Debt Collection
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A collection agency recently told me that they could contact all of my creditors to whom I owe money and then contact the bankruptcy court to have my assets seized and sold to satisfy the debts. Can they do this? I have not filed for Bankruptcy.
You didn't mention what the debts are so I'll assume you have
some secured and unsecured debt.
The collection agency not only lied to you, they used an illegal
threat (calling 3rd parties and the bankruptcy court) Begin
recording all calls to protect yourself in the future and report
their activity to your state attorney general.
For secured debt, the creditor is the only one who can seize the
item (car, boat, TV, house etc). In the case of a home, the creditor must go through foreclosure proceedings.
For unsecured debt, only IF you file bankruptcy, does the
bankruptcy court become involved. Then, unsecured creditors can ask the bankruptcy court to force
you to file a chapter 7, if they don't want to accept your
chapter 13 terms. The courts don't always support the creditorrs' requests.
Collectors have no say in bankruptcy
proceedings unless they hold a judgment against you. To do that,
they have to own the debt and then convince a court to grant a
judgment.
See my site for
more info on default judgments.
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Are attorneys subject to the FDCPA?
An attorney whose practice is limited to legal activities (e.g., the filing and prosecution of lawsuits to reduce debts to judgments) are not considered debt collection attorneys and therefore not subject to the FDCPA.
On the other hand, debt collection attorneys and lawyers who use general and specific debt collection tactics such as sending dunning notices, (debt collection letters) and making phone calls are accountable under the Fair Debt Collection Practices Act (FDCPA).
Don't be intimidated by letters and phone calls from debt collection attorneys. They must adhere to the FDCPA rules and, when they violate the law, can be sued just like any other collector.
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Are business debts covered under the Fair Debt Collection Practices Act (FDCPA)?
The FDCPA only offers protection to consumers for private debts. Here is the specific wording from the FDCPA:
" Any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which, are the subject of the transaction, are primarily for personal, family, or household purposes."
Some examples of consumer debts are auto loans; medical expenses; charge cards, credit cards, mortgages, personal loans and so forth.
Many other laws pertain to commercial and business debts. To attempt to list them all is beyond the scope of this site. However, I suggest you start with the Uniformed Commercial Code and then look for state and federal laws concerning international and interstate commerce.
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Are charged off debts still collectable?
Charged off debts are still collectible...even years later!
The IRS allows creditors to charge off debts that have become worthless. The rule is called the "Specific Charge-Off Method". In a nutshell, this rule allows creditors to take a loss on their income taxes when a debt they are trying to collect becomes worthless. Companies do not actually have to go to court to prove the debt is uncollectible and they can still try to collect the debt at a later date. If they are successful in collecting the debt (or any part thereof) they must claim it on their tax return in the year collected.
Quite often, creditors sell accounts they deem worthless (or not worth their time and expense) to third party debt collection agencies called Junk Debt Buyers.
When creditors sell an account, they sell all rights to the account as well so only the new legal owner of the account can collect the debt.
Once a company decides to charge off a debt they are required to report that information to a credit bureau within 90 days of the debt's charged off date.
Finally, although debts expire, collectors still have the right to try and collect on old debts. (see statute of limitations for more info)
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Can collection agencies add or charge interest?
Interest on Debts when no judgment exists!
Section 808(1) prohibits debt collectors from collecting any amount unless the amount is expressly authorized by the agreement creating the debt or is permitted by law.
For purposes of this section, "amount" includes not only the debt, but also any incidental charges, such as collection [53 Fed. Reg. 50108] charges, interest, service charges, late fees, and bad check handling charges.
808(2) Legality of charges. A debt collector may attempt to collect a fee or charge in addition to the debt if either:
(a) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or
(b) the contract is silent but the charge is otherwise expressly permitted by state law.
Conversely, a debt collector may not collect an additional amount if either:
(a) state law expressly prohibits collection of the amount or
(b) the contract does not provide for collection of the amount and state law is silent.
808(3). If state law permits collection of reasonable fees, the reasonableness (and consequential legality) of these fees is determined by state law.
808(4). A debt collector may establish an "agreement" without a written contract. For example, he may collect a service charge on a dishonored check based on a posted sign on the merchant's premises allowing such a charge, if he can demonstrate that the consumer knew of the charge.
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Can collection agencies charge interest on old debts?
Please see my in-depth answer here...
http://www.fair-debt-collection.com/searches/interest-on-debt.html
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Can collection agencies charge interest on old debts?
According to the FDCPA, interest, fees and other charges can only be added if the original credit agreement allows it and state law does not prohibit it.
Please see my in-depth answer here...
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Can collectors call my spouse and discuss my debts?
According to the FDCPA, section 805(d); debt collectors can legally discuss the details of your debts with your spouse even if the debt existed prior to the marriage or the spouse is not on the credit contract.
The same rule applies to minors (less than 18 years old), to a guardian, executor, and parents.
See this page for more info...
Collection Calls
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Can collectors discuss my debts with my minor children?
For our purposes here, we'll define minor as people that have not reached their 18th birthday.
There is absolutely no reason for collectors to even talk with a minor AND collectors are prohibited from discussing your debt or anything about your account with unauthorized third parties. They are also prohibited from using any threats or abusive language.
Regardless of the status of your account, DO NOT let collectors harass your children or any other minor.
Immediately report illegal behavior to your state attorney general and the FTC. Use the attorney-general link below to locate yours and then file a formal complaint.
While you're on the phone or the web site, ask if they can offer any assistance such as calling or sending the collector a written warning to stop harassing you and your children. Also ask for a reference to any state laws that offer protection from harassment.
Attorney General List of Websites
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Can collectors refuse to give you (or agree to) a reasonable payment plan?
There is no law compelling collectors, who own the debt, to agree to any payment plan!
Don't believe the myth that collectors, who refuse payments, forfeit their right to collect the debt and that the debt goes away. This is just not true!
Under those circumstances where collectors are working on behalf of a creditor, the collector is obligated to submit all reasonable offers to the creditor. In this case, only the creditor, has the right to refuse your payment offer.
Collectors who own debts can refuse your payment plan (and they usually do). However, collectors who refuse reasonable payment plans run the risk of losing their case should they pursue court action.
This is why it's so important to put payment offers in writing and keep accurate records of all efforts to resolve the issue.
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Can debt collectors demand that I tell them my social security number?
Collectors can demand that you tell them your social security number all day long; nothing illegal about that!
However, the better question is, "Do I have to reveal my social security number when collectors call?"
Collectors spend a great deal of time trying to find debtors. This means they may call 30 people with the same last name before they find the actual debtor. In order to "control the ball" from the very beginning of the call, collectors will demand that you comply with their orders. They'll demand that you confirm information such as your name, address and social security number.
There is no law compelling you to reveal your personal information to collectors or any other strangers who call you. The best approach is to recognize the collector's demand for what it is and then firmly respond with:
"I don't reveal personal information to strangers however, if you care read off the information you have, I'll be happy to confirm whether or not your information is correct."
No matter what the collector says, DO NOT give out your personal information, especially your social security number. After all, the caller may not be a collector but a scam artists trying to trick you into giving out your personal information.
By having collectors (or whoever is calling) read off the information they have, you control the ball and protect yourself in the process. If the social security number they read off is correct, confirm it. It it's wrong, say they have the wrong person and terminate the call.
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How do I stop collection calls or dispute debts?
Please see this page for in-depth information...
Disputing Debt Collections
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I have delinquent credit cards that I got while I lived in Oregon. I have since moved to Arkansas. Which states' statute of limitations applies to these cards?
Because the collector must sue you in the state in which you live, your current state's SoL applies.
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If a debt was not validated within 60 days of dispute, What rights do I have if the creditor starts collection actions a year later?
Assuming you've followed all of the creditor's dispute
requirements outlined in the credit disclosure statement and the creditor failed to meet the requirements outlined in this document as well, you have a valid complaint.
Put your complaint in writing, be specific and reference the credit disclosure statement. Keep accurate records of your efforts to resolve this.
If on the other hand, you're dealing with just a collector, there is no requirement for collectors to validate a debt within 60 days. The only time limit spelled out in the FDCPA is the 30 days you have to dispute the debt.
Collectors can take as much time as they need to properly validate a debt. If the collector failed to validate the debt and is now pursuing collection actions, you have a valid complaint and potential lawsuit against the collector for violations of the FDCPA.
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The collector is demanding I pay by Post-dated check; what are my rights?
Collectors can demand you pay by post-dated check but there is no law that compels you to pay by this method.
It's your choice! However, I never recommend paying by post-dated check or automatic withdrawal (EFT). These methods almost always result in your account be overdrawn for a variety of reasons but usually because and unethical collector withdrew the funds early.
Unethical collectors cash checks and withdraw funds early and some have been known to withdraw the same amount of funds twice even though they were only authorized a one-time withdrawal.
Don't let anyone bully you into using post-dated checks or automatic withdrawals.
These actions will cause you even more headaches and can cost you a great deal of time and money to resolve all the problems caused by these actions. Of course, once they have the money, getting it back is nearly impossible without an expensive legal battle.
State up front that you will be paying by check or money order sent via U.S. mail and put this in writing.
If anyone tries to force you to pay by post-dated check or automatic withdrawal, report them to your state attorney general.
Attorney General List of Websites
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What are the general rules when debt collectors contact me for the first time?
Debt collection notices and debt verification must follow the rules outlined in the Fair Debt Collection Practices Act (FDCPA).
Section 809 of the FDCPA covers notifications and validation of debts. When you dispute debts the FDCPA requires debt collectors to obtain verification of the debt from the original creditor and then you a copy of the verification document(s).
The principal purpose of this section of the FDCPA is to help consumers who have been mis-identified by debt collectors or who dispute the amount of the debt. The verification of the identity of the consumer and the amount of the debt be obtained directly from the creditor. Mere itemization of what the debt collector already has does not accomplish this purpose.
This section requires a collector, within 5 days of the first communication, to provide you a written notice containing: (if not provided in the first communication)
the amount of the debt; and
the name of the creditor, along with a statement that he will:
assume the debt's validity unless you (the consumer) disputes it within 30 days,
send a verification or copy of the judgment if the consumer timely disputes the debt, and
identify the original creditor upon written request.
WARNING! If a debt collector's first communication with the consumer is oral, he may make the above disclosures orally during this initial conversation and therefore avoid the requirement to send a written notice.
If you beleive a debt to be invalid, orally dispute it and demand the collector send the proper debt notification required by the FDCPA.
Section 805 covers communication rules and outlines who can be called, how often and when debt collectors must stop calling you.
Use this link for more information...
Section 805
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What can I do about collectors who keep calling me about a debt I paid (or settled) years ago?
When you've already paid off a debt (or settled it), the best way to stop harassment is to send collectors who call, a letter informing them that the account was previously settled and is no longer collectable.
Your letter should also demand that the collectors remove your account, and all references to your personal information, from their records.
Additionally, your letter should clearly state that you do not expect to hear from them again but, if you do, you will consider any contact in violation of the Fair Debt Collection Act and you will immediately report their actions to your State Attorney General and to the Federal Trade Commission and take any and all legal action necessary to protect yourself.
Use this link for free sample letters...
Free Sample Debt and Credit Letters
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What is a grace period?
Many lenders offer grace periods that may range from 5 days to as many as 30 days. However, these grace periods DO NOT not mean the debt is not delinquent or overdue, it only means the lender has agreed to wait a certain number of days before taking any collection actions.
Check the fine print in your credit disclosure statment!
Most credit contracts that include grace periods continue to charge interest during the grace period and, in many cases, at the highest interest rate allowed by law.
WARNING! Quite often lenders use your use of the grace period as an excuse to raise your interest rate.
Keep in mind that many lenders will charge an additional fee (usually called a late fee) and that your payment is applied toward the late fee first, then toward the outstanding or unpaid interest, then toward the current interest and finally (if there is anything left) toward the outstanding balance.
In most cases, the delinquent date and the date the statute of limitations to collect the debt begin running are the same day. This is also the date that should be reported to credit reporting agencies and credit bureaus.
Please see this site for more credit reporting info...
Credit Reporting Periods
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What is IRS Form 1099?
This is an IRS Statutory Notification Letter - Publication 908 referenced as IRS Form 1099.
Typically, you'll receive an official looking letter that reminds you of a debt that you have failed to pay. It then refers to the creditor's "right to forgive this debt and submit a Form 1099 to the Internal Revenue Service on all bad debt accounts.
The last sentence usually reassures you that the creditor does not intend to take such an action at the time, and then urges you to remit payment to "avoid any additional collection activity."
According to the FTC website, this letter, because of its implied threat, clearly violates the FDCPA, Section 807(5) "False threats of legal action"
See my answer to this FAQ here...
IRS Form 1099 - FAQ
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What is the legal definition of a minor, child or juvenile?
There are several definitions depending whether you're dealing with a state or federal law. Here are the most commonly accepted definitions of minors, children and juveniles:
Minors or Minority Definition:
The term generally refers to anyone who has not reached full age to vote, buy alcoholic beverages, join the military, sign legal contracts and and so forth. Exactly when someone is a minor depends on the issue at hand.
An 18 year old is considered an adult when voting, joining the military, signing credit contracts and so forth.
Only people 21 years of age can purchase alcohol thus a 20 year old is still a minor in this category.
Minority is the preferred legal term because it encompasses the full range of persons who fall into underage categories such as children, infant, juvenile, young person, pupil and so forth.
Children or Child Definition:
A person who has not reached the age of 14 is considered a "child of tender age". Just to clarify, children lose their status as a child of tender age on their 14th birthday. However, in some jurisdictions the term includes children up to the age of 21 in areas such as child custody and child support.
Juvenile Definition:
Generally this refers to people between the ages of 14 and 17. They lose their juvenile status on their 18th birthday.
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When are debts considered legally delinquent?
Unless the credit contract states otherwise, all debts become delinquent the day after a payment that is due is not paid.
Check your credit disclosure statement for the exact terms of your credit contract.
Also, see "Grace Periods"
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What does charge off mean?
The IRS allows creditors to charge off debts that have become worthless. The rule is called the "Specific Charge-Off Method".
In a nutshell, this rule allows creditors to take a loss on their income taxes when a debt they are trying to collect becomes worthless. Companies do not actually have to go to court to prove the debt is uncollectible and they can still try to collect the debt at a later date. If they are successful in collecting the debt (or any part thereof) they must claim it on their tax return in the year collected.
Generally, creditors will try to collect the debt for a few months or, in some cases a few years. They either do this through an in-house collection department, or by hiring a third-party collection agency. When they hire debt collectors, the creditor retains legal rights to the account and the bill collector must act on behalf of the original creditor.
Quite often, creditors sell accounts they deem worthless (or not worth their time and expense) to third party debt collection agencies. When they sell the account, they sell all rights to the account as well so only the new legal owner of the account can collect the debt. Once a company decides to charge off a debt they are required to report that information to a credit bureau within 90 days of the debt's charged off date.
Delinquent debts accounts are bought and sold daily so your old account might end up in the hands of a dozen different debt collectors over the course of several years. This explains why you receive out-of-the-blue calls from debt collectors demanding payment on an old forgotten debt.
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