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CT debt laws: Statute limits & debt relief methods

Connecticut debt collection laws provide debt collectors with a number of options for collecting past-due debts. However, they must first appear in court to get a judgment before proceeding. The court may award the collection agency a judgment. A judgment is a court's statement that the agency has the authority to request the following,

  • Wage garnishment
  • A levy on the debtor's bank accounts
  • A lien on the debtor's property
  • Seizure of the debtor's personal property by the sheriff. 

Laws refer to these as remedies. Depending on the situation, a collection agency may choose to employ one of these legal remedies. These are discussed below.

Law governing garnishment in Connecticut

Wage garnishment is a remedy that is most commonly used by collection agencies to carry out judgments. They get in touch with the debtor's employer and demand that they take a specific amount out of each pay period and send it to them. Connecticut permits two different types of garnishment: bank executions, or a bank account levy, and wage garnishment. Connecticut abides by federal law on wage garnishment and exempts 75% of the judgment debtor's disposable income.

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Laws pertaining to bank account levy in Connecticut

A levy gives the debt collectors the authority to seize non-exempt funds from a debtor's account against the money owed. State law controls the process for levying bank accounts and the amount, if any, that a debtor may argue is exempt from the levy. 

A debtor should check their state's legislation to see if a bank account can be levied, as many states have exemptions for certain quantities and types of funds from bank levies. 

Connecticut permits bank executions, often known as bank account levies.

 The following are exemptions found in Connecticut debt collection laws:

  • One vehicle with a fair market value of up to $3,000 (without any security interests or liens attached to it) under the CPI conversion factor.
  • Clothing, bedding, food, home furnishings, and equipment that are essential.
  • Books, equipment, farm animals, and feed for livestock that you might need for your job, career, or agricultural business.
  • A burial plot for the debtor and their close relatives.
  • Welfare payments and salaries received by welfare recipients under incentive earnings programs or comparable programs.
  • Payments from health and disability insurance.
  • Health aids you need for your work or for keeping well.
  • Benefits for veterans, social security, workers' compensation, and unemployment benefits.
  • Other than child support, alimony and support are only excluded from execution to the extent that wages are.
  • Child support payments that are court-approved.
  • Any weapons, military gear, clothes, or musical instruments that a member of the US military or militia owns.
  • Engagement rings and wedding rings.
  • One residential security deposit and one residential utility deposit.
  • Any interests or assets included in an individual’s retirement funds, IRA, Keogh, or anything similar in nature.
  • A sum given as compensation for a crime.
  • Benefits given by any association of people in Connecticut for supporting any of their members who can't work due to illness or infirmity.
  • The money that an individual is owed by an insurance company against any insurance policy on exempt property. 
  • The Interest in a piece of property with a value under $1000
  • A single person's homestead exemption is $75,000, and a married couple's homestead exemption is $150,000. If the debt is for medical expenses, the exemption is worth $125,000.
  • Transfers of funds made irrevocably to a nonprofit debt adjuster's account for the benefit of the debtor's creditors.
  • A maximum of $4,000 interest in any accumulated dividend or interest under, or loan value of, any life insurance policy that hasn’t matured yet which the person possesses and under which they, or a person they are dependent on, are insured.
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Laws governing lien in Connecticut

An encumbrance or claim on a property is known as a lien. For instance, if you own a home, a debt collector with a judgment has the power to place a lien on your property, obliging you to pay the judgment out of the profits of the sale or refinance if the home is sold or refinanced. 

The lien may restrict you from selling or refinancing until the judgment is paid off if the judgment amount is more than the value of your home's equity.

In Connecticut, either real estate or personal property may be subject to a judgment lien. The debtor's property must have a lien placed on it during the case itself, and after receiving a judgment, the debt collector has four months to submit a lien certificate to the town clerk of the Connecticut town where the debtor's property is situated. The debt collector submits a judgment for liens on personal property to Connecticut's Office of the Secretary of State. 

In Connecticut, a judgment lien is subject to the consumer's homestead exemption and has a lifespan of 10 or 20 years.

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Statute of limitations in Connecticut for debt collection

Another aspect of debt collection that you should familiarize yourself with is your state’s statute of limitations. This law sets the time period within which debt collectors can pursue legal action to collect a particular type of debt. 

According to debt collection laws in Connecticut, the statute of limitations for medical debt and credit card debt is six years. For auto loan debt, the statute of limitations is four years, and for state tax debt, it is fifteen years. The debt becomes "time-barred" after the statute of limitations expires; therefore, the debt collectors cannot file a lawsuit against you.

Despite the expiry of the statute of limitations for the debt you owe, you can still be held responsible for paying the debt. Debt collectors have the right to still get in touch with you and make an effort to recover the debt, but they won’t be able to do anything other than try to recover the money by themselves. 

You can decide whether or not to pay debts that are time-barred after being aware of the debt collector's restrictions. To avoid effectively restarting the statute of limitations, avoid making partial payments if you do not intend to pay off the debt entirely. Do not disregard a court summons for a debt that is time-barred; instead, contact a lawyer to go over your choices.

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Laws pertaining to debt collection in Connecticut

A "consumer collection agency" license is required for Connecticut collection agents. The Creditor’s Collection Practices Act or CCPA and Consumer Collection Agency laws or CCA are two laws that protect consumers in Connecticut from unfair collection practices.

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Creditor’s Collection Practices Act (CCPA)

The CCPA does not apply to collection agents; it only regulates the methods used by original creditors. The CCPA's regulations, terminology, and overall consumer protections are identical to those of the federal FDCPA. 

The primary distinction between the FDCPA and CCPA is that the latter only applies to original creditors. Like the FDCPA, if an original creditor wrongs you in violation of the CCPA, you have a private cause of action.

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Consumer Collection Agency laws (CCA)

Collection agencies, as they are known in Connecticut, are covered by the CCA statutes. In terms of consumer safeguards and restrictions, the CCA and the FDCPA are similar, but there are two key differences. Connecticut's CCA forbids the following:

  • Bringing legal action against you for a charged-off debt that they acquired from your primary creditor or bought
  • Adding collection costs above what you would be required to pay for that specific debt under Connecticut law

If a collection agent violates the CCA, get in touch with the Connecticut Attorney General and the Connecticut Department of Banking.

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FDCPA rules

The Department of Banking is responsible for enforcing debt collection laws and rules in Connecticut. The Fair Debt Collection Practices Act, or FDCPA, is a federal statute that safeguards customers from abusive debt collection practices.

Some FDCPA guidelines are as follows

  • You might receive communication with a debt collector in person, via letter, phone, telegram, or fax.
  • A debt collector cannot contact you before 8 a.m. or after 9 p.m.
  • If you let a collector know that you have legal representation, the collector can only get in touch with your attorney.
  • If you let a debt collector know you can't be contacted at work, they can’t call you there.
  • A debt collector has the right to get in touch with people you know to get your phone number, address, and place of employment. But they can't tell anyone that you owe money, and they can't get in touch with the same person more than once.
  • By writing a letter requesting that they stop contacting you, you can stop a collector from getting in touch with you. The collector may not get in touch with you again after receiving your letter unless to affirm that there won't be any further communication or to let you know that they're planning to take a specific action.
  • You or anyone else a debt collector contacts cannot be subjected to harassment or abuse.
  • When collecting a debt, a debt collector is not allowed to make any false, dishonest, or misleading claims.
  • In order to collect a debt, a debt collector is not allowed to use unfair methods.

In addition to being familiar with the state and federal laws that protect consumers from debt, you should educate yourself on the various techniques to get out of debt.

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How to get out of debt with debt consolidation in Connecticut

Some consumers turn to debt consolidation as a remedy when they are overburdened by having to manage several debts. You combine your many debts, such as credit card debt, medical debt, personal loans, etc., into one and pay them off by making a single monthly payment. You can consolidate debt in a number of methods; two of the best ways are getting a personal loan or utilizing a debt relief program.

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Debt consolidation loan

Loans for debt consolidation may be available through banks, credit unions, and installment loan providers. Many of your bills are consolidated into one single payment with these loans, and this makes paying off your debts simpler. These offers may also have interest rates that are less than what you are now paying. 

Many of the low-interest rates for debt consolidation loans could be "teaser rates," which are rates that are valid for a little period of time. Your lender might raise the rate you have to pay afterward. Your monthly payment may seem less to you at first than what you were paying before. Your monthly payments could seem less than before because you'll ultimately be making payments over a longer period of time. This can result in significantly higher overall costs for you. 

You probably won't be able to acquire cheap interest rates on the balance transfer, debt consolidation loan, or home equity loan if your debt issues have negatively impacted your credit score.

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Debt consolidation program

Contrary to taking out a loan, a debt consolidation program could be an excellent way to get out of debt. A debt consolidation program will often combine many loans into one monthly payment. A "program" is typically a service, or a set of services, provided by a debt consolidation business or organization: The business may accept a single payment from you on a monthly basis, and then, they will distribute it among your creditors. You won’t have to worry about having to take out yet another loan to pay off your existing debts.

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Spend some time getting acquainted with the debt collection laws in Connecticut and how you can get out of debt with debt consolidation. Be sure to think about what will satisfy both your short-term and long-term needs when you evaluate your options. The stress and weight of dealing with debt might occasionally paralyze you, but learning about your situation and your options will help you decide and move forward with confidence.

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