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What Is Debtor / Creditor Law?

Debtor-creditor law covers all non-bankruptcy aspects of the financial relationship between creditors and debtors. Debtor-creditor lawyers help debtor clients stay out of bankruptcy court. Some issues include the proper procedures for extending credit, consumers' rights about debt collection, and forms of credit satisfaction.

An attorney who practices debtor-creditor law may specialize in small business or consumer issues, helping clients manage debt.

Bankruptcy is a separate practice area. See Using a Bankruptcy Attorney to file for bankruptcy protection.

Terms to Know

  • Contingent claim: A claim the debtor owes in certain circumstances. A "contingency" is something that must happen before the debtor must pay the debt.
  • Creditor: A person who lends money or provides goods or services. The debtor owes money to the creditor.
  • Secured debt: Debt backed by a mortgage or other collateral. The creditor can collect on the secured property if the debtor defaults. Examples include home mortgages, auto loans, and tax liens.

Debtor-Creditor Law: Consumer

Some consumer debt issues may not need legal representation. Small claims court handles minor disputes. If you have trouble with debt collectors over a small bill, small claims courts are a good place to settle the matter. Judges and mediators can help resolve these issues by arranging a payment plan with the consent of the original creditor.

More serious problems may need legal services. Suppose a debt collection agency notifies you they are filing a claim against you for failure to pay your auto loan. If you default on a debt collection lawsuit, meaning you don't file the correct paperwork, the collection agency can repossess your car.

The Equal Credit Opportunity Act (ECOA) is a federal law that ensures that all consumers have equal ability to apply for credit. Agencies extending credit can't turn you down because of your race, religion, gender, or other protected characteristic. If you believe this has happened, contact an attorney at once.

Attorneys can help with credit card debt by contacting your lender on your behalf to arrange repayment plans.

Debtor-Creditor Law: Business

Business owners must follow the Fair Debt Collection Practices Act (FDCPA). The FDCPA is a federal law, but most states have similar laws that resemble the FDCPA. These laws apply to any business that extends or accepts credit. The laws regulate how businesses and debt collectors may try to collect on past-due accounts before starting legal action. The FDCPA and state laws:

  • Define how businesses can make phone calls, send letters or emails, or otherwise contact the debtor
  • Limit contact to third parties when trying to collect on a debt
  • Prevent creditors from harassing debtors, making false statements, or using unfair practices to collect a debt

Debt collectors can't garnish wages until after they get a judgment, collect more than the amount of the debt, or tell debtors they will go to jail. Creditors can't seize debtors' property or say they will do so unless they actually intend to file a creditor's lawsuit.

To learn more about the various issues related to debtor-creditor law, see FindLaw's Financial Consumer Protection sections.

Related Practice Areas

Get Legal Advice

You need legal help if you have issues with debt collections or other debtor-creditor matters. Contact a debtor-creditor lawyer in your area to learn about your options.

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