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

As the fourth-largest state in the country in size, Montana is on the other end of the spectrum when it comes to population. With an area of 147,000 square miles and an estimated population of 1.06 million, the aptly nicknamed Big Sky Country is the third-least densely populated state.

In addition to wide-open spaces and diverse geography, Montana offers residents other benefits. The state has a relatively low unemployment rate of 3.7%, as of March 2019. And despite having a median annual income that’s 12% lower than the nation’s ($53,386 vs. $60,336 in 2017), residents hold below-average debt levels when compared with national averages.

But like the rest of the country, many Montanans struggle with managing their debt. Fortunately, there are resources and services available to consumers who face financial difficulty. If you need help navigating your debt, this article will provide information on state and federal laws that affect you as a consumer, as well as strategies to help you improve your situation. Read on for what you need to know about debt relief in Montana.

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

Debt in Montana: At a glance

Debt collection in Montana

Montana residents who face debt collection are protected under the Fair Debt Collection Practices Act (FDCPA), a federal law that governs how third-party debt collectors may interact with consumers. Under the FDCPA, debt collectors cannot:

• Call you before 8 a.m. or after 9 p.m.
• Contact you at work if you’ve told them your employer does not permit such calls.
• Contact a third party about your situation other than to get your contact information; they may not disclose that you owe money.
• Harass or abuse you or anyone else they contact about you.
• Lie about the amount you owe.
• Use deceptive methods to collect a debt from you.

Some laws regarding debt collection are state-specific. In addition to the guidelines and limits established by the FDCPA, the following Montana debt relief laws exist:

• Homeowners can protect the equity in their home up to $250,000 of the assessed value by claiming a homestead exemption.
• If you own a car, up to $2,500 of the equity is protected.
• If a judgment is made against you that results in an attachment of your bank account (removal of funds), your entire account — up to the amount of the debt — could be emptied.
• If a judgment is made against you that results in wage garnishment, up to 25% of your disposable income (your wages less mandatory deductions) may be garnished.

Responding to collection letters

If you are contacted by a collection agency, it’s in your best interest to respond. Even if the debt is not yours or the creditor has inaccurate information, you should follow the proper procedures for disputing it. Keep these tips in mind:

• Request verification of the debt. You have 30 days upon receiving a collections notice to request verification or dispute a debt that is not yours. By law, the collector must send you proof that the debt belongs to you.
• Keep a record of your contact. As you communicate with collection agencies, hold on to all letters and keep a log of your phone conversations including the dates of calls, with whom you spoke and the outcome of each communication.
• Respond to court summonses. Do not ignore a court summons if you receive one. The State Bar of Montana provides tips on hiring an attorney, as well as a lawyer referral service.
• Get any payment arrangements you make in writing. Before you begin making payments, be sure you have proof of the agreement.

Collection agencies that violate federal or state law could be subject to legal action. If you encounter any trouble with a debt collector, or if you suspect they are operating outside of the FDCPA or Montana’s debt relief laws, contact the following organizations to file a complaint:

Montana’s Office of Consumer Protection Office of Consumer Protection

• P.O. Box 200151 Helena, MT 59620-0151
• 800-481-6896 or 406-444-4500
• [email protected]
• www.dojmt.gov/consumer/

Federal Trade Commission (FTC) Consumer Response Center

• 600 Pennsylvania Avenue NW
• Washington, DC 20580
• 877-382-4357
• TTY: 866-653-4261
• www.ftccomplaintassistant.gov

Consumer Financial Protection Bureau (CFPB) 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 your state’s statute of limitations

Each state has an established statute of limitations on debt collection, which outlines the time frame during which a debt collector can pursue legal action against you.

In Montana, creditors have between four and 10 years to sue you, depending on the type of debt. Once the time limit passes, the debt becomes time-barred.

Collectors can continue to contact you and pursue payment on a time-barred debt, but they do not have the right to take action beyond their own collection efforts. You are not excused from paying the debt, but it is up to you to pay it, knowing they cannot take legal action against you.

Keep in mind that if you do make payments on a time-barred debt, you’ll restart the clock on the statute of limitations, so beware of “waking up” an old account unless you intend to pay it in full.

If you receive a court summons on a debt you know is time-barred, do not ignore it. You should still contact an attorney.

Montana debt relief programs

As you familiarize yourself with both the national and federal debt relief laws in place, you should also explore the services and programs available to you.

• National Foundation for Credit Counseling (NFCC) can put you in contact with a member agency that provides credit counseling and other resources.
• Financial Counseling Association of America can help you find a credit counselor in your area.
• National Association of Consumer Advocates has extensive consumer resources as well as an attorney directory.
• Montana’s Office of Consumer Protection provides tips on debt relief and links to state-licensed debt relief companies.
• Montana’s Judicial Branch offers a self-help service with access to tools and information about your legal consumer rights.
• Montana Financial Education Coalition offers education and information on local resources.
• Montana Legal Services Association, a private, nonprofit law firm, helps Montanans through a network of community partners and free legal resources.

When considering a debt relief program, do your homework before signing up for any plan or service. While there are reputable organizations that do assist consumers, there are many others that deliberately attempt to deceive or scam customers.

Use conventional wisdom, and avoid anything that sounds too good to be true. Additionally, here are some warning signs that a company may be untrustworthy:

• It charges upfront fees. Avoid working with any company that charges fees before attempting to settle your debt.
• It guarantees specific results. Companies do not know what the outcome of their efforts will be before starting.
• It provides only one solution. Avoid organizations that push you into a debt management plan or another service with no other options.
• It advertises new government programs. Avoid companies that promote a new government debt relief program.

Payday lending laws in Montana

Most states have laws governing payday loans, which are short-term, high-interest loans marketed to consumers who struggle to make ends meet. They are one of the most costly ways to borrow money and should be avoided. Consumers who resort to using payday loans often fall into an unhealthy cycle of depending on them.

In Montana, payday loans are called “deferred deposit loans.” Lenders who provide these loans to consumers must be licensed by the state. Montana’s Deferred Deposit Loan Act places the following limitations on payday lending practices:

• Loan amount: between $50 and $300
• Maximum term: 31 days
• Maximum finance charges: cannot exceed 36% annual percentage rate (APR) (exclusive of insufficient funds fees)
• Maximum loan amount: must not exceed 25% of a borrower’s net paycheck amount

Additionally, lenders may not extend a deferred deposit loan to consumers with another outstanding deferred deposit loan. The lender must disclose the terms of the loan in understandable and simple language

MontanaLawHelp.org provides tips and resources on breaking the payday loan cycle. Additionally, if you suspect a lender is violating the law, you should file a complaint with Montana’s Office of Consumer Protection.

Tips to tackle debt in Montana

There is no one-size-fits-all solution to addressing debt. Instead, there are multiple paths you can take, depending on your situation. Here is an overview of some strategies available to you.

Consolidate your debt

Debt consolidation is the process of combining multiple debts into a single debt. There are various ways to consolidate debt, including taking out a personal loan, using a credit card or taking out a home equity loan or line of credit (HELOC).

Many consumers like the idea of streamlining their debts to just one or two payments. But the bigger goal behind this strategy is to pay less in interest and shorten the amount of time it takes to pay down the debt. That doesn’t always happen, though. In many cases, you could be consolidating no- or low-interest rate debts — such as medical debt — at a higher rate, increasing the total cost of the debt.

Debt consolidation does not reduce the amount of debt you owe; it merely moves it. Some consumers who consolidate can have the false perception that they decreased their debt. In many cases with consolidation, they incur even more debt.

Also, if you use a HELOC or home equity loan to consolidate debt, you’re putting your home at risk should you have trouble making the payments.

Refinance

If you own a car or a home, you may be able to refinance the loans on them. This is when the lender exchanges the interest rate or the repayment terms, or both, for more favorable ones. With a home, you also have the option of a cash-out refinance, in which you take out a lump sum of money against your home’s equity to pay down other debt.

While refinancing could result in a lower monthly payment, it usually increases the total amount you will pay and extends the amount of time you will be in debt. Additionally, using your home to pay off unsecured debt like credit card debt or medical bills is usually not a good idea as it puts your home in jeopardy if you’re not able to make continued payments.

If you are having a hard time making your student loan payments, you may be able to consolidate or refinance them. Check with your lender to see what your options are, or consider refinancing with a third-party lender. If you choose to refinance federal student loans, keep in mind that you’ll lose forbearance and deferment options or other protections unique to those loans.

Use a balance transfer card

For consumers who have good enough credit scores to qualify, paying off high-interest debt with a new credit card offering a low or 0% interest rate can be a way to reduce the amount of interest paid and the time it takes to pay down debt.

Many consumers have used this strategy successfully, but for others, a balance transfer card just opens the door to incurring more debt. Also, if the balance on the new card is not paid off before the promotional rate ends — typically anywhere from 12 to 21 months — you could potentially be paying even more in interest.

Get credit counseling

A professional credit or debt counselor can work with you to establish a budget and help you better manage your debt obligations. You can find a counselor through the NFCC, FCAA or local community organizations. The U.S. Department of Justice also provides a list of approved credit counseling agencies in Montana.

Create a debt management plan

A debt management plan is a structured payment plan managed by a credit counselor or a debt management company. Instead of paying multiple creditors, you make payments into an account specifically set up for the debt management plan. The counselor then pays your creditors from the account.

When you participate in a debt management plan, you will typically need to close the accounts that you enter into the program. Debt management plans can take a long time to complete, and some consumers who begin may never actually finish. Furthermore, there is a monthly fee associated with debt management plans, which adds up to thousands of dollars over the length of the plan.

Work with your creditors

Don’t underestimate the power of communicating with your creditors. Remember, their goal is to get paid, so even if you are severely past due, many creditors will be willing to work with you.

Some even have processes in place for consumers who face hardship.

Here are some tips for negotiating your own debt settlement.

Filing for bankruptcy in Montana

As a last resort, bankruptcy is another option. Typically, consumers choose between two types: Chapter 7 and Chapter 13.

Chapter 7 bankruptcy is a complete bankruptcy in which your assets are liquidated and used to pay your creditors. Chapter 13 is a structured repayment plan over a three- to five-year period. Both types of bankruptcy can affect your credit for seven to 10 years.

Many debt-laden consumers mistakenly think bankruptcy is their only option. Before pursuing it, make sure you’ve consulted with a counselor or other financial professional who will objectively look at your situation and discuss your options with you.

Montana’s Judicial Branch offers comprehensive resources on bankruptcy. Additionally, Montana’s Legal Services Association can provide assistance.

The bottom line

Again, there is no one-size-fits-all solution for tackling heavy debt. But the resources and information we’ve provided here will help you understand your options for debt relief in Montana, as well as some of the laws in place to protect consumers.

Spend some time reviewing the tools and strategies available to you. As you contemplate a course of action, be sure to consider the paths that will not only address your immediate situation but also provide long-term results.

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