What does the law say about not paying your debt in Michigan?

When it comes to their finances, Michigan residents have significant underlying debt problems.

On the surface, issue areas are rarely apparent since Michigan keeps debt levels lower than the national average

Michigan consumers and debt

One of the key reasons is that many Michigan consumers use bankruptcy to discharge their debts, lowering the state’s average debt levels.

Michigan law is quite extensive, going far beyond the federal government so it can protect consumers more than other states.

Michigan’s credit scores

The average credit score for Michigan is 653, which is just shy of the national average of 661.

The FICO scoring system ranges from 300 to 850, with higher numbers indicating a higher chance of paying debts on time.

Other reasons, such as high bankruptcy rates and frequent late payments, are more common in Michigan.

Is there a Michigan statute of limitations debt?

The statute of limitations for unpaid bills in Michigan is six years, regardless of the type of debt.

The debt can be personal loans, household debts, auto loans, credit card debt, payday loans, medical bills, medical emergencies, and most secured and unsecured debts.

What happens after six years of consumer debt?

The state law in Michigan implies that creditors cannot take legal action against you if a debt has been outstanding for more than six years or hasn’t been paid for more than six years.

Creditors and debt collectors are then prohibited to collect debts owed to them, but you would need to seek a court order to enforce the statute of limitations if the creditor does not comply.

What is debt collection in Michigan?

Certain types of income and property are considered exempt from debt collection under state and federal law. A creditor or debt collector cannot make you use exempt income or property to pay outstanding debt.

Debt collection may include several different types, but certain benefits cannot be collected. Amongst these are Public Assistance (PA), Social Security Income(SSI), and Social Security Disability.

Workers’ compensation, unemployment insurance, and VA benefits are also excluded.

You can work with an attorney and hire legal services (which usually include a free consultation) so debt collectors stop contacting you and you stop receiving such calls or certified mail which can even be illegal.

The Collection Practices Act

The Collection Practices Act is Michigan’s equivalent of the federal law known as the Fair Debt Collection Practices Act (FDCPA).

The state’s consumer protection statute, like the FDCPA, prohibits harassment, fraudulent, incorrect, and false statements or conduct to collect a debt.

Michigan limitations on debt collection

The limitations on debt collection in Michigan forbid debt collectors from making threats or using shaming tactics to collect debts.

The limitations Michigan faces also prohibit a debt collector from engaging in harassing, abusive, or otherwise detrimental ways to collect a debt.

Differences in federal law and state law

The most significant difference between the Michigan Collection Practices Act and the federal FDCPA is that it does not apply to credit repair.

The state’s debt collection law applies directly to lenders and creditors, whereas the national regulation only applies to outside debt collectors.

What you have to know about debt collectors in Michigan

The Fair Debt Collection Practices Act (FDCPA) classifies a debt collector as someone who regularly collects, or attempts to collect, consumer debts for another person or business, or refers to himself/herself as anything other than his/her own when collecting his/ her consumer debts.

According to numerous laws in Michigan, your creditor has up to six years from the date of your previous payment to attempt to collect a debt.

What is a judgment?

A judgment is a final order from a Court of Law that allows your creditor to pursue collections or wage garnishments as long as they re-open the judgment every ten years.

If your creditor obtains a judgment or default judgment and keeps it active by renewing it, the statute of limitations may not apply.

Third parties hired by lenders for debt collections on their behalf are known as third-party debt collectors.

Even if a debt has gone dormant for years, it may be collected again many years later or sold to a debt collector down the road.

When you sell a debt to a collection agency, the collection agency is likely to resume aggressive collections efforts to recoup its expenses.

How long can a debt collector in Michigan pursue a debt?

In the state of Michigan, a lot of consumers are struggling with outstanding debt.

When a consumer debt goes unaddressed for an extended period, creditors may file a lawsuit against the customer to get a judgment.

A judgment allows you to collect money against the debtor’s (i.e., the person who owes the debt) earnings, through methods such as wage garnishments or bank account seizures.

A lawsuit will be filed by creditors who are owed money if they claim you breached your obligations under your contracts.

In Michigan, the statute of limitations for a breach of contract is six years.

If debt collectors are harassing you, you can contact the Michigan Attorney General’s office at 877-765-8388 to make a complaint.

Another way to protect yourself from scams is to report them to the Federal Trade Commission. You can do this by going to their website or by calling them toll-free at 1-877-382-4357.

If you feel that your consumer protection rights are being violated by creditors, then you are recommended to document the contacts made by the creditor, including the person who contacted you, which company they are from, the time of the correspondence, and what was said by the debt collector.  With this information, you may be able to file a civil complaint against the creditor for violating both the federal and Michigan rules and get a judgment against them.

How can a lawyer help me get out of debt?

Both in the case of oral contracts and written contracts, it is better to hire professional legal services so you have an attorney on your side explaining the limitations and options until you are no longer legally obligated to pay.

The creditor wins the case and is awarded a judgment once that occurs. Many consumers opt to defend themselves against this.

An attorney’s legal services can help you figure out how to defend yourself against the creditor or assist you in working out a resolution with the creditor that makes sense for you.  Once you have an attorney involved the creditor understands that you may now be a viable bankruptcy candidate and may be more willing to work with you before you file bankruptcy. 

Benefits of working with an attorney

An attorney will be able to advise you of all your options to make the best decision for you and create a plan of action to get the debt relief you are seeking.

A debtor must be informed that judgments might be renewed by the collector on behalf of the debtor for an additional 10 years.

Both the Consumer Financial Protection Bureau and your lawyer are experts at finding ways to protect you as a consumer.

A lawyer can provide a precise amount of information to credit reporting agencies. They are not permitted to harass you, but they may attempt to get money from you.

Debt consolidation loans are one of the most popular methods to combine consumer debts in Michigan to get you a fresh start.

Debt consolidation loans are offered to help many people pay off their debts more quickly over time by lowering their payments and interest rates.

Benefits of consolidating loans

These loans give people a sense of security by lowering their debt levels. They also alleviate the worry of losing their house or car because of unmanageable auto loans, credit card bills, or medical expenses.

This consolidation can be the best course to cut your monthly payments and interest rates in a new contract.

Remember that if you have a legal contract with a creditor to whom you owe money in Michigan, you are required to pay it.

Learn how to deal with unprofessional debt collectors and your rights as a debtor.

The Babi Legal Group can assist you in finding better ways to deal with debt, credit, and payment.