Financial stability looks different for everyone. When we have a life event that creates instability, knowing your rights about debt collection (outlined in the Fair Debt Collection Practices Act (FDCPA)) can help you manage contact from a debt collector. There are community resources and companies that may be able to help you develop a debt recovery plan. However, be cautious and do your research before you set up a debt management plan.

Know your rights! When managing debt, you may receive calls from a collection agency hired by the creditor. 

Know what debt collectors cannot do:

• Contact you before 8am or after 9pm
• Contact you at work if you ask them not to
• Discuss your debt with others
• Threaten you or use obscene language
• Misrepresent the amount owed
• Try and collect interest, fees, or other charges on top of the amount you owe

Be careful in dealing with companies offering debt management services, also called debt adjustment or debt consolidation.

If you choose to use a for-profit debt settlement option, it’s important that you use caution. These private, for-profit businesses may offer to settle your debts for less than you owe by working directly with creditors.

The Federal Trade Commission provides the following cautions about for-profit debt settlement:

• There might be a negative impact on your credit report and credit score. Debt settlement programs often ask — or encourage — you to stop sending payments directly to your creditors. That means late fees and penalties may grow, put you further in the debt, and hurt your credit.
• Creditors might start debt collection. While you’re in the debt settlement program you may still get calls from debt collectors requesting repayment.
• You might not be able to settle all your debts. Your creditors have no obligation to agree to negotiate a settlement of the amount you owe. Debt settlement companies also often try to negotiate smaller debts first, leaving interest and fees on large debts to grow.
• You might not finish the whole program. Many people have trouble making payments long enough to get all — or even some — of their debts settled.
• There could be tax consequences. Any savings you get from debt relief services could be considered income and taxable. Talk to a tax professional to learn how this might affect your situation.

Avoiding scams
There are many debt settlement scams out there. Any company offering debt settlement or debt adjustment services in our state must be licensed with the Vermont Department of Financial Regulation.  You can check a license online by searching for the business name on nmlsconsumeraccess.org.

Helpful services
You can work directly with your creditors to negotiate a debt settlement without using a third party. There are also nonprofit debt settlement services you can use instead of using private, for-profit companies that can come with risks.  Local Community Action Agencies are a great resource for free advice too.  You can find additional resources at VTLawHelp.org.

You can take action to tackle your debt but be cautious of organizations that may try to take advantage. You have the power to protect yourself and your finances. 

If you have any questions about next steps, you can always contact the Consumer Assistance Program at 1-800-649-2424.