Debtor vs. Creditor Rights

AdobeStock_330337077-300x200Money changes hands frequently in the United States, and debtors refer to people who owe money while creditors are the parties who are owed money. It can often be a contentious relationship between these two parties, and an Austin, TX creditor and debtor rights attorney can help both sides exercise their rights.

Each side of a debt issue will rely on unfair generalizations about other parties, such as creditors being overly aggressive and greedy while debtors are supposedly lazy and unreliable. The truth is usually much more complicated.

Debtor Rights in Texas

The federal Fair Debt Collection Practices Act (FDCPA) protects debtors from harassment, threats, and unfair means of debt collection by debt collectors but only applies to third-party debt collectors, while Chapter 392 of the Texas Finance Code relates to state debt collection law and applies to original creditors. Under the FDCPA, creditors cannot call people during certain hours (phone calls are only allowed between 8:00 a.m. and 9:00 p.m.), call debtors at work, or call too often.

The FDCPA also provides that creditors cannot use vulgar language or abusive language, and they cannot lie about their identity to try and scare a debtor into payment, such as acting as law enforcement. The federal law also makes it illegal for a creditor to make threats about suing debtors or having them arrested, speak to any third parties about a debtor’s debt, or cause any kind of embarrassment for a debtor by making their debt public.

Debtors generally cannot take a person’s home, also known as a homestead, unless the debtor has not made payments on a mortgage or home equity loan, the debtor did not pay property taxes, or the debtor did not pay for work performed on a home. Wages that have not yet been paid cannot be taken to pay judgments in Texas except to pay court-ordered child support, spousal maintenance, student loans in default, or federal income taxes owed.

When a debtor files for bankruptcy, they will enjoy the protection of an automatic stay, which ends wage garnishment and collection efforts. An automatic stay will block all collection actions that have not already begun, but the stay can be lifted by the creditors.

Creditor Rights in Texas

When a debtor files for bankruptcy, a creditor can receive money from a trustee taking control of a debtor’s case by filing a formal proof of claim that explains the legal reasons why a creditor is owed money and the amount that is owed. In a Chapter 13 bankruptcy case, a debtor can challenge a creditor’s claim for payment but in a Chapter 7 case, the trustee is the only party that can challenge the creditor’s proof of claim.

A 341 meeting is a meeting between creditors and debtors that must take place during a Chapter 7 bankruptcy proceeding and is usually scheduled about one month after a debtor files for bankruptcy. It must include both the person filing for bankruptcy and a court-appointed bankruptcy trustee.

A 341 meeting gives a creditor an opportunity to discuss a debtor’s assets, liabilities, and income sources. They can also negotiate a plan for repayment of an outstanding debt.

Creditors may also be able to pursue breach of contract claims in certain cases. Many creditors resort to selling debts to debt collection agencies at a fraction of the price that a debtor owes even though the debt collection agency will seek repayment of the full amount, but collection agencies also have strict limits on the actions they can take.

Call Us Today to Speak with an Austin, TX Creditor and Debtor Rights Attorney

Are you a debtor or creditor in need of legal help? Make sure you work with an Austin, TX creditor and debtor rights lawyer who can help you understand all of your legal rights.

Structure Law Group, LLP knows how difficult these types of situations can be for both parties, and we actively work to find real solutions that allow people to get what they need. You can call (512) 881-7500 or contact us online to schedule a consultation with our Austin, TX creditor and debtor rights attorney.