You are behind on a credit card or other unsecured loan (a loan that has no collateral like a car, boat, or house). And you got the first call from a collector. What is your next step? Can they put you in jail? Can they sue you? Can they threaten to call your boss and fire you?

Since you had 12 credit cards and a personal loan in default in 1998 and 1999, I know what you’re going through. The fear of the unknown is probably too big for you right now. Get some peace of mind! I’ll explain what can and can’t happen to you.

1. You will not go to jail for defaulting on your loan.

The police will not show up at your door with handcuffs. We do not have a debtor’s prison in the United States. In fact, it is a violation of the FDCPA (Fair Debt Collection Practices Act) for someone to threaten to arrest you!

2. Debt is generally not sold to a collection agency until it is six months past due.

Your creditor hopes to get payment from you. But after 180 days, you have to clean your books. You will then transfer or sell your debt to a collection agency. This is called a a lot of. This does not mean that your debt has been eliminated! It is an accounting term; your debt still remains.

3. You can control the collector’s phone calls to you.

Collectors may only contact you during reasonable hours, which is generally 8 am to 9 pm, your business hours. If you no longer want to be called, whether at work, home, or both, you must obtain the collection agency’s mailing address and submit a notice to stop calling, WRITTEN. Some collection clerks are good at putting notes in your file to stop calling, but many are not good at this. I recommend that you send this Certificate with Proof of Shipping in case they keep calling you. That way, you have evidence to threaten them with legal action for violating the FDCPA.

4. You can monitor the collector’s shipments to you.

Just like phone calls. If you send them a written notice not to contact you by mail, they should stop. Although legally they can send you two more notifications. First, they received your notification and will stop contacting you. Two, they are taking action against you, like a lawsuit. Everything else will stop.

5. They will contact their relatives, employer and possibly friends.

Usually only if they can’t find you. This is called hop tracking. Legally, the collector can only discuss the debt with you, so they will use phrases like “It is very important that you speak with ____” or “Please have ____ call me as soon as possible.” They will try to get your phone number or address.

Your family and friends can tell the collector to stop calling them.

If your employer doesn’t want your phone interrupted while you’re on duty, the collector is supposed to stop calling. Which makes sense because the collector has no chance of getting any money from you if you get fired!

6. The collector cannot threaten to sue you.

The key word here is “threaten”. If the collector has started legal proceedings to take you to court, then he can tell you because it is a fact, not a threat. So if you get this call or letter, please take it very seriously.

7. If the collector wins in court, you will get a judgment against him.

The judgment is what allows a collector to legally garnish your wages, garnish your bank account, encumber your home, and even sell your car to collect the debt. You cannot garnish social security payments, retirement accounts, disability payments, etc.

A collector generally won’t spend the money to take you to court if you don’t have assets that you can access. This is called being judgment proof. So if he is unemployed and has few assets, the judgment is bark not bite.

Hopefully this alleviates the fear of the unknown for you. So if a collector calls, you want him to stop? Do you want to negotiate the debt with him? Does he see himself as judgment proof, so the debt will never be collected? He now knows what he can and cannot happen to him if he doesn’t settle or pay his debt. Sleep tight tonight!