We always expect that the terms of a contract will be fulfilled without any delays, changes, or surprises. When we sign on the dotted line, we naturally assume that all of the parties involved in the transaction will satisfy the commercial and financial obligations they have agreed to accept.
Unfortunately, this is not always the reality of financial relationships. Whether negligence, miscommunication, or unethical practices are the cause, there are many cases in which a debtor fails to make appropriate payments to a creditor. When this occurs, the financial consequences for the creditor can be disastrous.
On the other side of the issue, a debtor may be negatively affected by a creditor’s overzealous collection attempts. Oftentimes, debtors suffer from unnecessary or even unlawful harassment from aggressive creditors who disobey Pennsylvania or federal debtor protection laws. Creditors may even attempt to collect debts which they are not necessarily entitled to.
At Berkowitz Klein, our Delaware County commercial collections attorney have been assisting Pennsylvania businesses and individuals collect on delinquent debts and protect themselves against creditors for over 25 years. Thanks to our decades of experience practicing numerous areas of business litigation, we have the legal and financial expertise you need to settle your conflict, protect your finances, recover your losses, and move ahead with your life.
Debtor Protection Laws
Both the state of Pennsylvania and the federal government have strict laws in place which are designed to protect debtors from creditors. These laws regulate the ways in which creditors can attempt to collect a debt, in an effort to prevent creditor harassment.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act was established to protect consumer debtors’ rights in 1977. Under the Fair Debt Collection Practices Act, or the FDCPA, creditors are prohibited from taking actions such as:
- Contacting debtors before 8 A.M., or after 9 P.M.
- Making excessive phone calls with the intent to annoy or harass.
- Sharing information about the debt with unauthorized parties.
- Using abusive language or making threats.
The FDCPA also grants debtors the legal right to dispute a debt by demanding verification, and even to sue their creditors.
Fair Credit Extension Uniformity Act
The FDCPA is a federal law. The Fair Credit Extension Uniformity Act, or FCEUA, is specific to the state of Pennsylvania. The FCEUA compounds the provisions of the FDCPA, affording Pennsylvania debtors even more protection against creditors. Under the FCEUA, if the debtor retains an attorney, creditors may not communicate with a third party other than that attorney. Additional communication may only be permitted if the attorney fails to respond to creditors in a timely manner. Direct debtor contact may only be made if authorized by the attorney.
If a creditor violates the terms of the FCEUA, they are also in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. If such a violation occurs, the creditor may be liable for the debtor’s attorney fees, and may also be required to pay treble, or triple, damages.
There are many state and federal laws in place to protect debtors from creditor collection attempts. While these laws can make obtaining a delinquent debt challenging, creditors do have legal options when it comes to recovering payments which a debtor has failed to render. For example, creditors may be able to file a judgment lien, or to garnish a debtor’s wages.
One of the most effective ways for a creditor to recover financial damages they have suffered is by filing a judgment lien against the debtor. When a judgment lien has been filed against a debtor, the creditor has the right to hold the debtor’s property or account until the debt has been satisfied. Judgment liens may be attached to:
- Bank Accounts
- Motor Vehicles
It is important to note that creditors are prohibited from threatening debtors with wage garnishment unless the creditor has already obtained court clearance to do so. It is also important to note that Pennsylvania enacts strict wage garnishment laws, and that Delaware County, Pennsylvania wage garnishment is restricted to 10% of a debtor’s net wages.
Nonetheless, wage garnishment can be an effective tool to aid creditors in debt recovery. In Pennsylvania, wage garnishments can be used to help recover debts resulting from:
- Alimony Payments
- Child Support
- Student Loans
- Overdue Rent
- Criminal Restitution Fines
Lifting the Automatic Stay
One of the greatest challenges a creditor can face is attempting to collect from a debtor who has filed for bankruptcy. This is because when a debtor files a petition for bankruptcy, the debtor immediately comes under the protection of an injunction known as the automatic stay. According to the official definition supplied by the United States Bankruptcy Courts, the automatic stay is:
An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
Needless to say, the automatic stay poses a considerable obstacle to creditors. However, while the automatic stay blocks collection actions while in effect, the automatic stay can sometimes be lifted. In order to lift the stay, the creditor must file a written motion in court, at which point the burden falls on the creditor to prove that a lift would be justifiable.
If you are a debtor who has suffered from creditor misconduct, or if you are a creditor who has been financially damaged by a debtor’s failure to pay, you do not have to accept your situation. To speak with a qualified Delaware County commercial collections attorney about your legal options, call the law offices of Berkowitz Klein at (610) 889-3200 (ext. 1), or contact us online today.