Debtor rights protect borrowers from abusive actions by creditors during debt collection, bankruptcy, and lawsuits. These rights include the right to contest debts, file for bankruptcy, and not be evicted from their homes. Debtors can also sue creditors for violating their rights and may be compensated for legal fees.
In general, debtor rights are the rights of a debtor or a person who has borrowed a loan from a creditor. These rights ensure that creditors, such as banks, organizations and individual lenders, do not take abusive or unreasonable actions against debtors when it comes time to repay the debt. Situations that may trigger these rights include debt collection, bankruptcy, and lawsuits. Many countries have a section in their constitution that extensively discusses debtor rights, called the Fair Debt Collection Practices Act (FDCPA).
Debtors are usually given a certain period in which they are expected to pay their debts. Creditors can be abusive towards debtors, especially when they are unable to pay on time. In these cases, the debtor’s rights include filing a complaint against a creditor for excessive actions such as calling at inappropriate hours, threatening and humiliating family members, or using profanity during arguments. A debtor also retains the right not to be evicted from his home when he is unable to pay the debt, as well as possession of his chattels or other assets. He also has the right to forward a written warning to the creditor so that he suspends all communication that does not involve the recovery of the credit.
Debtors also have the right to contest their debts, and the US FDCPA requires creditors to remind debtors of this right. The debtor’s dispute rights may apply in situations where he has already paid his invoices and the debt collector is still contacting him, or when he wants to dispute the amount of the debt declared. In some cases, a debtor may also dispute a debt that has a “time barred” meaning that the claim has a due date where the debt collector can get the debt and the due date has expired.
In connection with disputing the debt, the debtor is advised to give written notice to debt collectors to cease all communication, as well as inform the debtor that they will cease to collect the debt, or that they will take legal action against the debtor. If the creditor does otherwise, the debtor has the right to sue the creditor. He can be compensated for legal fees and other court costs.
If the debtor has no chance to repay his debt, he has the right to file for bankruptcy. In the United States, debtors can choose between a liquidation process or a repayment plan, according to the law. With regard to bankruptcy, a debtor’s rights may include not having to repay creditors marked as extinguished and choosing which creditor to repay. The debtor may also be eligible for an “earnings plan” that redirects his partial wages to pay off debts.
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