"and cant pay my bills"
LESSON 8 RUNNING OUT OF MONEY Running out of money The Law WHAT SHOULD I DO IF I CAN’T PAY MY BILLS? Once you get credit it is easy to become overwhelmed. You may spend too much, lose your job, become sick, making it hard to pay your bills on time. The first thing you should do is try to work out a deal with the company or people to whom you owe money. They might be willing to accept a payment plan (smaller monthly payments over a longer period of time) or even accept less than the full amount. If you make a deal, be sure to get it in writing and have it signed by both sides. Above all, do not ignore your bills. SHOULD I PAY SOME BILLS IN FULL? Yes, always pay your rent. Your landlord can evict you if you do not pay your rent in full and on time. I AM GETTING CALLS FROM COLLECTION AGENCIES? CAN THEY DO THIS? WHAT CAN I DO? If you owe money to a business they might try to contact you or have a collection agency contact you. Either way you have the right not to be harassed or abused. Here is what will happen. Written notice. Within five days of its first call to you, it must send you a written notice including the amount of your debt, the name of the company you owe, and the fact that they will assume the information is correct unless they hear from you within 30 days. Disputing a debt. If you disagree with their statement, you must send a letter explaining your disagreement to the collection agency within 30 days. The collection agency must either send you proof of the debt or stop trying to collect. Payment plans. You might be able to set up a payment plan. Many creditors will be satisfied with a smaller payment as long as it arrives on time. Get the agreement in writing. I AM TIRED OF THE CALLS AND LETTERS, CAN I MAKE THEM STOP? You can stop them by sending the collection agency a letter asking them to stop. Date your letter, sign it, and keep a copy. After they receive your letter, they can only contact you to tell you that they are going to stop contacting you and explain what their next steps will be. They might plan to sue you in court. If you receive any court orders, do not ignore them. If you do, you could face a fine or jail time for contempt of court. MY CREDITORS ARE THREATENING TO GARNISH MY WAGES! If you do not pay a bill, a creditor or collection agency may sue you in court and get a judgment. Once they have a judgement, they can garnish your wages or bank accounts. LEGALWAYS LIVING 8-1 LESSON 8 RUNNING OUT OF MONEY Garnishment is a process by which people you owe get a court order that allows them to take money out of your bank account or paycheck without your permission. In some cases, however, wages are exempt, which means that they can’t be garnished. For example, your wages can’t be garnished if, now or within the past six months, you Were released from prison Received public assistance based on need, including MFIP, GA, MA, MSA, GAMC, SSI, VA, Emergency Assistance from any of these programs, or Energy Assistance. HOW DO I GET AN EXEMPTION? At least 10 days before someone garnishes you, they must send you a garnishment exemption notice. Fill out the notice and return within 10 days to stop the garnishment. Hand deliver one copy to the creditor and one copy to your employer or banker. If you don’t do it in 10 days, you can still claim the exemption, but it will take longer. You might get a reduced paycheck and have to ask for a refund. IF I DON’T GET AN EXEMPTION, HOW MUCH MONEY WILL I GET TO KEEP? You must be allowed to keep either 75% or your net wages or 40 times the Minimum wage for each week you work—whichever is more. (Net wages includes regular pay, sick pay, and overtime, minus the withholdings required by law, like taxes and social security.) WHAT IF MY MONEY IS IN A BANK ACCOUNT? Some money in bank accounts is exempt. After your bank receives garnishment papers it must send you the exemption forms within two days. The kinds of income that are exempt are listed on the form (examples include disability insurance benefits, reemployment compensation, public assistance benefits, social security benefits, exempt wages, etc.). Fill out the forms as instructed. CAN A COLLECTION AGENCY TELL MY PARENTS? In general, a collection agency cannot contact other people and tell them about your debt. They can call and try to get your address, work address, and telephone number. But they can’t say that you owe money. CAN THE CREDITOR COME BACK AND GET MY NEW TV? A creditor can repossess the property if he or she has a document that is signed by you which identifies the property, and gives the creditor permission to take it if you default (fail to make payments) on the loan. The property is called collateral and the creditor’s right to the property is called a security interest. This document is usually signed by you when you apply for a loan or credit card. Defaulting on the loan occurs when a payment is missed, late, or partially paid. If your creditor has regularly accepted partial payments, they may have given up the right to repossess. LEGALWAYS LIVING 8-2 LESSON 8 RUNNING OUT OF MONEY HOW DO THEY TAKE MY PROPERTY? They can come and take the property if they don’t breach the peace. They can ask you for the property, but if you refuse to give it back, they have to leave. If you are not there to object, they can take the property back if they don’t have to break into your home or garage. WHAT HAPPENS TO REPOSSESSED PROPERTY? The creditor sells it and applies the money to your debt. The creditor can also keep the property and cancel the debt. WHAT ABOUT BANKRUPTCY? In some cases you might want to consider bankruptcy. Bankruptcy might make sense if you do not see any way of catching up on your bills, and your creditors are taking action against you—garnishing your wages, for example. Bankruptcy will be included in your credit history and will make it difficult to get credit in the future. Contact a lawyer if you feel that bankruptcy is your only option. Portions of this were adapted from “Repossession” and “Your Rights with Collection Agencies” published by the Legal Aid Society of Minneapolis. LEGALWAYS LIVING 8-3 LESSON 8 RUNNING OUT OF MONEY Running out of money Questions 1. What is the first thing you should do if you can’t pay your bills? 2. What is repossession? 3. If you disagree with what a collection agency says you owe, what can you do? 4. Under what circumstances are wages exempt from garnishment? 5. What is a garnishment and how is it obtained? 6. When should a person consider bankruptcy? LEGALWAYS LIVING 8-4 LESSON 8 RUNNING OUT OF MONEY Running out of money Activity: What should you do? When I went into my favorite store a couple of days ago, I was offered 15% off if I would sign up for a credit card. I did and I bought the most I could charge. Now, the bill has come and I have no money to pay it. I think they were stupid to give me a credit card in the first place. What should I do? LEGALWAYS LIVING 8-5 LESSON 8 RUNNING OUT OF MONEY Running out of money Activity: You Decide You don’t have enough money to pay all of your bills this month. What should you do? Look at each option below and list the advantages and disadvantages of each. As you are listing advantages and disadvantages, think about (a) how much money it will cost, (b) how much it will raise , and (c) what might happen if you do it. 1. Take your money and go to the casino Advantages: Disadvantages: 2. Not paying rent for a month Advantages: Disadvantages: 3. Pawn your watch and electronic equipment Advantages: Disadvantages: 4. Not making car payments Advantages: Disadvantages: LEGALWAYS LIVING 8-6 LESSON 8 RUNNING OUT OF MONEY 5. Try to win a product contest (for example, cereal) by buying lots of boxes Advantages: Disadvantages: 6. Take your money and buy lottery tickets Advantages: Disadvantages: 7. Not paying your telephone bill Advantages: Disadvantages: 8. Trying to win a sweepstakes that comes through the mail Advantages: Disadvantages: 9. Not paying your utility bill Advantages: Disadvantages: 10. Paying a portion of your bills and contacting your creditors. Advantages: Disadvantages: 11. Filing bankruptcy. Advantages: Disadvantages: LEGALWAYS LIVING 8-7 LESSON 8 RUNNING OUT OF MONEY 12. Ignoring your credit card bills, planning to pay next month Advantages: Disadvantages: Adapted from a Consumer Law lesson developed by Sam Magavern, Community Legal Education Program, Legal Aid Society of Minneapolis LEGALWAYS LIVING 8-8