This information is intended to provide a brief overview of the law and procedures governing your rights regarding personal debt problems. It is not intended to be a substitute for legal counsel. There are various Legal Referral Services in Colorado, and they can provide you with a list of attorneys in the area who can help you with your rights regarding debt collection and credit errors and bankruptcy. If you need help in this area, don’t immediately file for bankruptcy. Your best option is to contact Consumer Credit Counseling, which can help you work out a debt repayment plan. For more information, contact the National Foundation for Credit Counseling, a non-profit organization that assists consumers in dealing with their credit problems. To find an office near you, call 1-800-388-CCCS (2227), or go to National Foundation for Credit Counseling.

The Fair Debt Collections Practices Act (FDCPA at U.S.C. Sec. 1692) prohibits certain methods of debt collection. This law only protects debtors from unfair practices; it does not erase any legitimate debts you owe. Here are some commonly asked questions and answers regarding your rights under the FDCPA.

No, a debt collector is anyone, other than your creditor or your creditor's attorney, who regularly collects debts for others. Your creditors will typically contact you by phone or letter about delinquent payments. Once your payments are 30-60 days late, the creditor may turn your account over to its lawyer or collection agency. The lawyer or agency is often paid a commission on the amount of debt they are able to collect for the creditor.

A "debt" is defined in the FDCPA as any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services at issue are used primarily for personal family and household purposes. This includes money owed for the purchase of a car, for medical care or for charge accounts.

A debt collector can contact you in person, by mail, by telephone or by telegram. However, you cannot be contacted at inconvenient or unusual times or places. "Convenient" is presumed to be between 8 a.m. and 9 p.m. at your location. You cannot be contacted at work if your employer (i.e. military supervisor or commander) disapproves. If the debt collector knows that an attorney represents you, he cannot contact you directly.

You can stop future contact by writing a letter to the collection agency telling them to stop contacting you. You can also accomplish this by telling them that you refuse to pay the debt. Once you have done this, the debt collector cannot contact you again except to notify you that they intend to invoke a specific remedy. This remedy must be one that the creditor or debt collector usually takes.

The debt collector also can't contact you if you send him a letter saying you do not owe the money within thirty days after you are first contacted. However, he can begin collection actions again if you are sent proof of the debt, such as a copy of the bill.

Debt collectors can contact third parties for debt collection assistance only when: (1) the debtor has given prior consent directly to the collector; (2) the collector has obtained a court order permitting the contact; or, (3) the contact is reasonably necessary to achieve a post-judgment judicial remedy. 

Other than these circumstances, the collector is very limited in who he can contact about your debt. If you have an attorney, the collector cannot contact anyone but that attorney. If you do not have an attorney, the collector can contact other people but only to find out where you live or work. When contacting people for this purpose, the collector generally can only contact them once and he must identify himself and state that he is trying to confirm or correct your location. He must refrain from mentioning the debt and cannot tell anyone other than you and your attorney that you owe money. He cannot mention that he is trying to collect a debt.

Within five days of first contact, the debt collector must send you a written notice telling you the amount of money you owe, the name of the creditor you owe it to, and what to do if you don't feel you owe the debt.

Debt collectors cannot harass, oppress or abuse any person. For example, they cannot use threats of violence or harm to property or reputation, publish a list of consumers who refuse to pay their debts (except to a credit bureau), use obscene or profane language, repeatedly use the telephone to harass someone, telephone people without identifying themselves or advertise your debts. 

Debt collectors cannot use any false, deceptive or misleading representations when collecting a debt. They cannot falsely imply that they are an attorney or government representative, falsely imply that you have committed a crime, falsely represent that they operate or work for a credit bureau, misrepresent the amount of the debt, indicate that papers being sent are legal forms when they are not, or indicate that the papers being sent are not legal forms when they are.  

Collectors are prohibited from saying that you will be arrested if you do not pay your debt; that they will seize/garnish/ attach/sell your property or wages unless the collector intends to do so and it is legal, or that actions will be taken against you that cannot legally be taken. Collectors cannot give false credit information about you to anyone, send you anything that looks like an official document that may be sent by a federal or state court or government or use any false name. 

Debt collectors cannot use unfair or unconscionable means to collect any debt. For example, they cannot collect any amount greater than your debt unless allowed by law, deposit a post-dated check before the date on the check, make you accept collect calls or telegrams, take or threaten to take your property unless it can be done legally, contact you by postcard or put anything on an envelope other than the collector's name and address (even the name shouldn't be used if it shows that the letter is about debt collection).

If you owe several debts, any payment you make must be applied to the debt you choose. A debt collector may not apply a payment to any debt you feel you do not owe. You can also make payment directly to the creditor, instead of to the debt collector.

You have the right to sue the collector in a state or federal court within one year from the date of the violation. If you win, you may recover money from the damage you suffered. Court costs and attorney fees can also be recovered.

 You can also contact state and federal agencies in addition to pursuing private action. A violation of the FDCPA is deemed to be an unfair and deceptive act or practice in violation of the Federal Trade Commission Act. Therefore, the FTC could pursue action. You can contact the main FTC office at (202) 523-3598. In addition, many states have their own debt collection laws. Check with your state Attorney General's office to determine your rights under state law.

Creditors can request an involuntary allotment against your military pay for debts owed. Therefore, members should be aware that they now ignore their creditors at their own peril. The Legal Office has a separate handout on this procedure. Come to walk-in legal assistance hours if you have any questions.

Credit billing errors do occur; they are easy to resolve if you know how to use the Fair Credit Billing Act (FCBA). Congress passed this law to help consumers resolve disputes with creditors and to ensure fair handling of credit accounts.

The FCBA generally applies only to "open end" credit accounts. Open-end accounts include credit cards, revolving charge accounts (such as department store accounts), and overdraft checking. The periodic bills, or billing statements, you receive (usually monthly) for such accounts are covered by the FCBA. The Act does not apply to a loan or credit sale which is paid according to a fixed schedule until the entire amount is paid back

The FCBA settlement procedure applies only to disputes over "billing errors" on periodic statements, such as the following:

• Charges not made by you or anyone authorized to use your account.
• Charges which are incorrectly identified or for which the wrong amount or date is shown.
• Charges for goods or services you did not accept or which were not delivered as agreed.
• Computational or similar errors.
• Failure to properly reflect payments or other credits, such as returns.
• Not mailing or delivering bills to your current address (provided you give a change of address at least 20 days before the billing period ends).
• Charges for which you request an explanation or written proof of purchase.

When many consumers find a mistake on their bill, they pick up the phone and call the company to correct the problem. You can do this if you wish, but phoning does not trigger the legal safeguards provided under the FCBA. To be protected under the law, you must send a separate written billing error notice to the creditor. Your notice must reach the creditor within 60 days after the first bill containing the error was mailed to you. Send the notice to the address provided on the bill for billing error notices (and not, for example, directly to the store, unless the bills that that that is where the bill should be sent). In your letter, you must include the following information:

• Your name and account number.
• A statement detailing the billing error and the dollar amount involved.
• The reasons why you believe there is a mistake.

You should send it by certified mail, with return receipt requested. That way you'll have proof of the dates of mailing and receipt. If you wish, send photocopies of sales slips or other documents, but keep the originals for your records.

Your letter claiming a billing error must be acknowledged by the creditor in writing within 30 days after it is received, unless the problem is resolved within that period. In any case, within two billing cycles (but not more than 90 days), the creditor must conduct a reasonable investigation and either correct the mistake or explain why the bill is believed to be correct.

You may withhold payment of the amount in dispute, including the affected portions of minimum payments and finance charges, until the dispute is resolved. You are still required to pay any part of the bill which is not disputed, including finance and other charges on undisputed amounts. 

While the FCBA dispute settlement procedure is going on, the creditor may not take any legal or other action to collect the amount in dispute. Your account may not be closed or restricted in any way, except that the disputed amount may be applied against your credit limit.

While a bill is being disputed, the creditor may not threaten to damage your credit rating or report you as delinquent to anyone. However, the creditor is permitted to report that you are disputing your bill. The Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants who, in good faith, exercise their rights under the FCBA. You cannot be denied credit merely because you have disputed a bill.

If your bill is found to contain a billing error, the creditor must write you explaining the corrections to be made on your account. In addition to crediting your account with the amount not owed, the creditor must remove all finance charges, late fees, or other charges relating to that amount. If the creditor concludes that you owe part of the disputed amount, this must be explained in writing. You also have the right to request copies of documents proving you owe the money.

If the creditor investigates and still believes the bill is correct, you must be told promptly in writing how much you owe and why. You may also ask for copies of relevant documents. At this point, you will owe the disputed amount, plus any

finance charges that accumulated while it was disputed. You may also have to pay the minimum payment amount missed because of the dispute.

Even after the FCBA dispute settlement procedure has ended, you may still feel the bill is wrong. If this happens, write the creditor within 10 days after receiving the explanation and say you still refuse to pay the disputed amount. At this point, the creditor may begin collection procedures. However, if the creditor reports you to a credit bureau as delinquent, he must also state that you don't think you owe the money. Also, you must be told who receives such reports.

Any creditor who fails the FCBA dispute settlement procedure may not collect the first $50 of the amount in dispute or finance charges on it, even if the bill turns out to be correct. For example, this penalty would apply if a creditor acknowledges your complaint in 45 days (15 days too late) or takes more than two billing cycles to resolve the dispute. It also applies if a creditor threatens to report--or goes ahead and improperly reports--your non-payments to anyone. You also have the right, as more fully described below, to sue a creditor for violation of the FCBA.

Disputes about the quality of goods and services are not necessarily "billing errors," so the dispute procedure may not apply. However, if you purchase unsatisfactory goods or services with a credit card, the FCBA allows you to take the same legal actions against the credit card issuer as you could take under state law against the seller. If your state law permits you to withhold payment to a seller for defective merchandise, or pay and sue for a refund, you might also be able to withhold payment to your credit card issuer. Because state laws on your right to stop payment vary, it is best to get legal advice from your Legal Assistance Office before you do so. However, before you take legal action, you must give the seller a chance to remedy the problem. Also, unless the seller is also the card issuer (such as a company that issued you a gasoline credit card), you must have bought the item in your home state or within 100 miles of your current mailing address, and the amount must have been more than $50.

Yes, you can sue a creditor who violates any FCBA provisions. If you win, you may be awarded damages resulting from the violation, plus twice the amount of any finance charge (but not less that $100 or more than $1,000). The court may also order the creditor to pay your attorney's fees and costs. You may consult your Legal Assistance Office for advice about such lawsuits, but a military legal assistance attorney will not be able to represent you in court. If possible, retain a private attorney who is willing to accept whatever fee the court awards as the entire fee for representing you. Some lawyers may not be willing to accept your case unless you agree to pay their fee--win or lose--or if you will add to a fee awarded by the court but which they believe is too low. Be sure you get a full explanation of what it could cost before you go to court.

For more information on the FDCPA contact: Federal Trade Commission Publications Division, Washington, DC 20580, (202) 326-2222, or go to their website at The Federal Trade Commission and ask for a copy of the brochure "Fair Debt Collection Practices Act."

An error on your credit report can keep you from being able to get the loan you want, buy the house, or obtain the credit card. Complete accuracy is needed because of the importance of these reports. The Fair Credit Reporting Act (FCRA), 15 U.S.C. Section 1681, is intended to protect consumers from having inaccurate information circulated, in order to protect the reputation of the consumer

The FCRA requires credit-reporting agencies to adopt reasonable procedures in obtaining information which is fair and equitable to the consumer with regard to the confidentiality, accuracy, relevancy, and proper utilization of this information. Reasonable procedures of credit reporting agencies to update records have been interpreted by courts to mean what a reasonably prudent person would do under the circumstances. The test the court uses involves balancing potential harm from the inaccuracy against the burden on the credit-reporting agency of safeguarding against such inaccuracy. Therefore, a credit reporting agency is not strictly liable for the dissemination of any inaccurate information, but only must demonstrate a duty of reasonable care.

Practically speaking, you have a right under federal law to challenge items on your credit report. The credit bureau then has a reasonable period of time, usually interpreted as 30 days to decide whether that item should be removed. The credit-reporting agency usually forwards the protest to the credit grantor. If the credit grantor reaffirms the information, the credit bureau almost always sides with the credit grantor.

There are three major credit bureaus - Equifax, Experian, and Trans Union - and they don’t share information. So even if you correct an error with one, you will have to do the same for the other two. Therefore, we suggest you obtain a copy of all three credit reports six months before you apply for a home loan. An error on your credit report can take months to clean up.

Cosigning a loan is serious business. Some studies show that three out of four cosigners of finance company loans are asked to repay the loan. When you are asked to cosign, you are being asked to take a risk that a professional lender will not take. Think about it. The lender would not need a cosigner if the borrower were a good risk.

If you do cosign and your friend or relative misses a payment, the lender can collect from you right away without pursuing the borrower first. And the amount you owe may be increased--by late charges or by legal fees - if the lender decides to sue to collect. If the lender wins the case, he or she may be able to take your wages and property. Do not be pressured into cosigning. Consider your decision carefully--cosigning may not be a good idea. 

Despite these risks, there may be times when you want to cosign. Perhaps your son or daughter needs a first loan, or a close friend is facing repossession, court action, or otherwise needs help. Here are a few things to consider before you cosign:

Be sure you can afford to pay the loan. If you are asked to pay and cannot, you could be sued or your credit record could be damaged.

Consider carefully before you pledge your property, automobile, or furniture to secure the loan. If the borrower defaults, you could lose these possessions.

Ask the lender to establish the specific amount of money that you might owe. The lender does not have to do this, but some will if asked. You may also be able to negotiate the specific terms of your debt. For example, you may agree to pay the principal balance on the loan, but not late charges, court costs, or attorney’s fees. In this case, ask the lender to include a statement in the contract like this: "The cosigner will be responsible only for the principal balance on this loan at the time of default."

Ask the lender to agree, in writing, to notify you if the borrower misses a payment. Notification should come before a late charge is added, or before the loan is "accelerated" (when the whole loan must be repaid at once). This way you will have time to deal with the problem or make back payments without having to repay the whole amount.

Make sure you get copies of all important papers signed by the borrower: the loan contract; the Truth-in-Lending Disclosure Statement; and any warranties for products purchased if it is a credit sale. You may need these if there is a dispute between the borrower and the seller. To ensure that cosigners are aware of the liability they may be incurring, the Federal Trade Commission requires that all cosigners be given the following notice:

• You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility. 
• You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which may increase this amount.
• The creditor can collect this debt from you without first trying to collect from the borrower.
• The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, the fact may become a part of your credit record. 

However, this notice is not the contract that makes you liable for the debt. 

Generally individuals file one of two types of bankruptcy. The first is a Chapter 7, or Liquidation. The second is a Chapter 13, or Debt Consolidation. (A Chapter 11 Reorganization is for businesses.) Attorneys in this area charge anywhere from $300 to $800 for a Chapter 7, with a filing fee of$175. Most attorneys want the fee paid in advance for a Liquidation. A Chapter 13 costs $160 to file and the attorney charges $900 to $1800. These fees are included in the debt consolidation plan.

In a Chapter 7, when the individual files a petition with the bankruptcy court, there is an automatic stay put on all creditors. This means that the creditors have to go through the bankruptcy court to obtain repayment. In some instances if the debt is secured, the creditor can obtain relief from the court. Unsecured creditors like credit card companies will usually get nothing.

The bankruptcy court allows an individual to keep certain assets under exemptions which are spelled out in state law. In Colorado, there is a $30,000 homestead exemption which means that a creditor can not force you to sell your home if there is less than $30,000 equity in it. Other exemptions in Colorado include: household goods up to $1500 in value; wearing apparel up to $750 in value; jewelry and watches up to $500 in value; tools and equipment for the purpose of gainful occupation up to $1500 in value; a motor vehicle up to $1000 in value. Most of these values are calculated using salvage value since there is generally no market for them. However, the motor vehicle value is calculated from the current "Blue Book" unless there is extensive damage to it.

The advantages of filing for a Chapter 7 are that it will clear your debts and you get a "fresh start." In some cases, this may be the best alternative available. Nevertheless, some debts are not dischargeable in bankruptcy. For example, most tax debts are not dischargeable if less than 3 years old. Similarly, student loans fewer than 7 years old are also not dischargeable. Other debts such as child support payments or are not discharged in bankruptcy for public policy reasons. One disadvantage of filing for bankruptcy is that you will have a hard time obtaining credit after the bankruptcy. The bankruptcy can stay on your credit report for up to 10 years. Also, even if you do obtain credit the interest will likely be very high. The Code only allows an individual to file for Chapter 7 once every 6 years.  

A Chapter 13, Debt Consolidation allows an individual to make periodic payments (usually monthly) to pay their debts. The individual, through his attorney, submits his plan to the Chapter 13 Trustee in the state. Creditors have to accept the plan, or they can force the individual to file a Chapter 7. The Trustee only allows an individual to file a Chapter 13 if they have a job which provides steady income. Generally, most individuals should not file a Chapter 13 unless their home is being foreclosed, or they have a large bill which would not be discharged under a Chapter 7, such as a tax bill.

The Air Force policy concerning bankruptcy petitions filed by military members is one of strict neutrality. Air Force members have a statutory right to invoke the procedures of the Bankruptcy Act. No adverse actions may be taken against a member of the Air Force for filing a petition for bankruptcy, receiving a discharge of a debt in bankruptcy, or consolidating his debts under a Chapter 13 bankruptcy plan. Similarly, Commanders and Supervisors may not require members to seek financial counseling assistance before allowing them to file bankruptcy. The assets and protection of rights of individual creditors are matters for the Bankruptcy Court and the Air Force cannot intervene in any matter. Creditors should receive no assistance from the Air Force to collect debts and members should be treated like any individual not in military service. 

Nevertheless, the underlying circumstances of a case may involve such mismanagement of personal affairs or dishonorable failure to pay just debts as to become factors that may form a basis for adverse action against the member. However, the mere filing of a petition in bankruptcy, or receiving a discharge in bankruptcy is not considered "mismanagement" or "dishonorable."