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

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Arkansas has one of the lowest average credit scores in the country, ranking 48th, although its average debt levels for things like credit cards and mortgages are on the low end compared with other states.

There are other factors that work in Arkansas’ favor, too: The median household income in Arkansas was estimated to be nearly $46,000 a year for 2017, and just 3.7% of residents were unemployed in March of this year, according to the U.S. Census Bureau. The average monthly mortgage payment constitutes just under 13% of income within the state, making it one of the lowest in the nation.

But regardless of the type of debt you have, your income or your credit score, getting in too deep is a scary prospect. Fortunately for its residents, Arkansas has pretty strong protections for debtors in place to help you deal. To that end, this article will cover the general state of debt in Arkansas, the laws governing how collections work, as well as your rights and options for dealing with debt.

Debt in Arkansas: At a glance

Arkansas debt
Type Per capita balance, 2018 Rank out of 50 states (1 is highest) Change from 2017 (%) U.S. per capita balance
Credit card debt $2,410 47 4.8% $3,220
Student loan debt $4,330 43 3.8% $5,390
Auto debt $5,380 5 2.7% $4,700
Mortgage debt* $18,260 48 0.3% $33,680
* First-lien debt only
Source: Federal Reserve Bank of New York, March 2019

Debt collection in Arkansas

If your account goes to collections, you’ll be subject to state and federal debt collection laws. For Arkansas residents, those are somewhat inconsistent when it comes to borrower protections.

The Fair Debt Collection Practices Act (FDCPA), for example, is a federal law meant to protect borrowers by placing limits on things like what times of day and the number of times per day you can be contacted, and prohibiting harassment and threats as a means to collection. The act applies to consumer debts, like credit cards, medical bills or a mortgage. It does not apply to debts incurred from business losses.

In Arkansas, the FDCPA does not apply to original creditors, meaning you’re only protected under the act if the lender uses a third party to collect what is owed.

When you look at the homestead exemption in the state, which defines how much equity in your home cannot be subject to legal judgment, properties are protected for up to $2,500 in value. And when you consider vehicle equity, that’s only protected up to $1,200 in Arkansas.

If your bank gets an order to levy your account, and thereby seize your existing assets, you’d be protected up to $800 (if single) or $1,250 (if married), and anything above that would be subject to collections. This rule applies to any bank account your name is associated with, even if you are only listed as a co-account holder. So those who believe their accounts may be subject to levies should remove themselves from joint accounts to protect their assets.

Then there are wages: With a 75% exemption, Arkansas residents have a high level of protection from wage garnishment, which occurs when money is taken directly out of your paycheck, rather than from your bank account. That percentage is calculated after mandatory deductions, like federal and state taxes as well as Social Security, unemployment and disability taxes, are taken out.

Voluntary deductions, like retirement and health savings account (HSA) contributions, however, are not included — except for certain debts like paying delinquent taxes or child support. The remaining 25% would be removed from each paycheck until the debt is paid off. That said, the 75% exemption does make it less likely that a debt collector will sue you because it’s such a small proportion.

There is another notable exception to the wage-garnishment rule to be aware of: If your take-home pay is $217.50 or less per week, your wages cannot be garnished if your debt goes into collections.

Responding to collection letters

Know your rights. If you get a debt collection notice, for example, you can stop the company from contacting you. In that case, you should send it a letter detailing your request to end collection communications and make a copy for your records. The National Association of Consumer Advocates also advises sending that by certified mail and paying for a return receipt to document that they have received the letter. Once received, the collector can only contact you to tell you it won’t be contacting you again, or to make you aware if it intends to take legal action against you. Keep in mind, however, that this only stops contact, it does not wipe out your debt.

Request a debt validation/verification letter. By law, the debt collector must send you a “validation notice” within five days after first contacting you. That will tell you the total amount owed, the name of the creditor and how to proceed if you believe the debt isn’t yours.

Don’t ignore a court summons. If you don’t make efforts to start repaying your debts, the collector may sue for the amount owed. That’s why it’s vital to work with the collector to evaluate your repayment options, such as  working out a potential installment plan, to avoid a lawsuit. If the debt is verified as yours and you are sued, you’ll need to find a lawyer and go to court by the date specified in the court papers. You should also be aware that not responding or showing up will likely result in a judgment being made against you. If the collections company wins the lawsuit, that’s when actions like wage garnishment would become a possibility. Remember: You have to be an active participant in the process in order to preserve your rights.

Report violations. Alternatively, if you believe that a third-party debt collector has violated the FDCPA by doing things like contacting you too frequently or lying about your debt, the state attorney general suggests keeping detailed records of your communications with the collector and any written correspondence between you and the company. You should also report the violations to the attorney general’s office, the Federal Trade Commission (FTC) or the Arkansas State Board of Collection Agencies. It’s also a good idea to talk to a lawyer to see if you’re entitled to sue the debt collector. If so, an Arkansas-based lawsuit would be limited to one year from the time of violation.

Understanding your state’s statute of limitations

Debts that have been in collections are subject to statutes of limitations. So if you have old debts that you cannot repay, there are state-mandated limits on how long the collector has to actively pursue repayment by, for example, filing a lawsuit against you.

Here’s how those limitations break down by debt category in Arkansas:

Arkansas Statute of Limitations on Debt
Mortgage debt 5 years
Medical debt 2 years
Credit card 5 years
Auto loan debt 4 years
State tax debt 10 years


Once the statute of limitations passes, you still legally owe the amount due, although it’s considered “time-barred.” And collectors can still do things like call you or mail you letters to seek payment.  That old debt also may still be on your credit report. And for Arkansas residents, acknowledging that your debt is in default, or making additional payments (even partial ones), would reset the clock and reopen the window for lawsuits.

The last thing you want to do is make a payment — even if it’s just $1 — on a time-barred debt, because that will reset the clock on the statute of limitations and give the debt collectors more time to sue you.

Arkansas debt relief programs

If you’ve ended up taking on more debt than you can handle, there are programs designed to help you get back to a healthier financial situation.

Debt relief firms. For some, that may happen through a debt settlement company, which would negotiate your debt down to a more manageable amount on your behalf. Some for-profit organizations that operate within the state include: National Debt Relief, CuraDebt and CareOne Debt Relief Services.

Credit counseling. It may be worth exploring credit counseling, instead, as your first step. These programs may be able to help you develop a debt management plan that works for you (provided you have unsecured debt), or at least point you in a better direction.

If you decide to go the counseling route, start by checking out the U.S. Trustee Program for a list of approved agencies, in addition to learning about the National Foundation for Credit Counseling and the Financial Counseling Association of America. It’s also a good idea to reach out to the Arkansas Attorney General’s office, as well to ensure there aren’t any complaints filed against the office you’re considering.

Watch out for bad actors. The Arkansas Attorney General advises consumers to be cautious of any organization that promises to make unsecured debt go away, touts a new government program or tells you to stop talking to your creditors. And, in general, the debt settlement option can be expensive, it can adversely affect your credit, it can take a long time to complete and the programs themselves may also be limited, excluding certain kinds of debt from settlement.

Ultimately there are no guarantees that the program is legitimate or will work as advertised. That said, a debt settlement company does provide an alternative to bankruptcy and may be an option for those with a credit score of 700 or below.

Payday lending laws in Arkansas

Arkansas prohibits the issuance of payday loans, having repealed its statute on the practice in 2011. That means residents cannot have or take out a payday loan. While this may seem restrictive for those looking for short-term borrowing options, it’s actually a more consumer-friendly policy because payday loans are known for their high interest rates (some in the triple digits) and high fees that can keep borrowers in a state of near-perpetual debt.

Tips to tackle debt in Arkansas

When you owe a substantial sum of money, it can be difficult to see a way out of that debt. But there are options. Here are a few to consider:

Consolidate your debt

Consolidation is when you take existing debts and bundle them into another form of financing, like a personal or home equity loan. That way, borrowers only have to deal with a single loan, lender and payment due date. Depending on the kind of consolidation you go for, it may be used to wipe out anything from existing credit cards to medical debt.

Those with good credit profiles may be able to get an interest rate that’s lower than the average associated with their existing debts. And using a consolidation loan to pay off debt that has gone into collections, you may be able to get a credit boost as well.

But to qualify in the first place, you’ll usually have to have a good credit score and a DTI ratio lower than 50%. In general, the better your finances, the better your rate. So this option may not be available for some whose debt already has gone into collections.

Be sure to compare offers from multiple personal loan lenders to be sure you’re getting the best deal, which you can do through LendingTree’s online marketplace.


For those with solid credit and a stable source of income, refinancing can be a good option to lower your interest rate and reduce long-term financing costs. But it can also be used to reduce short-term costs if, for example, the borrower were to opt for lower monthly payments.

Refinancing means turning an existing debt into a new debt, though: It resets the terms for your loan, and will affect everything from interest rate and fees to how long you have to pay it back.

Refinancing is a common option for those with auto loan or mortgage debt, but can also be used for things like student loans. But again, qualifying relies upon your current financial profile, so those with bad credit or a variable income will likely have to look elsewhere for relief.

Use a balance transfer card

A balance transfer card allows consumers to transfer their existing debt over to a new credit card that carries a low or 0% limited-time interest rate, for a fee. Provided you can qualify for a high-enough credit limit, and pay off the balance within that time frame, it could be a great way to control costs and get on the path to being debt-free. It would also lower your credit utilization, or amount of debt across available credit lines, by increasing your total available credit, thereby boosting your credit score in the short term.

However, if you can’t pay it off before the introductory rate expires, then the remaining balance would be subject to a regular credit card interest rate. And there may be deferred interest charges if you miss a payment or have a balance after the promotional period expires. That means you’d be charged for all the interest you would have owed from the beginning of the promotional period.

Keep in mind that because this is a new line of credit, a balance transfer card is generally only available for those with a very good credit score and a solid income. Also, you can’t transfer balances from cards from the same bank.

Filing for bankruptcy in Arkansas

In some cases, it may be best to file for bankruptcy in order to get clear of debt. But keep in mind that it isn’t right for everyone. Filing also means taking a hit to your credit profile, which can translate to more expensive loans in the future. That said, the long-term impact can be beneficial. So you’ll have to weigh your options carefully before pursuing it.

Here are some other things to keep in mind:

The two most common kinds of bankruptcy in the United States are Chapter 7 and Chapter 13. A major difference between the two is that Chapter 7 results in the liquidation of the debtor’s assets (and stays on your credit report for seven years) while Chapter 13 requires the debtor to adhere to a repayment plan that lasts three to five years (and remains on your credit report for up to a decade). To qualify for Chapter 13 bankruptcy, you also have to get credit counseling.

If you’re considering filing for either kind of personal bankruptcy, it’s also important to know that there are some kinds of debt that cannot be wiped out. Some non-dischargeable debts include: tax debts, loans obtained under false pretenses and back child support. Other kinds of debt, like government student loans, may require you to prove undue hardship to qualify for a discharge. There are also the immediate costs to consider: Filing fees for bankruptcy are several hundred dollars, and attorney’s fees on top of those will vary, depending on who you hire to represent you.

The bottom line

Arkansas residents who are deep in debt do have options for relief. And the state’s protections offered for those facing collections do shield debtors somewhat from third-party collection companies, making it a little easier on those worried about things like wage garnishment. Ultimately, the best way out of debt will depend on your circumstances, but talking to someone like a credit counselor can help you figure out which option will help you take that first step back into financial health.

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


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