As a creditor, it can be frustrating when your debtors refuse to pay what they owe you. However, in Massachusetts, there are laws in place to protect both the debtor and the creditor. As such, it is important that you follow the proper procedures when attempting to collect a debt.
In this article, we will explore the debt collection process in Massachusetts, including laws and regulations that govern it, and steps creditors can take to increase their chances of collecting on a debt.
Dealing with debt can be stressful and overwhelming, but understanding the debt collection process in Massachusetts can help ease the burden. This section will guide you through the different players involved in debt collection and the regulations they must follow.
A debtor in debt collection refers to an individual or entity who owes money to a creditor or a collection agency. The debtor is responsible for repaying the amount owed, which may include the principal amount borrowed as well as any interest or fees that have accrued. The debt may be in the form of a loan, credit card balance, or other type of financial obligation.
If your creditor is unable to collect the debt, they may hire a third-party agent to collect on their behalf. These agents are known as debt collectors and are required to obtain a license from the Division of Banks before they can collect a debt. Debt collectors do not have direct rights to the debt they are collecting, which means they cannot take legal action against you without the creditor's permission.
In some cases, a creditor may hire an attorney to collect on unpaid debt on their behalf instead of a debt collector. Attorneys are already licensed to practice debt collection in Massachusetts, so they don't need to obtain an additional license. However, they must follow the Supreme Judicial Court's Rules of Professional Conduct, the Attorney General's Debt Collection Regulations, and the Fair Debt Collection Practices Act (FDCPA) restrictions when collecting a debt.
Debt buyers are agencies that purchase delinquent debt from creditors attempting to collect a debt. They are not the original creditor but own the debt and can legally collect on it. Debt buyers do not need to obtain a license to collect on the debt they own, but they must follow the FDCPA and the Attorney General's Debt Collection Regulations.
Before you start the debt collection process in Massachusetts, it's crucial to understand the Massachusetts debt collection laws and the regulations governing the debt collection process. Massachusetts has its own set of laws regarding any abusive or unreasonable debt collection practices, which creditors must follow strictly to avoid legal trouble.
Under Massachusetts debt collection laws, debt collectors must provide certain information to debtors, including the amount owed, the name of the creditor, and information on how to dispute the debt. Additionally, debt collectors cannot use deceptive or harassing tactics to collect debt. If a debtor requests that a debt collector stop contacting them, the collector must comply.
Debt collection in Massachusetts is governed by the Fair Debt Collection Practices Act (FDCPA) as well as state-specific laws, such as the Massachusetts Debt Collection Regulations. It is essential for creditors to understand these laws to ensure that they are collecting debts legally and ethically.
The Massachusetts Attorney General's Office enforces the state-specific laws that regulate debt collection practices. These regulations prohibit harassing, abusive, or unfair and deceptive acts of debt collection, and require that creditors and debt collectors provide certain disclosures to debtors.
The FDCPA is a federal law that regulates the behavior of debt collectors. It prohibits debt collectors from engaging in abusive, deceptive, or unfair practices, and requires them to provide certain disclosures to debtors.
If you're a creditor trying to collect a debt in Massachusetts, it's important to know the Massachusetts statute of limitations on debt. The statute of limitations sets a time limit for debt collectors and creditors to sue someone for debt, which usually starts from when the breach of contract occurs.
In Massachusetts, the statute of limitations for consumer-related debt is six years. This means that for creditor card debt, oral and written contracts, the statute of limitations is six years. If no payments have been made on a debt account in six years or more, the debtor cannot be sued for it.
However, if a debt collector has already obtained a judgment against a debtor, the statute of limitations extends to 20 years. This means that the judgment is valid for up to 20 years, and the collector can garnish wages or seize property during that time period. Additionally, the unpaid debt accumulates interest based on the statutory rate of 12 percent during this period.
Below, we’ve listed the exact Massachusetts statute of limitations on debt laws as they are written in Massachusetts General Laws Ch. 260 §1 and §2:
“The following actions shall be commenced only within twenty years next after the cause of action accrues: First, Actions upon contracts under seal. Second, Actions upon bills, notes or other evidences of indebtedness issued by a bank. Third, Actions upon promissory notes signed in the presence of an attesting witness, if brought by the original payee or by his executor or administrator. Fourth, Actions upon contracts not limited by the following section or by any other law. Fifth, Actions under section thirty-two of chapter one hundred and twenty-three to recover for the support of inmates in state institutions.
“Actions of contract, other than those to recover for personal injuries, founded upon contracts or liabilities, express or implied, except actions limited by section one or actions upon judgments or decrees of courts of record of the United States or of this or of any other state of the United States, shall, except as otherwise provided, be commenced only within six years next after the cause of action accrues.”
Knowing the Massachusetts debt collection laws is crucial for creditors to understand their rights. Understanding the illegal debt collection practices can also help you defend yourself during a lawsuit.
Before attempting to collect a debt, it is important to verify that the debt is legitimate. This can be done by requesting proof of the debt from the debtor. If the debtor is unable to provide proof of the debt, you may not be able to legally collect it.
If the debt is legitimate, the next step is to send a demand letter to the alleged debtor yourself. This letter should include the amount of debt such debtor has owed you, the reason for the debt, and a deadline for payment. It is important to keep a copy of the letter for your records.
If the debtor fails to respond to your written request or the demand letter or refuses to pay, you may need to file a lawsuit. In Massachusetts, small claims court handles cases involving debts of $7,000 or less. For debts over $7,000, in practice law you will need to file a civil suit.
If the court rules in your debt settlement favor, you will obtain a default judgment against against the debtor. This judgment allows you to legally collect the debt through wage garnishment, bank account levies, or other means.
Once you have a judgment against the debtor, you can take steps to garnish their wages or bank accounts. You will need to follow specific procedures outlined by Massachusetts law to do this.
If you are unable to collect the debt on your own, you may want to consider hiring a collection agency. These agencies specialize in debt collection and can help you recover the money you are owed. However, it is important to research debt collection agencies carefully to ensure that they are reputable and follow all applicable laws.
In some cases, it may be beneficial to negotiate a settlement with the debtor. This can help you avoid the time and expense of a lawsuit, while still recovering some of the money you are owed. If you choose to negotiate such payment plan or settlement, it is important to have a clear agreement in writing.
Once you have a judgment against the debtor, you can take steps to garnish their wages or bank accounts. You will need to follow specific procedures outlined by Massachusetts law to do this.
If the debtor owns property, you can enforce a lien against the property. This means that you will have a legal claim on the property that must be paid before the debtor can sell or transfer it.
To maximize your chances of successful debt collection, consider these tips:
It is crucial to keep detailed records of all communications with the debtor, including phone calls, emails, and letters. You should also keep copies of any documents related to the debt, such as contracts and invoices. Stay organized and keep detailed records of all communication with the debtor.
Persistence is key when it comes to debt collection, but it is essential to avoid harassing or abusive behavior. You should maintain a professional demeanor at all times and adhere to all relevant laws and regulations. Be persistent but professional in your communication with the debtor.
If you are struggling to collect a debt, you may want to consider working with a collection agency. These debt collection agencies often have experience and resources that can help you recover your money.
When collecting debt in Massachusetts, be sure to avoid these common mistakes:
Collecting debt in Massachusetts can be a challenging process, but with the right knowledge and strategies, creditors can improve their chances of success. By understanding the state laws and regulations governing debt collection, staying organized and professional, and being willing to negotiate with debtors, creditors can increase their chances of collecting debt successfully.
Consumer-related debt has a statute of limitations of six years, which includes credit card debt as well as oral and written contracts. Nonetheless, if the debt collector has secured a judgment against the debtor, the statute of limitations is extended to 20 years. (See: MGL c.260, § 20)
In Massachusetts, the statute of limitations for consumer-related debt is six years. This means that for creditor card debt, oral and written contracts, the statute of limitations is six years. If no payments have been made on a debt account in six years or more, the debtor cannot be sued for it.
If your debt remains unpaid despite collection tactics, the creditor may opt to file a collection lawsuit against you. Failure to file a response within the response period allows the plaintiff (the creditor) to obtain a default judgment, resulting in an automatic win against you. Once the plaintiff secures the judgment, it can resort to various collection methods, such as wage garnishment or bank levy, to obtain payment.
To prevent a default judgment, it is necessary to respond to a debt lawsuit in Massachusetts within 20 days. To do so, you must address every issue raised in the Complaint, assert your affirmative defenses, and submit the Answer document to the court.
