In addition to taking a heavy toll on the health of our national community, it has adversely affected our country’s economy.
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Many businesses are experiencing a decline in consumer activity. As a result, revenue is dwindling.
So, if you own a business you might be worried about how to manage it during this unprecedented crisis. Trust me, you need to plan instead of panicking. There are many ways to help your business survive COVID-19 and protect it, along with your employees.
But first, make sure to pay your bills on time. If you don't, your creditors might mark delinquency on your credit report, and your debts might be submitted to collection agencies after a certain time. Yes, you heard it right! Debt collections continue amidst the outbreak of COVID-19.
So, what if you've already missed payments and recently been contacted by debt collectors? How will you deal with them during this stressful pandemic? It's very important to realize that you have rights.
First of all, there's no need to pay as soon as you receive a collection call because debt collectors often take advantage of adverse situations. With that in mind, follow these measures:
Ask for the details of the debt collector, such as the name of the caller and the debt collection company, its address, etc. If the collection company is legitimate, the collector will provide the details.
Under the FDCPA (Fair Debt Collection Practices Act), you can request a debt validation letter from the collector. The letter will contain the information about your original debt amount along with other charges levied by the collection agency, if applicable. Usually, you'll receive the letter within five days from the initial contact. If you don’t, you have up to 30 days to send a letter requesting a debt validation letter.
Don’t admit the debt unless it’s proven by the debt validation letter. Debt collectors often call for making payments for debts that have passed the statute of limitations or that don’t belong to you or are already paid. So, don’t readily admit that the debt is yours. Ask for the debt validation letter first, and then act accordingly.
Don’t reveal additional information about your current debt, income, and other finances. Debt collectors might gather some of the information from your credit report and use it to force you to make immediate payment, but remember, you don’t need to provide these details over the phone. So, hang up if necessary. Your conversation with the debt collector should be short but informative. Take notes, like the name of the collector, collection company, debt amount, etc., while communicating.
After receiving the debt validation letter, if you find out you don’t owe any or some of the debt, dispute it as soon as possible. Send a letter to challenge the validity of the debt with supporting documents. Keep in mind you have up to 30 days from receiving the validation letter to dispute the debt.
Due to the outbreak of COVID-19, some states have recommended stopping debt collection activity for the time being. So, check with your state's attorney general to learn if there are any recent updates about debt collections in your state. Plus, some states such as California, Alabama, Alaska, and some cities like Los Angeles and San Diego have temporarily halted evictions, foreclosures, etc. So, check with your local and state governments to find out if there is emergency protection due to the pandemic.
Is it possible to stop debt collectors from contacting you? Yes, it is! If you're exhausted by incessant collection calls, you can mail the debt collectors a letter to request that they stop calling you. I would suggest sending a letter via certified mail and keeping the return receipt as proof that the collector has received it.
Of course, stopping collection calls doesn’t mean that you don’t owe the debt anymore. But, you might get a temporary break from the incessant collection calls. Again, you will still owe the debt, and the debt collection agency might file a lawsuit against you to collect it. So, if you find that you really owe the debt, it’s best to pay it off as soon as possible. If you need help to do so, you can seek debt relief assistance.
The bottom line is that you have to handle the situation efficiently. You might be worried about your business during this pandemic. And a debt collection call might become an added burden. I hope, now, you understand how to deal with the debt collectors during the pandemic. The key is to stay calm.
Lastly, stay safe and follow the precautionary measures recommended by the Centers for Disease Control and Prevention (CDC). And, if possible, help others during this pandemic.
You may disagree that you owe any money. You may have a defence to a debt if, for example, you agreed to a contract but:
- you were told something that was not true (you were misled into signing)
- you were forced to sign or were taken advantage of (even by a family member)
- a law has been broken.
If you think you have a defence or you disagree with the debt get legal advice fast. You only have a short time to act. You need to file a defence in court. You can get legal help to do this.
You get a payment from Centrelink or Workcover
If your only income is from a Centrelink payment, a court will not make you repay your debt from this income. Workcover payments are usually protected too.
You might also be judgment proof. This is where your only income is a Centrelink or Workcover payment and you:
- do not own and are not buying a house
- do not own any significant assets, for example, savings or expensive antiques. Basic household goods, such as your fridge or washing machine, are not significant assets
- own one registered car worth less than $7500.
However, if your income is protected but you decide to apply for an instalment order at court then you lose this protection.
Your debt is too old
You may not have to pay an old debt if for six years you have not:
- made payments on the debt
- said in writing that you owe the debt
- had any court orders made against you.
This is called a statute barred debt.
If you are not sure if your debt is statute barred get legal advice before you speak to your creditor or make repayments.
Note: The period is 15 years, not six years, where:
- the debt is secured by a mortgage over property
- there is already a court order to repay.
Where there are mortgages over property, the law is complicated so get help. To find out if an order has been made about your debt you can get a copy of your credit record or contact the Magistrates’ Court.
If the creditor asks you to pay an old debt, get other support. They must prove that the debt is yours and less than six years old (or 15 years old in some cases). If they cannot, and you have not agreed you owe the debt, or started to pay some of it, they cannot force you to pay.
If the debt is statute barred, then this is a defence if the creditor goes to court.
You are or may become bankrupt
It is common for people to get into debt because they are trying to pay off too many things at once. Sometimes an offer of part-payment can work. Or, as the debts pile up, you might choose to become bankrupt.
Bankruptcy gives you a legal right to protection from your creditors. You hand over control for most of your debts and significant assets to a bankruptcy trustee. Not all debts will be cancelled by bankruptcy.
Get other support for debt and financial issues.
Your options before a court order or judgment
Once you know your rights, write to the creditor to explain why you think you don't have to pay. For example:
- you legally do not have to pay the debt (for example, if the debt is an old debt you may be statute barred)
- they will not be able to get money from you (for example, if you are receiving payments from Centrelink or Workcover you may be judgment proof).
You need to be certain that your debt is statute barred or that you are judgement proof before you write to the creditor. If you are not sure, get help from a financial counsellor or one of the free services listed in Other support for debt and bankruptcy. The creditor may still start court action. If so, get legal help.
Is the debt gone forever?
Not always. If the debt is statute barred, or your bankruptcy period has passed, then it is probably gone.
Otherwise, if you get money in the future – for example, if you are on Centrelink payments now but get a job later – the creditor may be able to get back the money you owe them.
Any remaining debt will get bigger because interest will be added, so the creditor may get back more money than you originally owed.
Other support
Know your rights before you do anything. Find out how you can get other support for debt and bankruptcy.