Imagine being a senior citizen living on Social Security and perhaps a small fixed pension and trying to deal with the rising costs of living. Or imagine being a disabled person with no hope of earning enough to make ends meet.
You've been forced to use your credit card to survive, and the balances have piled up. Creditors have little hope of collecting from you, a person with few assets and only government benefits as income. But how do you stave off the harassing calls?
When most people get into debt trouble, I recommend they contact the National Foundation for Credit Counseling at 800-388-2227, a number that will connect them to the nearest local office of this trusted nonprofit. There they can get free or inexpensive counseling, or enter a debt repayment program in which creditors agree waive late fees, lower finance charges and accept a lower payment, which is made through the agency.
It may take years, but working people can typically make their way out of debt.
Many seniors and disabled people on fixed incomes, however, are trapped. And they are frequently harassed by debt collectors. Advising seniors and disabled people of limited income to just hang up doesn't ease their anxiety.
One option is to invoke the protections of the federal Fair Debt Collection Practices Act. That's the approach taken by Debt Counsel for Seniors and the Disabled (www.debtcounsel.net), a law firm based in Chicago.
The debt counsel steps between the debtor and the debt collectors, protecting the debtor from harassment and calls, telling the collectors, in effect, they have little hope of getting blood from this particular stone. Once a debt collector is notified in writing that the debtor is represented by counsel, the collector cannot contact the debtor.
That does not mean the debtor cannot be sued, but, depending on a debtor's age, assets, income and disability status, the collectors may be discouraged. Government pensions and Social Security cannot be garnished as a paycheck can, and in some states a debtor's home and other property are protected.
The key to the process are state laws that say creditors can no longer sue a debtor after a statute of limitations has passed. For instance, in Illinois, if no payment on a debt has been made in five years, the debtor cannot be sued. Florida declares debts uncollectable by lawsuit after four years. In Texas it is four years, and in Tennessee it is six years. (Note: Making any payment on a debt resets the timetable in the statute of limitations.)
Clients are instructed to get information from collectors so the debt counsel can send an official letter of representation. If the collection attempts persist, DCSD will file suit against the collector.
Once the statute of limitations has passed, a collector cannot threaten to sue or place liens. And if anyone tries to harass the debtor in violation of the collection practices act, the former debtor can contact his or her state attorney general and report the collection attempts. Then, the uncollected debts roll off the credit report in about seven years (vs. 10 years for a bankruptcy).
DCSD charges a one-time set-up fee of $125 to $250, depending on the amount of the debt and the income of the person seeking help. It also charges an ongoing monthly fee of $25 to $45 per month. At the end of the period, the debt counsel will write a “goodwill” letter to a future credit grantor or landlord, advising of compliance with the process.
Could you do this on our own, without paying any fees? Sure. But impoverished seniors and disabled people have enough to worry about. But if politicians can use the laws to avoid debt repayment, surely seniors and disabled people should get top legal advice to do the same. And that's The Savage Truth.
Terry Savage is a registered investment adviser and the author of four best-selling books. She responds to questions on her blog at TerrySavage.com.