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Understanding the Rights and Limitations of Creditors

Kinnaird Law Firm July 14, 2023

Creditors – Folder with Labeling and Gavel Under both federal and state laws, creditors and debt collectors are permitted to contact debtors and try to recover debts reasonably and ethically. Unfortunately, some non-compliant creditors may try to use unfair, abusive, and deceptive means to recover debts from debtors. If you're exploring your financial relief options and want to know the rights and limitations of creditors, consulting with an experienced Colorado bankruptcy attorney is imperative for detailed guidance. 

At Kinnaird Law Firm, we're committed to offering knowledgeable and comprehensive guidance to clients in debt relief and bankruptcy-related matters. Our reliable team can enlighten you about what creditors are allowed to do and prohibited from doing when collecting debts and explore your possible legal options to seek financial relief. We're proud to serve clients across Colorado Springs, El Paso County, and Douglas County, Colorado. 

Consumer Rights Laws 

There are various consumer rights laws in Colorado and throughout the United States that are designed to protect consumers from defective products and services, fraud, and unethical business practices. Here are some state and federal consumer rights laws: 

Fair Debt Collection Practices Act (FDCPA) 

The federal Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors, creditors, and third-party collection agencies from collecting debts from debtors using unconscionable, abusive, harassing, or unfair tactics. This includes false and misleading representation. 

Fair Credit Reporting Act (FCRA) 

The federal Fair Credit Reporting Act was established to ensure fairness and accuracy and to keep consumer information collected by reporting agencies (including the credit bureau) private. Likewise, the FCRA will help regulate the different techniques used by credit reporting agencies to collect, access, use, or share consumer information made available in their credit or financial reports. 

Colorado State Law 

The Colorado Consumer Protection Act was designed to maintain a competitive and fair business environment and protect consumers from deceptive trade practices of businesses or being targets of fraud. 

Actions That Must Be Avoided When Collecting Debt  

According to the FDCPA and applicable Colorado state laws, when collecting debts or interacting with debtors, creditors, debt collectors, or third-party collection agencies must not: 

  • Misrepresent or use false statements. 

  • Shame or disrespect the debtor publicly into paying their outstanding debts. 

  • Interact with the debtor irrationally. 

  • Threaten to arrest the debtor. 

  • Call the debtor at unusual times or places. 

  • Pretend to work for a public or government agency. 

  • Issue threats of violence against the debtor. 

  • Harass the debtor with endless demand letters, calls, emails, or texts. 

  • Contact the debtor at an awkward place or time. 

Alternatively, creditors can contact the debtor's attorney, file a lawsuit against the debtor, or seek a judgment lien when applicable. 

Filing a Lawsuit 

Under Colorado law, a creditor or debt collector is within their right to file a civil action against a debtor and seek a court order or judgment to collect unpaid debts. In the event of a successful judgment, the creditor may be able to garnish: 

  • 25% of the debtor's disposable weekly earnings, or 

  • The amount by which the debtor's disposable weekly income exceeds 30 times the federal or state minimum wage, whichever is less. 

Seeking Lien Judgment 

A creditor may seek a judgment lien requesting the court to place a lien on the debtor's property, asset, or personal belongings. If successful, the verdict will give the creditor a legal right or claim on the property until the debtor settles their unpaid debt. In addition, the creditor may be able to foreclose the property or force a sale. 

Bankruptcy Effects on Creditor's Rights 

Among the possible options to stop continuous creditor calls or harassment is filing for bankruptcy. Once you file your bankruptcy petition, an "automatic stay" order will be activated, thus prohibiting creditors and debt collectors from contacting or harassing you, garnishing your wages, repossessing your property, or taking any further legal action against you. 

Recourse Options When Creditors Aren't Respecting Discharge 

If the creditor or debt collector disobeys the automatic stay order, continues to contact you, or fails to honor your bankruptcy discharge, you need to act immediately and notify your bankruptcy attorney. Your legal counsel can advocate for your best interest, take necessary legal action against the noncompliant creditor, and help you pursue a solution. 

Protect Your Rights and Your Peace of Mind 

When going through financial hardship, filing for bankruptcy is among the possible options to achieve debt relief and stop creditor calls or harassment. At Kinnaird Law Firm, our attorneys have the resources and skills to advise and guide clients in complex legal matters involving creditors' rights and bankruptcy. Our skilled legal team can assess your available options, walk you through the bankruptcy process, and help you achieve the financial relief you seek. 

Contact us at Kinnaird Law Firm today to schedule a simple case assessment with experienced bankruptcy lawyers. We're proud to serve clients across Colorado Springs, El Paso County, and Douglas County, Colorado.