Missouri Debt Relief: Your Guide to State Laws and Managing Debt

In Missouri, the median household income is slightly lower than in the rest of the U.S. — $56,885 compared to $61,372 in 2017. However, lower-than-average salaries in the state are in line with Missouri’s low cost of living. Unemployment is also lower in the Show-Me State. In May 2019, only 3.3% of Missourians were unemployed; the national rate was 3.6%.

Despite favorable data, many residents still have trouble paying their bills. While the average debt load of Missourians is lower than the U.S. average, over 35% of Missouri consumers have at least one debt in collections, according to the National Consumer Law Center. That figure exceeds the national rate of 33%.

If you are a Missourian who is struggling with debt, know that there are laws in place to protect you and resources and strategies available to you to get out of debt. In this article, we’ll cover the Missouri debt relief laws that affect consumers and provide you information and tools to help you navigate your situation.

• Debt in Missouri: At a glance
• Debt collection in Missouri
• Missouri debt relief programs
• Payday lending laws in Missouri
• Tips to tackle debt in Missouri
• Filing for bankruptcy in Missouri
• The bottom line

Debt in Missouri: At a glance

Debt collection in Missouri

Unlike most states, Missouri does not license or regulate debt collection agencies. However, all collection agencies must adhere to the Federal Fair Debt Collection Practices Act (FDCPA), the federal law that governs debt collection practices. Some of the guidelines and protections in place under the FDCPA include:

• Debt collectors may only contact you between 8 a.m. and 9 p.m.
• Debt collectors may not contact you at work if they know your employer does not permit such calls.
• Debt collectors may not harass you or anyone else over the phone or through any other form of contact.
• Debt collectors may not lie when collecting debts (e.g., falsely implying that you have committed a crime).
• Debt collectors must stop contacting you if you ask them to do so in writing. (Note that requesting a creditor to stop contacting you does not end their collection efforts, as they may pursue other legal avenues to collect the debt.)

Should a creditor successfully sue you and secure a judgment against you for nonpayment of a debt, Missouri generally follows federal limits on wage garnishments. The following is protected:

• 75% of your disposable earnings (If your tax status is head of household, Missouri State law protects 90%)
• Personal belonging up to $3,000 in value
• Vehicles up to $3,000 in value
• Up to $15,000 of the value of a home ($5,000 for a mobile home)

Responding to collection letters

It can be tempting to ignore notices and phone calls from debt collectors, but doing so can make your situation worse. It’s in your best interest to respond to your creditors. Keep these tips in mind as you communicate with debt collectors.

• Keep track of all communication. Hold on to all letters and keep a written log of your phone calls. Document whom you spoke to and the date and time of each call, as well as the outcome of each conversation.
• Request validation of the debt. The FDCPA states that consumers have 30 days upon receiving a collection letter to dispute the debt or request validation of a debt, meaning the collector has to send you proof the debt is yours.
• Respond to court summonses. If you receive a court summons, do not ignore it. Seek legal counsel immediately to determine your next steps. Missouri Legal Services provides information and resources for hiring an attorney.
• Get written proof of any payment arrangements. If you make payment arrangements with a collection agency, be sure to request the agreement in writing before proceeding with payments.

If you suspect a debt collector is violating any of the laws under the FDCPA, you can file a complaint with the following agencies:

Federal Trade Commission: 

• Consumer Response Center
• 600 Pennsylvania Avenue NW
• Washington, DC 20580
• 202-326-2222
• www.ftccomplaintassistant.gov

Consumer Financial Protection Bureau: 

• Consumer Financial Protection Bureau
• P.O. Box 2900
• Clinton, IA 52733
• Toll-free: 855-411-2372
• TTY: 855-729-2372
• www.consumerfinance.gov/complaint

Understanding Missouri’s statute of limitations

If you have debt in collections, it’s important to know the statute of limitations in your state, which establishes the amount of time within which collectors can take legal action against you.

Depending on the type of debt, Missouri statute of limitations on debt range between five to 10 years. After that period has passed, the debt becomes time-barred, which means collectors no longer have the right to sue you.

Keep in mind that you still owe a debt even if it is time-barred. Collectors can continue to contact you and pursue payment on the debt, but they are limited to their own collection efforts. It is up to you whether or not to pay a time-barred debt, knowing the creditor’s limitations. Beware of making any partial payments on time-barred debts unless you intend to satisfy the entire balance, as doing so will restart the clock on the statute of limitations.

Should you receive a court summons on a debt that you know or believe to be time-barred, do not ignore it. You should seek legal help to determine a course of action.

Missouri debt relief programs

Many agencies — both nationally and on the state level — assist consumers who struggle with debt. Here are a few places to find help:

• National Foundation for Credit Counseling (NFCC): The Missouri Attorney General recommends that consumers contact NFCC to find a credit counselor.
• Financial Counseling Association of America (FCAA): Find a certified credit counselor in your area.
• Missouri Legal Services: Connect with a legal aid program in the state and find information on various consumer topics.

Before moving forward with a particular debt relief program, make sure you understand the terms of the assistance. Unfortunately, many consumers who seek debt relief fall victim to scams, as some companies take advantage of consumers’ vulnerability.

Watch out for the following warning signs that indicate you may be dealing with a disreputable company.

• Guaranteed results. Companies cannot promise or predict specific results of their negotiation efforts.
• Government programs. A common tactic of some companies is to advertise a “new government debt relief program.”
• Upfront payments. Avoid working with a company that charges you before it has done any work.
• Voluntary contributions. Some companies often disguise their fees as “contributions” but pressure you into making them.
• No explanation of the risks of using their services. Companies are required by law to disclose the potential repercussions of using their program.

Payday lending laws in Missouri

Payday loans are short-term loans aimed at consumers who have trouble making ends meet. These loans typically are for small amounts, but the fees that payday lenders charge make them a costly way to borrow money. Missouri consumers pay as much as 454% or higher annual percentage rate (APR) on payday loans.

In Missouri, creditors who provide payday loans must be licensed by the state’s Division of Finance. State law places the following limitations on payday loans:

• Maximum loan amount: $500
• Loan term: Between 14 and 31 days
• Finance charges: No more than 75% of the loan amount in accumulated interest and fees

In general, it’s best to avoid these types of loans. In addition to the high fees, consumers often fall into a cycle of relying on payday loans regularly.

Tips to tackle debt in Missouri

When it comes to managing debt, there are multiple strategies available depending on your situation. Here are a few ways to navigate your debt.

Consolidate your debt

Debt consolidation is the process of taking several debts and combining them into one new debt — typically at a lower interest rate and monthly payment.

You can accomplish debt consolidation in various ways, including using a personal loan, home equity loan or home equity line of credit (HELOC). You can use this strategy for multiple types of debt, including medical debt, credit card debt and personal loans.

Keep in mind that while debt consolidation can reduce the payment on your debt, it doesn’t reduce the amount you owe. Additionally, there are pitfalls to watch out for with this strategy, such as consolidating low or no-interest debt like medical debt, at a higher rate. Also, using a home equity loan or HELOC to pay off unsecured debt essentially puts your home at risk if you encounter trouble making the payments.

In addition to all of the above, some consumers who free up credit card balances and other forms of revolving credit without addressing the cause of their overspending often risk running up the balances again and ending up in deeper debt.

Refinance

Refinancing your debt means changing the terms of the loan — either the interest rate, the term length or both. This typically applies to secured debt such as car loans and mortgages, provided you have equity in the asset. With a home, you also can do a cash-out refinance in which you refinance the terms and walk away with a lump sum of money to pay off your other debts.

This strategy can reduce the monthly payment on your debt, but it often does so by increasing the repayment term, resulting in staying in debt longer and paying more in the long run. In the case of refinancing a mortgage, you’ll need to pay closing costs, which can sometimes offset the benefits of refinancing.

Student loans often can be consolidated or refinanced, as well. Check with your lender to see what your options are, or consider refinancing student loans with a third-party lender. And make sure you understand the terms of the refinance before proceeding. If you choose to refinance federal student loans, know that you’ll lose forbearance and deferment options and other protections government loans provide.

Use a balance transfer card

Another option is to take advantage of a 0% or low-interest introductory rate on a credit card to pay down some or all of your debt. Like debt consolidation, using a balance transfer card combines multiple debts into one new debt.

You’ll need good or excellent credit to qualify for a low interest rate and a credit limit high enough to cover most or all of your debt. With this approach, keep in mind that if you do not pay off the debt within the introductory period, typically between 12 and 21 months, you could end of paying more over the long run. It’s also important to know that these cards often come with a balance transfer fee of 3 to 5% of the transferred amount.

Additionally, be careful of freeing up balances without addressing your spending habits, or you’ll likely run them up again.

Seek out credit counseling

Working with a certified credit counselor can be an effective way to address a current debt issue and also help you over the long term. A credit counselor will work with you to establish a budget and devise a plan to manage your payments. You will usually need to pay for credit counseling, although some nonprofits may provide some resources for free.

To find a counselor, contact the NFCC, FCAA, housing agencies or other community agencies in your area. Department of Justice provides a list of approved credit counseling agencies in Missouri.

Consider a debt management plan

If you work with a credit counselor, they may recommend you enter a debt management plan, which is an organized repayment agreement between you and your creditors managed by the counselor.

Instead of paying your creditors, a debt management program requires you to make payments into a separate account set up specifically for the plan. The counselor then pays your creditors from the account.

Typically, consumers need to close any accounts they enter into a debt management plan. You’ll also need to pay a monthly fee, usually between $25 to $35. The average length of a debt management plan is four to five years.

Negotiate with your creditors directly

An often overlooked approach to dealing with debt is to work with your creditors directly. This strategy may seem intimidating, but keep in mind that creditors want to get paid. Depending on how much you owe and how past-due you are, your creditors may be willing to negotiate with you. Contact each one to see what your options are. Some companies have official hardship procedures in place for consumers who have difficulty paying their bills.

Filing for bankruptcy in Missouri

If you believe you cannot manage your debt situation with one of the above solutions, then bankruptcy may be an option to consider.

Consumers typically choose between two types of bankruptcy: Chapter 7 and Chapter 13. With Chapter 7 bankruptcy, your assets are completely liquidated to pay off your debts. In Chapter 13 bankruptcy, you enter a structured repayment plan over a three- to five-year period.

Choosing to file for bankruptcy is a significant decision that should be made only after consulting a financial professional. A bankruptcy can affect your ability to gain credit for as long as seven to 10 years.

Missouri Legal Services offers information on filing for bankruptcy in Missouri, as well as links to free bankruptcy assistance and additional resources.

The bottom line

If you are struggling with debt, the best thing you can do is to educate yourself and create a plan. Familiarize yourself with the resources and Missouri debt relief laws we covered here, and explore the strategies for paying down your debt.

As you consider your options for managing your debt, make sure you think about what will address your immediate needs and also provide a long-term solution.

The information in this article is accurate as of the date of publishing.