A debtor is someone who owes money to someone else. Generally it is not a crime to fail to pay a debt, although failure to pay some court-ordered debts such as child support may lead to criminal charges. Except in certain bankruptcy situations, a debtor can choose to pay debts in any priority he or she chooses.
If you have failed to pay a debt, you have broken a contract or agreement between you and a creditor. Most oral and written agreements for the repayment of consumer debts (debts for personal, family or household purposes, and debts secured primarily by a person's residence) are enforceable. However, most debts that are for business or commercial purposes must be in writing to be enforceable. If the agreement requires you to pay a certain amount of money, then the creditor does not have to accept a lesser amount. Even if you have lost your job, become ill, or just cannot afford to pay the bill, you still owe the amount stated in the agreement. Also, if there was no actual agreement, but the creditor has lent you money, performed services, or provided you with a product and you have kept the product or benefited from the services, you must pay the creditor.
If you owe money, the creditor may assign the debt to a debt collector, which is typically a collection agency. The creditor may hire an attorney to collect the debt. The attorney may also be considered a debt collector. The debt collector may send you a letter or other notice requesting payment. A federal law called the Fair Debt Collection Practices Act requires that the first notice from a debt collector describe the debt and additional charges, costs and expenses according to the agreement between you and the creditor. If you orally dispute this debt, or any portion of it, within 30 days after receiving the notice, the debt collector cannot assume it is valid. If you dispute the debt in writing within this 30 day period, the debt collector must stop any further contact with you until the debt collector sends you proof of the debt. The fact that you do not respond to the debt collector's notice cannot be used as evidence that you owe the debt.
An Oregon law called the Unlawful Debt Collection Practices Act also controls how a creditor may try to collect a debt, whether by letter or phone call. Unlawful debt collection practices would include the use of obscene or abusive language. The creditor cannot call your employer about the debt or call you at your place of work if you have notified the creditor not to. The creditor may call you at work only after he or she has in good faith, but unsuccessfully, tried calling you at home during the day or between 6 p.m. and 9 p.m. A creditor can write to you at work only if your home address is not available. In either case, the creditor may contact you at work only once a week. A creditor who willfully violates this law may be liable to you for minimum damages of $200, your legal fees, and in some cases punitive damages.
A creditor may sell your debt to a collection agency. This means that the collection agency buys the right to collect the debt. A collection agency may be operated by one person, or it may be a nationwide business. A collection agency has no greater rights than the original creditor and cannot make you pay any fees that could not be charged by the original creditor. Generally, however, the amount of your debt will be increased because it has been assigned to a collection agency. Debt collectors — both collection agencies and lawyers who try collecting debts — must comply with the federal Fair Debt Collection Practices Act, as well as Oregon state law. The federal law prohibits a debt collector from communicating with anyone about a debt except for those involved in the debt collection process. These include you, your spouse or your parents if you are a minor. The debt collector may not harass you or call you at work if the debt collector knows that your employer prohibits that type of communication. A debt collector is also subject to the same collection rules as an original creditor. You may prevent a debt collector from calling or writing to you by notifying the debt collector in writing that you either will not pay the debt or want to stop all further communication with them. You should keep copies of any such communication, as well as any envelopes. If a debt collector violates this federal law, it may be liable to you for all actual damages you suffer and additional damages up to $1,000.
If you have purchased something on credit and signed an agreement called a "security agreement," and you have failed to pay the debt for your purchase, the creditor may try to repossess or take it back. This will usually only happen when you purchase a major item like a car or furniture and agree to pay the price in installments. Even though the creditor can repossess your property if you do not pay your debt, the creditor cannot enter your house without permission, assault you or take your property if you physically try to prevent the repossession.
If you have not signed a written security agreement, the creditor does not have a right to take any of your property unless the creditor has first obtained a judgment against you. In order to get a judgment, the creditor must go to court. Either the original creditor or a collection agency may sue you to collect a debt. If this happens, you will be served with a summons and complaint. If you want to dispute the existence or the amount of the debt, you must file a timely response with the court. You must file a response within 14 days if you are sued in small claims court. You must file a response within 30 days if you are not sued in small claims court. Filing a response means filing a motion or answer. There is generally no court appearance that you, the debtor, must attend. If you do not respond to the complaint, or if you file a response and ultimately go to court and lose, the creditor will obtain a judgment. This judgment will include the amount of debt and may include interest, court costs and the creditor's legal fees. It may also create a lien upon any real property, such as a house, that you own.
A judgment is not a court order that tells you that you have to pay any money. Instead, it is a way for the court to confirm that you owe the creditor a certain amount of money. If the creditor wants to collect any money from you based on the judgment, further action must be taken. The creditor may try to collect your debt by having the sheriff take some of your real or personal property to sell at a public sale. The proceeds of the sale would then be applied to pay the judgment. The creditor may also take money from your savings and checking accounts, or garnish your wages. It is not a crime to fail to pay most judgments.
Oregon law protects, or exempts, some of the property you own, some types of income, or the equity you have in certain property from being taken by creditors if they obtain a judgment against you . The property and income that you may protect is generally the same property or income that you may protect in bankruptcy. For example, clothes and jewelry are protected up to a maximum of $1,800 in value. Up to $3,000 in value for a vehicle (cars, trucks, and other motor vehicles) is protected. Household goods including furniture, a television set, and utensils are protected up to $3000. There are a number of other exemptions. The value of these items is determined by "market value". Except for a car, market value is often called garage sale value. Social Security benefits, TANF, unemployment benefits, retirement income, and many other types of government benefits are protected from garnishment. This income may also be protected when deposited in a bank account. Net wages are protected from garnishment unless they exceed a certain amount. Except for certain debts, such as student loans, taxes and child support or alimony, a judgment creditor cannot garnish more than 25 percent of your net wages.
If two or more members of a household are judgment debtors, each person may be entitled to claim the exemption in the same or different property. There is also an Oregon exemption (sometimes call the "homestead exemption") available for the equity a person has in his or her residence if the residence is located within the state of Oregon. A single debtor may exempt up to $40,000 of equity in a house. Married debtors may exempt up to $50,000 of equity.
Note that the exemptions can be complicated. You may want to consult with an attorney to determine what exemption value (if any) you have in your home or other property when faced with a judgment or the need to file bankruptcy.
In most cases, the judgment amount must exceed $3,000 at the time it was entered before a judgment creditor can force the sale of a judgment debtor's residence. The judgment remains a lien on the property, however.
Legal Editor: Richard Slottee, Lewis & Clark Legal Clinic, January 2012