Original creditors and collection agencies will often collect on discharged debt, charge offs, debt absolved by bankruptcy, and even debt that’s been settled. This is debt that can’t legally be collected on via a civil court judgment. However, collection agencies won’t let a little thing like your legal rights stand in the way of their profits. See also, What is a junk debt buyer?
**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.
Often creditors will continue to report a discharged debt as a ‘live’ debt on your credit report, making it appear that you still owe the debt and that it’s active. They do this in hopes that you’ll need new credit for a purchase (like a home), and you’ll have to come back and pay them to get your credit report cleared up. If you sue the creditor, they’ll claim they have no record of the discharge, or that the court didn’t notify them of the bankruptcy.
A couple of months ago I wrote an article about a debtor who was trying to settle a debt with Chase Bank. Chase had ‘assigned’ the debt to a collection agency and the CA agreed to settle the debt. Desiring to guarantee this debtor handled the settlement properly I gave her the following instructions:
1) She contacted the original creditor to insure that the collection agency legally represented them (the creditor).
2) She documented the names and positions of the representatives and supervisors with whom she spoke to on the phone (original creditor).
3) She requested that the collection agency fax her a statement saying that this settled amount would 100% satisfy this debt and that the loan would be reported as ‘paid in full’ to credit reporting bureaus.
4) She then called the original creditor to insure that they agreed to these terms and documented the phone call with their names, their positions, their supervisor’s name, and date of conversation.
Despite following these instructions Chase Bank still sent her a bill the next month for the settled amount. She had to fax them a copy of their settlement agreement twice before the matter was settled. What if she hadn’t kept a copy of the settlement? Chase Bank would have continued to bill this consumer for the settled debt. Later on, Chase would have sold this debt to a collection agency and likely reported it as a charge off on her credit report.
If you have an agreement with a creditor make sure you get it in writing before you pay them. Otherwise, they will act as though no agreement occurred, they will still attempt collection on the debt, they will report the debt to credit reporting agencies negatively, and then they will sell the debt for pennies on the dollar to a collection agency.
Yes creditors and collection agencies are collecting on discharged debt. They accomplish this by using loop holes in the law, or by going around the law altogether. The best way to fight abuse from collectors is to keep a paper trail of all documents related to the debt. In order to make creditors follow the law – you may have to employ the services of a law office. Sometimes there’s just no way around it.
How long can collectors try and collect on a debt?
Collection agencies are collecting on debts far past the Statute of Limitations and other debts that have been legally absolved for years. Two weeks ago I was contacted by a reader who had a collection agency trying to collect on a debt from 1989. The State in which she lives has a Statute of Limitations of 4 years. That means this CA is trying to collect on a debt which is 15 years past the legally allotted time for debt collection in her state. The debt doesn’t even appear on her credit report. See also, Debt past the SOL but collection agency still suing.
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Related Articles
* Restrictions on Wage Garnishment for Debt Collection.
* The Fair Debt Collection Practices Act
* Reasons not to file Bankruptcy or Settle Your Debts
* Can you go to jail for not paying your debts?
* How to settle your debts on your own
I just received a call from a collection agency trying to collect a debt from 1991 and discharged in 1995 in my husbands name. I told them good luck. You mentioned the statute of limitations in a previous response. The loan originated in Virginia and we now reside in Florida. What are the laws for these states?
If it’s been charged off but still in house then it has not been sold to a collection agency. You need to find out what ‘charge off’ means in this case. Can you pay? Does the debt still exist? Are they going to sell it to a collector? I’d call them and ask them.
Don’t give anyone your checking acct. Unless you want to simply go and open an account, with a different bank, for the sole purpose of paying these banks. Meanwhile your main account would still be safe. Otherwise, I wouldn’t give them my banking info.
I’m trying to work with all our credit card companys on some type of payment program. Some that I’ve called have told me that the account is now in ‘charge off’ status but is still kept in-house. Can I still work with this bank on some type of payment plan or is this really been discharged and bought by a collection agency? How can I find out.
Also, on the few that I’ve been negotiating with, they all want me to give them my checking acct so that they can put me on an automatic pay plan. I’ve insisted that I do not want to give them a checking account and I will pay them via cashier’s check or money order. They insist that if I do not provide them with some type of secured account that they can withdraw from then their is no payment program available for me. How or what do I say to them about this? I’ve read in your many articles to NEVER give them my checking acct #.