Whenever an individual or a business takes out a loan, there’s an expectation that this borrowed money will be paid back in full at a later date. If any interest has accrued on the loan, these additional funds must also be paid back, and there are significant legal consequences in the state of California if a person or business borrowing money doesn’t pay it back properly.
In any lending arrangement, the person borrowing the money is called the borrower or the “debtor,” and the person providing the loaned money is called the “creditor.” Since debtors have a tendency to fail in following through with repayment of their debts, there is a comprehensive legal framework in place in California that protects creditors from losing the money that they have lent. If you’re experiencing issues getting back the money you’re owed in San Diego, California, count on the expert lawyers at San Diego Bankruptcy Attorney to get the job done.
What Are Creditor’s Rights?
“Creditor’s rights” is a term that refers to the legal framework that protects creditors and allows them to recoup their losses in the event that a lending situation goes awry. Creditors have different rights in different states, but the creditor’s rights laws in California are among the most comprehensive in the nation.
This group of laws that gives creditors their rights allows lawyers to use various legal mechanisms to extract value from a consumer or commercial debtor. While creditors have certain rights in California, the proper legal pathways must be observed if these lending individuals or institutions want to receive their funds back by the books. Understanding the various mechanisms that creditors have at their disposal to recoup losses with the help of lawyers is the best way to avoid the discomfort and inconvenience of being denied what you’re owed.
What Is the Fair Debt Collection Practices Act?
Before we cover the legal action that a California attorney can take to protect a creditor’s rights, it’s important to understand the major laws governing these sorts of situations both federally and at the state level. A piece of legislation called the Fair Debt Collection Practices Act (FDCPA) governs the tactics that debt collectors can use across the country, and this law lays down significant limitations to how debt collectors can attempt to collect debts on behalf of their clients.
While the FDCPA doesn’t apply to the original creditor, it does apply to any third party that has been tasked with collecting the creditor’s debts. If the law considers a person or organization to be a third-party debt collector, they are then prohibited from collecting debts at inconvenient times throughout the day. Specifically, the FDCPA prevents debt collectors from making collections calls before 8 AM or after 9 PM unless the debtor and the debt collector have made previous arrangements to talk outside of these times.
The FDCPA also prevents debt collectors from making debt-related calls to a person’s place of work at either their verbal or written request. If a written request is supplied, the debt collector is also prevented from making calls to the person’s home. On the other hand, this piece of legislation allows debt collectors to call a debtor’s relatives, associates, and neighbors once each to try to acquire contact information if they cannot find it by other means.
In general, the FDCPA prevents debt collectors from harassing debtors. They can only inform the debtor of the debt that they owe and request payment. They cannot threaten bodily harm or arrest, and they cannot threaten lawsuits unless they truly intend to take the matter to court.
More and more, individual debtors are becoming educated about the protections afforded them by the FDCPA, which makes it harder for creditors to receive the loaned funds that they are owed. It’s important to remember that the FDCPA only applies to consumer debt, and the legal framework surrounding commercial debt is quite different.
What Is the California Fair Debt Collection Practices Act?
In addition to the FDCPA, consumers in California are also protected by the California Fair Debt Collection Practices Act (CFDCPA). This piece of state legislation puts protections in place that go above and beyond the rights afforded by the FDCPA.
For instance, the FDCPA only considers third-party individuals to be debt collectors. The CFDCPA, however, stipulates that anyone attempting to collect a debt, including the original creditor, is a debt collector and is therefore hampered by the same consumer protections that apply to third-party debt collectors.
There is additional legislation in California that also limits the potential actions of attorneys and law firm staff who attempt to collect debts for creditors. The CFDCPA even applies to companies that produce tools, software, and forms that help debt collectors do their jobs and anyone who collects debts as a normal aspect of his or her business.
Like the FDCPA, the CFDCPA only applies to individual consumer debt, and it does not apply to debt incurred in the course of running a business. Also, this legislation does not prevent attorneys or mortgage servicers from foreclosing on your home, and individuals or businesses that do not normally collect debts are also exempt from the CFDCPA.
In addition to the protections afforded by the FDCPA in terms of how a debt collector can interact with a debtor, the CFDCPA also makes it illegal for a debt collector to make defamatory statements about a debtor, threaten to reassign the debtor’s debt or use profane or obscene language during the debt collection process. Under the CFDCPA, debt collectors also cannot call or visit a debtor frequently in a way that is perceived as annoying or threatening.
Issues Surrounding Debtor Protections in California
Due to the FDCPA, it has become much harder for debt collectors, whether they are attorneys or dedicated debt collection agencies, to collect debts on behalf of creditors. For creditors in California, however, the CFDCPA has made things even more difficult. Not only are creditors prohibited from collecting debts directly from debtors, but they are even constricted in the types of speech that they can use when they interact with debtors.
With these advanced consumer protections in place, it’s practically impossible for individual or commercial creditors to attempt to collect the debt from consumers on their own. The only way to proceed in the instance of outstanding consumer debt in California is to rely on attorneys to assist in the process. Qualified creditor’s rights attorneys in California are the only professionals in this state capable of navigating the incredibly complex legal framework surrounding debt collection in this state to deliver the financial results that you deserve.
How Can a Qualified Lawyer Defend Creditor’s Rights?
Since you are essentially prohibited from collecting your own consumer debts in California, you’ll need to rely on a lawyer to clear the way to make debt collection legal. While the laws in California governing commercial debt are different than those that apply to consumer debt, you’ll also need a lawyer’s help if you want to recoup debt that has been incurred in a commercial context.
There are quite a few different types of legal actions that a lawyer can undertake in court to gain the blessing of the law to collect debts. We’ll cover some of these actions in the following sections.
Legal Action Against Consumer Debt
To collect a debt owed by a consumer in California, it’s almost always necessary to file a lawsuit against that consumer. Your lawyer will go to court, and he or she will seek a judgment from the judge. The court will then issue a summons to the consumer to appear in court.
During the court hearing, your lawyer will express the details of the case and explain why debt collection is warranted. If the debtor decides to seek legal representation for the hearing, his or her lawyer will fight your attempts to legalize your debt collection.
Depending on how each party expresses their positions, the judge may or may not award a judgment to you as a creditor. If a judgment is made in your favor, you will be able to pursue a number of remedies, which are methods that you can use to recoup your debt. Some examples of common remedies include:
- Wage garnishment: This method is one of the debt remedy tools that is most often awarded in California courts. When wage garnishment is ordered, up to 25 percent of a debtor’s wages can be seized each month to be paid to the creditor. Most types of retirement funds are exempt from wage garnishment, and the portion of a debtor’s wages that are awarded varies from judgment to judgment.
- Account levy: An account levy is when the court orders that a certain amount can be taken from a debtor’s bank account(s) to be paid toward the balance of the judgment. In some cases, a debtor may be able to argue that certain funds are exempt from this levy, but there are no restrictions on how much money can be seized as part of the levy process.
- Lien on real property: Also known as an encumbrance, a lien is a claim on a property. When a lien is placed on a debtor’s home, if the debtor sells or refinances their home, the proceeds must go toward the debt defined by the court’s judgment. If a lien is placed on a home, it cannot be foreclosed, but the lienholder can demand that the county sheriff auction the property to fulfill the demands of the judgment.
- Seizure of personal property: Also known as replevin, seizure of personal property can also be ordered by the court in instances of consumer debt. While replevin can mean a number of different debt-related actions, it most commonly refers to seizing valuable personal property that is then sold to satisfy the consumer’s debt.
Is There a Statute of Limitations for Consumer Debt Collection?
In the state of California, judgments handed down regarding consumer debt collection must be executed within 10 years or they become invalid. However, judgments can be renewed after five years have passed from the original judgment. To do so, it will be necessary to serve the debtor again and go to court.
Also, the state of California generally does not allow lawsuits to be made to collect debts based on written agreements that are over four years old. It is often, however, difficult to determine exactly when this four-year period began or ended since actions like partial payment of the debt can restart the clock.
Legal Action Against Commercial Debt
The laws surrounding commercial debt in California are very different than those dealing with consumer debt in this state. However, the process of collecting a commercial debt in California begins in the same way as collecting consumer debt: with a court hearing.
If the court determines that a creditor is within their rights to pursue debt collection from a commercial agency, they will pass down a judgment, and the creditor is then free to pursue collection via a number of different mechanisms. Unlike the case in consumer debt, the FDCPA does not apply to commercial debt, and instead, a governing body called the Commercial Collection Agency Association (CCAA), which is a branch of the Commercial Law League of America (CLLA) regulates the collection of commercial debt.
Debt collectors are only allowed to pursue collections against commercial entities if they are members of the CCAA, and there are quite a few requirements to receive certification from this prestigious organization. If a law firm or a collections agency is a member of the CCAA, it can petition for a debt collection judgment from a California court, and it can then use a variety of tools, such as a writ of execution, to acquire assets from the commercial debtor.
Representation in a Bankruptcy Proceeding
Creditor’s rights become especially important if a debtor files for bankruptcy. Whether a consumer files for Chapter 7 or Chapter 13 bankruptcy or a commercial organization files for Chapter 11 bankruptcy, a number of new rules come into place after a judge has determined that a debtor is financially insolvent.
One of the most common effects of a debtor filing for bankruptcy is an automatic stay, which is a ruling that prevents creditors from continuing any efforts to collect a debt from a debtor. In some cases, it may be possible to work around an automatic stay, but you’ll need qualified legal help if you want to be able to collect funds from a debtor after they have filed for bankruptcy.
When a person or a corporation that has amassed a significant amount of debt files for bankruptcy, it’s usually the case that a number of different creditors come knocking in search of financial recuperation. The potential of entering into this type of conflict with another creditor makes it all the more important to understand your creditor’s rights. For instance, a creditor that established a comprehensive public record of their loan will receive preference in the case of a conflict, and you’ll also be given preferential treatment if it’s deemed that you’re in possession of the collateral.
Under certain circumstances, a qualified creditor’s rights lawyer in California can help you force a debtor’s home into foreclosure. If the debtor has no other way to pay their debts, or if their other repayment methods are not sufficient, it’s possible to foreclose their real property and reap the profits.
We’ve already covered how it’s possible to place a lien on a consumer’s home as part of a creditor’s rights judgment, but it’s also possible to make either a person or a commercial entity sell their home immediately with all of the profits going toward paying off their debt. Foreclosure proceedings become complicated, however, when bankruptcy is also in play, so get in touch with a creditor’s rights lawyer to determine the best way to proceed.
Paying for Collection Efforts in California
As you determine the nature of your creditor’s rights and how you can use these rights in California to recoup the money that you’re owed, there is one more important factor that you should keep in mind. For instance, all of the costs incurred through your collection efforts will be considered by the judge presiding over your case, and they will be included in the total dictated by the judgment.
Therefore, the debtor will end up having to pay all of the costs of having their debt collected. This factor still applies even if you’re collecting debt from a major corporate entity as part of a commercial debt judgment.
As you can see, the law surrounding creditor’s rights in California is anything but straightforward, and none but the most qualified attorneys can cut through the red tape to deliver the results you deserve. Count on the creditor’s rights lawyers at San Diego Bankruptcy attorney to get you the funds that you’re owed in the San Diego area: Call our bankruptcy attorney at 619-488-6168 today to get started!