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A consumer may negotiate with creditors to settle his debts by paying less money than what is owed, a process called debt settlement. Debt settlement laws offer consumers protection on accounts like credit cards and personal loans.
In Florida, settlement is an option for consumers who are falling behind on their payments. With the possibility of saving money, consumers may find the downsides of settlement acceptable. Downsides include an adverse effect on a debtor's credit score and the possibility of lawsuits from creditors seeking the full balance. While all states follow federal laws protecting debtors from harassment and abuse from collectors, Florida has extended those restrictions to original creditors, as well, providing another layer of debtor protection.
Statute of Limitations
Florida, among other states, has laws that govern the time limits in which either party may file civil suits regarding past contracts. Florida's statute of limitations on debt is five years, according to state statute 95.11. After five years, debt collectors may not sue debtors for nonpayment of credit card bills. These debts are then considered "time-barred debts." When a debtor is sued on a time-barred debt, the debtor may have the case dismissed by letting the judge or court know that the debt in question is time-barred.
Although a debt collector may not threaten a debtor with a lawsuit on a time-barred debt, the statute of limitations does not stop any collectors from attempting to collect. Beware of "re-aging" of old debts. By acknowledging or paying on old debts, consumers may unknowingly reset the clock on the statute of limitations. Any activity on an old account may cause the debt to be re-aged.
In some instances, state courts may announce a ruling that may take precedence over the statute of limitations, making the time limits on debts either earlier or later than state law. In these cases, court rulings in which a creditor files against a debtor, the statute of limitations will likely be ignored and the court's judgment enforced.
Homestead and Garnishment Laws
Florida laws offer a high level of protection for debtors' homes and wages, giving Florida debtors strong negotiation options with their creditors. If a debtor is not protected, she may be ordered by a judge to take a number of steps to pay back her debt. These could include having employers set aside wages until the debt is paid, known as garnishment, and the seizing of assets such as bank accounts. Florida laws protect the main provider in households from wage garnishment unless she authorizes such action in writing or fails to file for the "head of household" exemption. Florida debtors also have some protection from having the courts enforce the refinancing or sale of a property in the event of a lien. With some exceptions, as long as debtors file a homestead exemption, their homes are protected. Debtors should consult an attorney to make sure they qualify for and claim these exemptions.
When it comes to collecting credit card debt, Texas laws impose extreme prohibitions on creditors seeking to collect a debt, even if the credit card company gets a civil judgment against a debtor for a legitimate debt. Unlike most states, which permit private creditors to garnish wages and other income, Texas law permits credit card companies an extremely limited number of legal options to collect post-judgment debt. For this very reason, many debtors in Texas are described as "judgment proof."
Secured v. Unsecured Credit
It's important to understand the difference between secured debt and unsecured debt, such as that owed to a credit card company. Secured debt is a debt that you take out for a specific tangible item, such as a car, home, furniture or a household appliance. If you default on a secured debt, the item can be repossessed. A bank can foreclose on your property, a car dealership can take back a car, and a local business can obtain other goods sold to you on credit through the store. However, unsecured debt is debt accrued through credit card purchases for a variety of goods and services. A credit card company cannot repossess any item that you purchased. To collect a debt, the credit card company must file a suit against you in court for the money you owe.
Wages cannot be garnished by a credit card company in Texas. Most states allow private creditors to take up to 25 percent of a debtor's disposable weekly earnings or 30 times the weekly federal minimum wage (in conformation with Title III of the Consumer Credit Protection Act) after the creditor gets a civil judgment against the debtor. Texas is one of a handful of states that opted out of federal law authorizing states to allow credit card companies to garnish income. In Texas, the only type of wage garnishment will typically be when child support is in arrears. Also, the federal government may garnish wages for back taxes owed or a student loan in default.
Can a Credit Card Company Take My Home?
In Texas, a credit card company cannot take your home or place a lien against it if you claim it as a homestead. In Texas, the only time a homestead is subject to a lien is when the homeowner fails to make mortgage payments, owes ad valorem or federal income taxes, fails to pay a contractor (in which case the contractor can place a mechanic's lien on the property) or defaults on a home equity loan.
The only legal way a credit card company can collect a debt post-judgment is to garnish the money in a debtor's bank account, provided the debtor has not filed for bankruptcy. If the debtor has no bank account, the creditor has no way of enforcing a civil judgment. Given the strong protection given to debtors in Texas, most credit card companies opt to negotiate the amount of a debt rather than pursue a judgment in court.
Harassment of Debtors
The federal Fair Debt Collection Practices Act prohibits credit card companies from engaging in illegal methods of debt collection, harassment or threats. However, the state of Texas strengthens debtor protection by applying its own set of laws. For example, a credit card company cannot threaten to garnish the wages of a debtor or take a debtor's home. A credit card company or collection agency representing it cannot make repeated calls that cause a phone to ring consistently, nor can the creditor threaten to charge the debtor with a criminal act. Any creditor who engages in any of the behaviors in Chapter 392 of the Texas Finance Code is guilty of a misdemeanor offense, punishable with a fine of $100 to $500 per violation, as long as the charges are filed within a year that the illegal action takes place. Additionally, the debtor can seek an injunction from the court against a creditor and sue for actual damages.
Reporting Credit Card Company Harassment
If you are illegally harassed or threatened by a credit card company or third-party agency representing the company, or if the credit card company engages in any of the collection methods listed in the Texas Finance Code, contact the Texas Attorney General's Consumer Protection Hotline at 1-800-621-0508 or the Consumer Assistance Hotline of the Office of Consumer Credit Commissioner at 1-800-538-1579. You can also file a complaint against the creditor with the American Collectors Association of Texas.