I'm behind on my bills, and I've been hoping to catch up. However, debt collectors are mailing notices and calling my house. Is it okay if I turn off the phone and don't acknowledge debt collection calls? I'm not sure what happens if you ignore debt collectors.
It depends. Dealing with growing debt is difficult, so wanting to ignore debt collectors is understandable—and sometimes, not acknowledging debt collectors can be the right thing to do. Before making that decision, determine if you'll be able to pay in the future or if you'll be filing for bankruptcy.
If you'll use bankruptcy to wipe out or "discharge" debt, your strategy of ignoring creditors will work fine. When you're going to get rid of debt that way, there's not much reason to talk with debt collectors, and answering calls from debt collectors can make things work. Debt collectors know bankruptcy will wipe out the debt and will often double down on debt collection efforts—you probably don't want to be harassed even more.
If getting rid of debt in bankruptcy isn't an option, and you'll have the funds to pay your debt in the future, consider talking with your creditors. However, you'll likely want to wait until you develop an action plan. The timing—and your situation—is everything. Here are a few things to consider.
If you're not employed or making very little, and you don't have any valuable assets a debt collector can take, you likely don't need to worry about repaying your debts. Debtors like you can ignore creditor calls—you're judgment proof.
People who are judgment proof can ignore creditors because debt collectors can't collect from judgment-proof people. But being judgment-proof is rare. So before assuming you're a judgment-proof debtor, you'll want to know what a creditor might be able to take to satisfy a debt, and here is how you do it.
Find out the types of property your state lets debtors protect from creditors. Every state has laws protecting or "exempting" a debtor's property like clothing, household goods, some equity in a car and home, and a retirement account.
But exemption laws vary widely. Here's where you'll find your state's exemption laws (exemption laws apply during collections and bankruptcy).
Also, don't assume you're judgment-proof unless you're sure your financial situation is permanent. Even though most creditors must file a debt collection lawsuit and get a money judgment before taking your property with wage garnishments, bank levies, and property seizures, money judgments last for years. And the interest on judgment debt accumulates the entire time the debt remains outstanding.
Debt collectors rarely give up. Here are some things to be aware of while figuring out how to pay your debt or whether you should discharge your debt in bankruptcy.
Next, you'll want to consider whether you can get the debt relief you need by filing for bankruptcy. Chapter 7 bankruptcy will likely be a good option. Debtors can wipe out qualifying debt, like medical bills, credit card debt, personal loans, and more, in approximately four months without paying anything to creditors.
If you make too much to pass the Chapter 7 means test or have a house, car, or other property you'd lose in Chapter 7, Chapter 13 bankruptcy will likely be a good choice. Find out what you'll pay in a Chapter 13 plan.
And filing for bankruptcy stops debt collectors almost instantly. Creditors and debt collectors learn about the automatic stay put in place by the bankruptcy court shortly after you file and must stop most debt collection actions immediately.
Ignoring a debt collector isn't always a good strategy. You should call a debt collector back in these two instances:
Many people are uncomfortable asserting their rights or negotiating lesser amounts with debt collectors. An attorney can help.
We wholeheartedly encourage research and learning, but online articles can't address all debt, credit, and bankruptcy issues or the facts of your case. The best way to protect your assets from debt collectors and in bankruptcy is by consulting with a local bankruptcy lawyer.