Don't allow debt collectors to bully you

It's critical that you not be coerced into paying what you cannot afford

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question for the expert

Dear To Her Credit,
Is there a minimum you can pay on a defaulted credit card to keep from having your wages garnished? I have a credit card balance of $1,070. A man from a collection agency called and wanted me to pay the account in full. I told him I do not have that kind of money. He wanted to know how much money I have in my bank account, and I told him I have $22, maybe $23. He informed me that the credit card company wants to garnish my wages, and he gave me three options: pay $507 now and $50 a month until it is paid off; pay $811.42 now as a settlement offer; pay $101 a month for 10 months. I informed him that after I pay all my bills for the month, I have $140 left for gas and groceries. I was told that the third offer of $101 a month for 10 months was my final offer or they will do a legal demand. I asked the man to ask them for another offer, and the third offer was the final offer.

I said, "So out of the $140 I have left every month for gas and groceries you want $101 of it?" He said "yes." What are my options, if I have any at all? -- Cheryl

Answer for the expert

Dear Cheryl,
There is no magical minimum payment to keep creditors from taking legal action. If the minimum payment is $10 and you pay $9, you're in default. As a practical matter, however, small payments are vastly preferable to creditors than no payments, so they will often delay action if you make some payment every month.

Your two basic options now are to continue to allow this bill collector to bully you or to put a stop to it and preserve your rights under the Fair Debt Collection Practices Act. Creditors have a right to try to collect what is due. They do not have the right to scare people in to thinking they won't be able to eat or fill their cars with gas for the next year.
Talking to him by phone puts you at a disadvantage. Notice how he was able to intimidate you and ask things that were none of his business. (I'd have asked him what he had in his checking account, just to see how he likes it!) Even if you had come to an agreement with him over the phone, how would you prove it? You should deal with collection agencies by mail only.

Here's how to stop talking to a bill collector:

1. Next time he calls, tell him not to contact you by phone again. He must comply.
2. Download a basic cease-and-desist sample letter, fill in the blanks, and send by certified mail with receipt requested.

That stops the phone calls. Next, you need to take the threat of garnishment seriously.

The company can't garnish your wages without going through legal processes, and that takes time. Even then, the amount they can take is strictly limited by law. By the time you claim exemption for your minimum living expenses, they won't be getting nearly what they want.

However, eventually they can take you to court to get their money. State laws vary, and you'll need an expert on local laws on your side to keep that from happening or to protect your interests when it does.

Don't be tempted by advertisements for easy bankruptcies ($1,070 is much too small an amount to warrant bankruptcy), and avoid for-profit debt consolidators and similar programs.

An accredited counseling agency can show you options for dealing with your debt and help you avoid garnishment of your wages.  Choose a credit counselor from the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies

See related: Debt collection sample letters, Know your rights: Fair Debt Collection Practices Act, Garnishment: How it works, how to avoid it 

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Updated: 01-21-2018