We often discuss the options and rights that individuals in debt have under the law, but did you know that creditors have rights, too? Creditors are those to whom money is owed.
While creditors have to abide by the law when seeking payment for loans and other credit, they have some legal expectation of receiving payment when they loan money. To that end, they can take certain actions to collect on money, including mailing bills and notices, calling those who owe money within the requirements of the law and filing legal documents with the court system.
Some creditors tie debt to a specific object. Because of this, they have a right to collect the item if the debt is not paid according to contract. One common example of this type of relationship is seen with auto loans or homes. If a person is late enough on making payments, the creditor can start legal proceedings to repossess the vehicle or foreclose on the home. In most cases, the creditor does not actually want the property — they would much rather receive the payments. Because of this, creditors are often willing to work with individuals to create solutions for payment that work for both parties.
In situations where no solution can be reached, creditors do have the right to seek a judgment against someone for the loan. This can lead to garnishment of wages, liens against property and even seizure of cash in bank accounts.
While all this might seem to indicate that the creditor has all the rights and all the power, this isn’t true. Debtors have a number of rights, too, which include filing for bankruptcy if the situation allows. When you file for bankruptcy, the creditor no longer as the ability to take some of the above actions, and you have time to work out arrangements through the bankruptcy process.
Source: FindLaw, “Creditors’ Rights and Collection Options,” accessed Feb. 05, 2016