If you are a senior citizen who is having a difficult time repaying unsecured debt, it is vital that you understand what can—and cannot—happen to you if you can’t pay. Knowing how creditors may behave when trying to collect on a debt will give you the confidence to communicate and negotiate with them effectively.

Original Creditors Versus Collection Agencies
The first thing you should determine is whether the business you are dealing with is the original creditor or a collection agency. Since these two types of creditors are regulated differently, you’ll need to know the right laws for each, and which agencies to contact if you have problems with their collection methods.

Original Creditors
An original creditor is the business with which you started and still have a relationship. It could be a department store, doctor, credit card company, or financial institution. If the debt is still with that business, then that is whom you are going to work with.

Original creditors must comply with state law when collecting a debt. While most states’ laws closely mirror federal law, each state has slight legal variances. Contact your state Attorney General’s office to learn the exact law for where you live.

The collection practices of original creditors are often less confrontational than those of collection agencies. This makes sense, since it is in the company’s best interest to maintain a positive business relationship with you, particularly if you are a long-time customer. If you are unhappy with their collection practices and believe they have overstepped their legal boundaries, speak up! Contact them and explain why you are displeased and that you want the action to stop. If they continue to break the law, however, report them to the Better Business Bureau and your state’s Attorney General, who will investigate the matter.

Collection Agencies
If your debt goes unpaid, it will very likely be sent to a collection agency. Sometimes collection agencies are under contract with the original creditor (in which case they must abide by your state’s guidelines), other times debts are bought outright. If your debt is sold to such a business, collectors must abide by a federal law called The Fair Debt Collection Practices Act (FDCPA). Regulated by the Federal Trade Commission (FTC), this law limits the way third-party collectors do business.

Many seniors—and consumers in general—are intimidated by collectors. Unlike original creditors who want to keep you as a happy customer, these businesses are only interested in one thing: collecting what is owed. However, as scary as they can sound, they really are strictly regulated. Among other things, they are not allowed to:

• Call you repeatedly
• Call you before 8am or after 9pm, or at any inconvenient time
• Call you at work if you tell them it jeopardizes your job
• Discuss your debt with anyone other than your spouse without your permission
• Use profanity
• Misrepresent themselves
• Make false threats

You are under no obligation to speak with collectors, particularly if they are making you uncomfortable or frightened. Do not be afraid to excuse yourself and hang up the phone.

Some disreputable collectors may make false threats with the hopes of scaring you into sending some money. However, no matter what they say, rest assured that you cannot be sent to jail for unsecured debts. No one can take money from your accounts or sell your property either, unless you’ve lost a lawsuit first. Making these empty threats is illegal too—and the collector may be fined for such behavior. Report conduct violations to the FTC.

If you really want the calls and letters to stop, the FDCPA gives you the right to send a letter to the collection agency stating that you want all communication to end. This is called a “cease and desist” letter, and should be used only if you are very sure you won’t be sued or you want your day in court. Upon receipt of the letter, the collector has only two choices: end all communication for good, or begin legal action.

Legal Action
If you owe money for an unsecured debt, being sued is a very real possibility. If the case goes to court and the creditor wins, you can be held liable for not just the original debt, but also a whole host of assorted court costs. To collect, the creditor may:

• Take up to 25 percent of your wages until the debt is paid (a wage garnishment)
• Force the sale of valuable assets, including expensive electronics and heirlooms, or take money out of your checking or savings accounts (a levy)
• Place a claim against such property as a home or vehicle so when you sell it, the portion of what you owe will go to the creditor (a lien)

If you are concerned about getting sued, know that even if you have a job, a portion of your income is protected from garnishment, as is Social Security income and most retirement plan distributions. And if you don’t own any expensive property or have a substantial amount of cash tucked away, then liens and levies are irrelevant. If you are worried about losing your home in a lawsuit, you can probably relax—forced home sales are very rare.

Many seniors who are in a financial bind are what is considered “judgment proof.” That is, if you have no income or assets to take, then a lawsuit is not going to help them recoup what is owed. This does not mean you can’t or won’t be sued. It means that if you do not have anything, nor will ever have anything, you should make that perfectly clear to the creditor as soon as you can. They may decide against legal action, consider the debt uncollectible, and drop the matter for good.

Your Responsibility
So what are your responsibilities when it comes to debt? When you borrow money, the agreement is that you will repay it according to the creditor’s terms. Therefore, it is up to you to monitor your account, manage your money, contact the creditor at the first sign of trouble, and do your best to work something out if you can’t pay as agreed.

While creditors are not obligated by law to accept anything less than what they are asking, they very well may consent to a reasonable payment plan, or possibly even settle for less than the amount owed if offered a lump sum. Understanding your legal rights and the consequences of not paying will help you effectively work with all types of creditors.