payment or something you're totally out of luck!

I really think anyone who works for one of these debt collection agencies is scum. I doubt they would like it if I called them ten times a day and called their families too!

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