If you’re entangled in debt collection, or soon will be, you’re going to encounter terms you’ve either never heard before, or those you have heard but are unclear on what they mean. Either way, it’s difficult to emerge from financial downturn in your life if you’re fuzzy about what you’re doing, or what a creditor, debt collector, or court is saying to you. You can even make your situation worse.
On that note, here are debt collection key terms that you should be aware of and perhaps should stash away for reference when needed. When debt collectors are after you, that’s no time to be glossing over terms you don’t know or understand.
- Accrued interest. This is the amount of interest that’s added to a debt, which increases how much a borrower owes.
- Arrears. This is a debt that is unpaid and delinquent.
- Bankruptcy discharge. This is a court order that means that you don’t have to pay a debt and that a person or entity can no longer try to collect the debt.
- Charge off. Even though the debt is still owed, this is the amount a creditor ceases to expect to be paid and that is written off for accounting purposes.
- Debt settlement. This is an agreement by a creditor such as a credit card issuer to accept less than the full amount owed to “settle” a debt. Learn more by checking out Freedom Debt Relief.
- Default judgment. This is a court ruling against a consumer who either didn’t answer or defend a lawsuit filed by a creditor or its debt collector.
- Exempt funds. This is money that creditors or debt collectors are prohibited from freezing or taking from a consumer’s bank account to satisfy a judgment.
- Fair Credit Reporting Act (FCRA). This is a federal law that promotes the accuracy, fairness, and privacy of data in consumer reporting agency files. The legislation also gives consumers the right to view their credit reports and dispute errors.
- Garnishment. This is the act of mandating that an employer withholds part of a debtor’s earnings to pay a creditor that has a court order.
- Harassment. This is the use of threats, intimidation, pressure, or abuse in debt collection. Such actions are illegal.
- Interest. This is the price for borrowing money or making purchases on credit. It’s usually figured as a percentage of the sum due.
- Judgement. This is a court order that states a lawsuit’s outcome.
- Mini-Miranda warning. This is a warning used in debt collection that lets consumers know that anything they say and any info they give while in communication with them may be used to collect the debt.
- Original creditor. This is the individual, company, or entity to whom the debt is purported to be owed.
- This is the initial debt sum or the remount that remains unpaid, sans collection fees and interest.
- Statute of limitations. This is a specific period after which a debt collector can no longer sue to collect a debt.
- This is a term for a credit account on a person’s credit report. Tradelines include, for example, credit limit and current balance.
- Verification of a debt. This is when a consumer asks the debt collector to show proof that the debt belongs to them, and/or that the amount owed is accurate.
- Zombie debt. This is a very old debt that is no longer owed, but that a debt collector suddenly attempts to collect.
So, those are some key debt collection terms that may come in handy. You don’t want to guess meanings when your financial life is on the line. And if you need help getting out of overwhelming debt, we suggest that you contact Freedom Debt Relief.