What are unsecured debts?
Unsecured debts are loans which were given even without a collateral or property set aside specifically for the repayment of a debt. The loan was not made with a link to a personal or real
property which can be taken by the creditor in case the debtor defaults on paying the loan.
What are some examples of unsecured debts?
Credit card debts are usually unsecured debts. This is because you are able to use your credit card just like cash to pay for your purchases for food, gas, or groceries. The bank or credit card company that issued the credit card pays for your purchases and bills you one month later. The credit card company thus extended you a cash loan. One month later, if you pay the entire purchase price which you charged on your credit card, you don’t pay interest. When you only pay a portion of the purchase price or amount due, you will pay interest for the rest of the credit extended to you. If you fail or refuse to pay the amount due to the credit card company, the credit card company will have to collect the debt from you. The credit card company will only collect cash from you – it cannot take properties in exchange for the amount you owe because the loan extended to you was not secured by any property as collateral.
How can creditors lawfully collect from a debtor who has defaulted on
payments on a loan?
Creditors or lending companies usually have collection departments that call and write to debtors to notify them that they have failed to pay the monthly payments due on an unsecured cash loan and to pay the debt immediately. They can also hire credit collection agencies which will collect the unpaid loan. Sometimes, credit companies ‘sell’ the unpaid debts to a debt ‘buyer’. Sometimes, creditors can hire collection lawyers who will first send letters to the debtors demanding payment and if no payment is made, the collection lawyer will file collection cases in court.
The collection agencies or debt ‘buyer’ must be licensed under New York laws to engage in the business of debt collection. In all their correspondences and all the phone calls they make to collect on unpaid
debts, they must identify themselves and identify the details of the debt. They must distinctly provide the name of the original creditor and the original amount due plus detailed information on the interests, penalties, surcharges and other charges.
What should you do when you are faced with a collection matter?
A defaulting debtor will usually feel harassed by credit collection agents. Some threaten debtors and even hound them at home or at their place of work. The first thing to do is to hire an attorney who specializes in collection defense. A Debt Defense Attorney can help you dispute the debt and he can make sure that if the debt is already time-barred, you should not be made to pay it. A collection defense attorney can also help negotiate with the credit collectors to reduce the debt so that you only pay what you owe without all the charges and penalties tacked on to the original debt.
We at the Maxwell Law Firm PLLC, assist in client debt settlement, foreclosure defense, tax collection defense, filing for Chapter 7 and 13 bankruptcy, and mortgage home loan modifications. Contact us and speak to our competent and experienced New York Bankruptcy Attorney so that you can get the debt relief you are seeking. Please give us a call at 718-701-0095 to discuss your options.