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Over Your Head in Debt

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Always pay your most important bills first

If you cannot pay all of your bills, you have to decide which bills to pay first.  The most important bills are the bills with the worst consequences if they are not paid.

  1. Rent or mortgage payments on your home, continued utility service, and food are your basic necessities.  These are your most important bills and should be paid first.
  2. Your car loan is an important bill to pay.  If you get too far behind on your car loan, the bank will repossess your car (see our Auto Repossession pamphlet).
  3. Credit cards, personal loans and medical bills are the lowest priority for repayment.

What is a Creditor?

A creditor is any person or organization to whom you owe money which has a finance charge added to the unpaid balance, or is scheduled to be repaid in installment

  • Unsecured debt is debt which is not secured by property.  A personal loan, medical bills and credit card debt are typical unsecured debts.  Unsecured creditors must sue you and get a court order before they can collect their debt.  A creditor cannot garnish or attach your wages without a court order.
  • With Secured debt, the creditor has an interest in property (such as a car or house) to guarantee payment of the debt.  If you do not make your payments, the creditor can take back (repossess or foreclose on) the property used to guarantee the loan.

 What will happen if I do not pay my bills?

If you know you will not be able to pay a bill, you may call the creditor before missing the monthly payment and try to work out a repayment plan that you can afford. Consumer Credit Counseling Service may be able to assist you with this. They can be reached at 1-800-660-5609.

If you do not pay a bill, your creditors will contact you to find out when and how much you will be able to pay.  Open all mail from creditors.  Ignoring a bill will not make is go away.

If you do not pay your bills, your creditor may hire bill collectors to contact you about repaying your debt.

  • A Bill Collector is a third party hired by the creditor to collect the debt from you.  Collection agencies and attorneys who contact you about a debt are bill collectors.

What can I do when a creditor is pressuring me to repay a debt?

Remember, unsecured debts such as credit card balances and personal loans are your lowest priority for repayment. Unsecured creditors know this and will likely try the hardest to collect the debt. 

  • Do not let a creditor pressure you to agree to a payment plan you cannot afford. 
  • Do not be humiliated into sending a payment or a post-dated check you cannot afford the debt.
  • Never (or almost never) take out a home mortgage to pay off credit cards or medical bills.

What can I do when my debt is referred to a bill collector?

Within 30 days of receipt of a notice from a bill collector about a debt, you may write a letter requesting proof of the debt if you disagree with the amount (including the total balance, interest charges, or late charges). The bill collector must stop all contact until you receive written proof of the debt. If the bill collector cannot provide written proof, he or she cannot contact you again.  Keep a copy of all letters you send and receive about the debt. 

If you do receive written proof of the debt and you disagree with the amount, you should write a letter telling the bill collector that you dispute the amount.

  • Creditors and bill collectors are limited by law in how and when they may communicate with your to collect overdue bills.

Telephone contact with creditors and bill collectors

When a creditor or bill collector calls, always write down the person’s first and last name, and the name of the company he or she represents.  Also write down the date and time called, and notes about what the person said.

Under state and federal laws, creditors and bill collectors may not:

  • call before 8 a.m. or after 9 p.m.;
  • use profane, obscene or vulgar language;
  • threaten to take your possessions or have you arrested without first obtaining a court order;
  • frighten you with the threat of criminal prosecution if you do not forward a post-dated check.

You do not have to talk to creditors or bill collectors.  If they use language that offends you, accuse you of fraud, or otherwise insult or pressure you, hang up.

  • A creditor or bill collector cannot send you to jail or take your children away from you.

Telephone calls at work

Bill collectors may not call you at work if you tell them not to call you there. If you tell a bill collector not to call you at work, follow up with a letter. Remember to keep a copy for yourself. 

Bill collectors may call your family or friends only once and only to confirm your address. They may not talk to anyone except you about the repayment of the debt. 

Creditors may call you at work but must abide by the following guidelines: 

  • Creditors may call you at work only if they cannot reach you at home.
  • Creditors may not call you more than once a month at work without your written permission.
  • If creditors leave messages for you at work, they must indicate their name and the name of the company they represent.
  • Unless specifically asked, creditors may not indicate that the call is about an unpaid debt.

Cease letters

Under federal law, if you send a letter to a bill collector requesting that all letters and telephone contact be stopped, the bill collector must comply with your request.

Make two copies of the letter.  Send the original by first class mail.  If you can afford the added expense, mail a copy by certified mail return receipt requested.  When you receive the return receipt, staple it to your copy of the letter.  Be sure to keep one copy for yourself.

After you write a cease letter, the bill collector must stop all contact.  The creditor then has to decide whether to sue you in court to collect the debt. Not all cases of unpaid debt result in a lawsuit. Many times creditors do not follow through on a threat to sue.

Bill collectors who contact you after you have sent a cease letter are breaking the law. It is important to keep a record of all contact including the time called, the caller’s full name, who he or she represents, and what was said.

Download a "cease letter" you can fill out on your computer, print and send to a debt collector.

Sample cease letter


Bill Collector Name and Address

RE:      [Name of Creditor]

Account No. [     ]

Dear Sir or Madam:

I am writing to request that you stop all contact with me regarding the above account as required by the Fair Debt Collection Practices Act, 15 USC sec. 1692c(c).

I am unable to pay the debt at this time.


Your Signature

[Your Name and Address]

When a creditor sues you

Never ignore a lawsuit.  Do not ignore papers received from a court.  By responding to a lawsuit (you may do this by filing an appearance), you may challenge the amount of the debt the creditor claims you owe, or the amount of attorney’s fees requested by the creditor.  If you ignore the lawsuit, you will lose any rights you may have to challenge the debt.

If the judge decides that you owe the debt, this is called a judgment.

If a judgment is entered against you, you will likely receive a notice to appear at a periodic payment hearing to set up a reasonable repayment plan. At the hearing, you will have a chance to show that you are unable to pay the debt by filling out a financial affidavit.

You must go to the Periodic Payment Hearing to keep this right.  If you fail to attend the Periodic Payment Hearing, the court could issue a warrant for your arrest.

  • The court cannot order you to pay a judgment from certain types of income, including Social Security, TANF, and APTD

If you feel your rights have been violated regarding the collection of a debt, contact the State Attorney General Consumer Protection Bureau at 603-271-3641, or contact an attorney. Low-income individuals may call 603 Legal AId at 1-800-639-5290. If you are not low income, call Lawyer Referral Service (LRS) at 603-229-0002 to obtain the name of an attorney (there may be a nominal fee for the referral made by LRS).

Este panfleto esta´ obtenible en Español.

Para pedir una copia, llame al
1-800-639-5290 o al 603-224-3333.

This pamphlet is based on the law in effect at the time of publication. It is issued as a public service for general information only, and is not a substitute for legal advice about the facts of your particular situation.

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