Shortcut Navigation:

Dealing With Creditors

If you are having trouble making your payments, notify your creditors before you get behind. Creditors are easier to work with if they know ahead of time that there’s a problem. Also, it shows “good faith”—that you are concerned about your debts and intend to pay.

Don’t be surprised, angry or discouraged if you still have a few problems with unsympathetic or ruthless creditors.

Most of us tend to live up to and beyond our means. With your income reduced, you may find yourself in over your head.

Don’t panic!

You have some rights and protections. Learn what they are. Knowledge of these rights is essential in bargaining successfully for arrangements with creditors.

Creditor Action Plan

Step 1: Notify Your Creditors Before You Get Behind

Take your creditor worksheet and determine what bills you are going to be able to pay. Then, notify your creditors before you get behind.

This is important. Creditors usually are easier to work with when you let them know about your situation before a severe problem arises.

When contacting creditors, tell them you want to work out a satisfactory arrangement for delaying, reducing or refinancing payments until you return to work.

Contact creditors in writing so there is a physical record of contact to place in your file. The letter (PDF) can be placed in your account file—a phone call may not be noted. Always include your account number, your phone number and your address. Keep copies of your letters to creditors. Most libraries have coin-operated copy machines. A written record of responsible contact may also be important if legal problems emerge later.

Try to type letters to creditors, but readable handwriting is just as good.

Step 2: Contact the Court About Child Support or Alimony Payments

If you are making child support or alimony payments under a decree of divorce but are unable to meet the payments due to unemployment or severely reduced income, contact the clerk of the divorce court and explain your situation. Stay in touch with your ex-spouse to avoid unnecessary legal action. Failing to notify the court of your inability to pay can result in legal problems.

Follow up with a written letter of explanation. If ordered to court, contact an attorney. Bring documentation (pink slip or lay-off letter from your employer or union) with you.

Do your best to provide what support you can—and keep records. Missed child support payments must be made up. Talk to your ex-spouse or court officer about a repayment plan.

Step 3: Pay What You Can

Even if you cannot pay creditors the amount they want, make your best effort to pay something regularly. This holds arrears as low as possible and lets the creditor know that you are doing all you can. Partial payment may keep your account from being turned over to a collection agency.

Step 4: Stay in Touch With Creditors

After the initial contact, it’s important that you keep in regular contact with creditors—every two weeks or so. This reassures the creditor, shows a responsible attitude toward your obligation and may keep the creditor from “hounding” you.


When the Bill Collector Comes

A Debt Collector Who is Trying to Find a Debtor Cannot…

  • Tell a third party that he/she is a debt collector, unless asked,
  • Use a postcard or indicate on the envelope that he/she is engaged in debt collection, or
  • Contact a person other than the debtor more than once to learn the debtor’s location.

Once a Debtor Is Located, a Debt Collector Cannot…

  • Contact you at an unusual time (generally between 9:00 p.m. and 8:00 a.m.),
  • Make continuous or anonymous phone calls to harass you,
  • Contact you at your place of work if the employer forbids communication during work hours,
  • Use profanity or other abusive language,
  • Threaten to use violence or other criminal means to harm your person, reputation or property,
  • Impersonate a police officer or government official,
  • Misrepresent the legal status of a debt,
  • Threaten imprisonment or other action that legally the bill collector or creditor could not take, or
  • Make other false and misleading statements.

You can write to the bill collector saying that you want him/her to cease communications. The bill collector must stop contacting you except to advise you of any legal action he/she or the creditor intends to take.

If a Debt Collector Violates the Law, You May…

  • Notify the Federal Trade Commission, 202-326-2222, which supervises the bill collector.
  • Sue for actual damages and punitive damages.

Contacting a Credit Bureau

Sometimes problems with debt collectors can keep you from restoring your credit rating after you go back to work. You may want to contact a local credit bureau to review your credit records. Credit bureaus collect credit information about consumers for the use of businesses to whom consumers apply for credit.

Credit Bureaus Can Provide Information Only to…

  • Creditors who are considering granting or have granted you credit,
  • Employers considering you for employment,
  • Insurers considering issuing you an insurance policy,
  • Government agencies reviewing your financial status in collection with issuing you a license, or
  • Anyone else with a legitimate business reason for needing the information, such as someone to whom you have applied for credit.

If You Contact the Credit Bureau, It Must…

  • Let you know the nature and substance of all information contained in a credit report,
  • Inform you of the sources of its information,
  • Provide you with the names of employers, creditors and others who recently have received reports about you, and
  • Reinvestigate within a reasonable time any information you dispute.

If the Credit Bureau Finds the Information Is…

  • Inaccurate or cannot be verified, the information must be corrected or deleted.
  • Accurate, the credit bureau must allow you to write a brief statement of dispute and include it in all future reports.

The Credit Bureau Must Automatically Delete…

  • Information on a bankruptcy that is more than 10 years old, and
  • Other adverse information that is more than seven years old.

If Any Deletion or Notation Is Made…

You may request that the new information be sent to:

  • Any employer receiving information during the past two years, and
  • Any other person receiving a report during the past six months.

If You Believe a Credit Bureau or Credit Report User Has Violated the Law, You May…

  • Notify the Federal Trade Commission (credit bureaus and many credit information users are under their jurisdiction).
  • Sue for actual damages (including attorney’s fees and costs.)

If Someone Improperly Requests or Receives Information…

If a person or firm knowingly requests information under false pretenses, or if a credit bureau knowingly gives information to someone not authorized to receive it:

  • You may ask a U.S., county or district attorney to sue the unauthorized user or the credit bureau.
  • The unauthorized user or the credit bureau may be fined to $5,000 or imprisoned for up to one year.

If You Are Sued

When negotiating arrangements with creditors for paying off your bills, remember that if you are unable to keep your payments up or if you own property, the creditor can sue you to recover the amount of the bill.

Some creditors are easier to work with than others.

Private hospitals, for example, are more likely to sue you over a bill than a public facility is. If you own property other than that on which you reside, the creditor’s lawyers may come after it. They may even come after your home.

Most hospitals, however, are reluctant to sue a low-income family beset by health problems because such a suit would likely be heard by a jury, and no hospital wants to be seen as attacking a family that is down on its luck. Hospitals are in competition with each other and they tend to be public relations conscious.

With any creditor it is important that you show good faith: do your best to pay something on your bill each month. If you must miss a payment, call and let the creditor know.

Check your mail carefully so that you can respond quickly if the creditor becomes impatient for payment. Ignoring mail only makes things worse.

If you have wages or income and have not made acceptable arrangements, your income may be garnished. That means money may be deducted automatically from your pay to pay off a debt.

A garnishment can only be done by order of a court. You have a right to be heard at a hearing before a garnishment may be ordered. You may avoid a garnishment if you can show the judge you are doing the best you can. Public benefits of any kind cannot be garnished.

Lawsuits and garnishments over bills usually only occur when no effort is made by the debtor to take care of his/her responsibilities.

Be responsible, take charge and DON’T IGNORE YOUR MAIL.

If you are sued or summoned to court for a garnishment, get an attorney. Call the Legal Services Corporation or Legal Aid Society, or ask the local bar association for a referral.

Personal Bankruptcy

Despite changes to the law that have made it more difficult for people deeply in debt to file for bankruptcy and have limited the relief these people can receive, bankruptcy may still be a viable option. Consult an attorney who specializes in individual bankruptcies to make this determination.

Take Action

Protect the Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau has done crucial work to safeguard Americans against the deceptive and abusive practices of big banks, student loan servicers, credit card companies and predatory lenders. Tell Congress to protect this important agency.

Sign the petition. »


  1. Federal Trade Commission
  2. Legal Services Corporation
  3. Legal Aid Society
  4. Local Bar Association
  5. Credit Counselor

Join Us Online