Debt Prison &#187; Collection Agencies

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

How to survive debt in the UAE

Debt Prison — Sun, 26 Jul 2009 16:32:04 +0000

A Debt Prison reader contacted me two months ago in regards to the desperate financial crisis she was facing in the UAE with outstanding debt. She began calling her creditors daily to convince them that negotiation was in their best interest as well as hers. With persistence and daily phone calls she convinced the creditors that they must agree to a workable payment plan. For Iara, the key to success against the UAE collectors was to keep the lines of communication open and contact them daily until a favorable solution is gained. The same can often be said about collectors here in the U.S..

Without the valuable real-life experiences of my readers this blog would not serve as a reliable source of information for debtors. My thanks to each and every one who has taken the time to share their experiences with collection agencies! Here’s the comment Iara posted about winning against her debtors in the UAE.

Dear Barry,

You asked me to come back to you, so I came back to tell you what happened to me after that disastrous affairs with credit cards in UAE. I mentioned to you how helpless I felt, and I wanted to run for my life and go back to Philippines, my home country. Well, the end was quite the opposite. “FIGHT OR FLIGHT”, I’ve chosen to fight. I am not a criminal to run away.

I started my personal struggle by reading your articles, and it really inspired me, and it taught me the things I need to know: the lies & intimidation of the collections department and how to deal with it. It hasn’t been an easy journey. I decided to tackle my Royal Bank of Scotland credit card first because it was smaller & easier to kill (only AED 6600). I spent almost two months calling them every single day. I’ve gotten to know all the people working there in Collections Department, from the several agents to the Team Leader and then finally the overall Manager.

I was turned down many times or was being referred to various, different people. They kept on telling me that someone will call me back, but nobody ever did. But I never gave up, I called the customer service and I asked for their help. I told them how unhelpful the agents of Collection Department were and if they could just give me the Manager’s number and name. Surprisingly, I got the information, and I talked to the Manager and recounted to him that I’m willing to pay but nobody’s helping me. I told him that I am planning to leave the country for good, and if nobody will arrange my account, I will just leave without paying it. After 30 minutes somebody called me back, they told me to pay the AED 1640.00 and for the succeeding 5 months, I will pay only AED 1000, INTEREST FROZEN (CREDIT CARD SETTLEMENT).

My other credit card started calling me, but I followed your advice. I didn’t talk to them, they would just make me depressed, and there was nothing I could do, having no money to pay the AED 5000 they wanted. So I just dropped AED 200 or AED 500 monthly to that said bank, and I was continuously charged the OVER LIMIT FEE & LATE PAYMENT FEE & ALL THE INTEREST (which is shockingly more than AED 850 per month)!!!!!!!!!!!!!

Weeks crept on. Then few days ago, I received an email from FGB offering me an Easy Payment Plan that has no other fees but only the 1% per month (so that’s only 12% per annum), and payable for 36 months . . . I was really happy when I received it. Imagine, I am charged more than AED 800 per month for the penalties and interest alone, but with this plan, I am actually paying only AED 238 interest per month with my outstanding divided to 36 months.

I signed the offer, and now I cannot imagine the relief I feel for having a debt-free life. ALMOST.

I hope that my story will serve as an inspiration to those desperate souls out there.

6 months ago, I thought about ending my life because of debt.

Now, I am sooo good. I lost a lot of money, but I earned an experience and I learned a lesson.

Grateful,

iara

DP Reader Wins Civil Suit Against Bill Collector

Debt Prison — Wed, 27 May 2009 00:27:52 +0000

Recently I exchanged emails with a reader who went to court to defend himself against a collection agency. I thought it would be a good idea to release the contents of the email (after receiving permission from the author) to demonstrate a real life experience in a court of law. The debtor walked away from court WITHOUT a judgment against him. In court you have the right to force the plantiff to produce the documentation which would prove you ever entered into a legally binding agreement with the creditor. You have the right to request the collection agency provide a copy of the original contract, which would include your signature, that indicates you ever entered into an agreement with any lender. If the collection agency fails to produce a copy of the contract with your signature, there’s a good chance the judge will move to dismiss their case against you. Details of this email have been changed to protect the identity of the email’s author.

Dear Barry,

On May 5th, 2009 I was summoned to appear in my County Court as I was being sued by a collection company by the name of **Debt Collector. As sat and waited my turn to be called, there were several people who found themselves in the same boat as I was. Each of them agreed that they owed money and made some sort of payment arrangement.

When I was called the Judge asked me how I felt about owing this money to this company. I stated that I never heard of **Debt Collector until I received the summons and as far as I knew I had no contract with this company stating that I did owe them anything. The Judge looked at the paperwork and said, he didn’t see any contract and that I might have a point. He since dismissed the case, but gave **Debt Collector 20 days to come up with a signed contract between myself and this collection company.

Also, on April 10, 2009 I sent the attached file (letter private via author), through snail-mail, to **Debt Collector, the Clerk of Courts and the Federal Trade Commission. I know they all received my mail, as I required signature confirmation.

What I need to ask you is, is there a possibility that **Debt Collector would continue with this case in the 20 days allowed, in other words, could they possibly proceed unless they could produce a signed contract (not a copy), with my original signature and a signature from the company?

Please, if you have the time to reply I would certainly appreciate it. Thank You.

Sincerely,

For the debt collector to continue with the suit, a signed contract must be produced, indicating that the defendant ever entered into any legally binding agreement with their client. Failure to produce the signed contract should prevent the case from moving forward. This debtor handled this properly.

When you are sued by anyone… defend yourself!

Debt Validation: FDCPA Rules

Debt Prison — Tue, 31 Mar 2009 01:11:25 +0000

One of the most important sections of the Fair Debt Collection Practices Act is Section 809 Validation of debts. This Section lays down the guidelines for conduct pertaining to the debt validation process. Within 5 days from the first time a collection agency contacts you (phone or mail) you should write a Debt Validation Letter. In their response to this letter, the collection agency is to provide you with the following:

* The amount of the debt.

* The name of the original creditor (Capital one, Bank of America, Discover, etc, etc..).

* Their response letter should state, that unless you dispute this validation within 30 days, that this debt will be considered valid and collection attempts will commence. It should also state that if the debtor does in fact dispute the debt, the collection agency will mail you a verification of the debt or a previous judgment from a civil court case.

* If the debtor disputes the debt, the collection agency must halt all collection attempts for 30 days until they can provide a mailed copy of the applicable information: 1. amount of debt and/or 2. original creditor’s name and address and/or 3. verification of debt and/or 4. civil court judgment.

Please understand that failure to ask the collection agency to validate the debt would not be used as an admission that you owe the money – if you later find yourself in civil court over the matter.

809. Validation of debts

(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this title may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.

(c) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.

(d) A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).

(e) The sending or delivery of any form or notice which does not relate to the collection of a debt and is expressly required by the Internal Revenue Code of 1986, title V of Gramm-Leach-Bliley Act, or any provision of Federal or State law relating to notice of data security breach or privacy, or any regulation prescribed under any such provision of law, shall not be treated as an initial communication in connection with debt collection for purposes of this section.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

How to avoid a lawsuit from a collection agency

When will the Collection Agency sue you?

Debt Prison — Fri, 27 Mar 2009 01:27:17 +0000

There’s no absolutes as to when a collection agency will sue you for debt owed. Today a friend of mine received a summons for a civil suit from a collection agency. This article is pretty much part two of this article which I wrote earlier on. He was trying to wait them out hoping they wouldn’t sue. This is the second friend I’ve seen sued over the years by collection agencies.

Here are the facts on the recent case.

He owed $5,000 to creditor on a high interest credit card.

He stopped paying the debt one year ago.

Received a collection letter from collection lawyer (debt ballooned to $6,000) in another state not licensed in Mississippi. I advised to ignore the letter since the collector couldn’t sue in MS court.

Debt was transferred to another collection agency in TN which has a lawyer on staff in MS. They mailed out a collection letter to my friend two months ago describing the debt in the amount of $6,200.

My friend ignored the letter and did not request validation of the debt.

Summons came yesterday for civil suit for debt.

It doesn’t always happen this way. And in the case of my friend he is an unlikely candidate for civil suit. He has no assets, is a student in college, and has a part time job. Even though it will take the creditor probably years to retrieve their money with a judgment, they still pursued the civil suit/judgment.

My other friend was sued under the same circumstances. He was a full-time student and had a part time job with no assets. However, some people go years without being sued.

So what makes a person more likely to be sued than another?

There really are no certain criteria for determining when and if a collection agency will sue you.

For some hints check out the following articles I’ve written on the subject:

How to avoid paying a debt (if you really want to give them a hard time)

The more money you owe the more likely you’ll be sued within 18 months or less.

If you move to another state and fail to update your information (by not registering to vote, getting a new Drivers License, or applying for new credit) you can make it difficult for the collection agency to locate you. If they can’t locate you before the Statute of Limitations has passed you should be in the clear.

If you have assets like a car or home and a decent job then you are a good candidate for a lawsuit. However, the lack of all of these items doesn’t necessarily mean they won’t sue. And the more debt you owe the more likely they’ll sue.

Don’t forget to mail out a Debt Validation Letter in response to each collection letter you receive.

I’m advising my friend to get a lawyer to represent him. This can prevent him from being abused by the collection agency by paying a bunch of phony charges. Often, without any assistance, you can end up paying much more than what you should.

** Remember, the best way to solve these problems is to pay the debt and get it out of your life.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

How to Avoid Paying a Debt

Debt Prison — Wed, 11 Feb 2009 01:25:25 +0000

This article details some methods for avoiding payment on a legitimate debt (beating a debt) that I picked up from some sources on the internet. You’ll have to have some courage and confidence to actually go through with such an experiment. However, this method is the best way to avoid payment on the debt, or at least for paying the minimum amount possible. This article assumes that you legitimately owe this debt and have defaulted on payments. We’ll outline five steps for avoiding payment on the debt. See also, all of my articles on Collection Agencies.

** 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.

Request validation of the debt

Mailing out a debt validation letter (registered mail of course) simply means you are requesting for the collection agency to prove that they have any legal authority to collect on this debt and that you owe it. The Fair Debt Collection Practices Act doesn’t apply to original creditors such as Bank of America, Citibank, Capital one, and Discover Card. A validation letter is used when the original creditor has sold or assigned the debt to a collection agency. It is important that you make sure this collection agency has the legal right to collect this debt. If they can’t prove they possess the legal right then the debtor doesn’t pay. A debt validation letter will also buy you some time. The collection agency is not allowed to pursue the debt while it is being disputed.

Alright so let’s assume the collection agency validates the debt. Now you need to write another dispute letter. In this letter, you should declare that this debt is legally disputed, you do not owe the debt, and that you are now requesting for the collection agency to provide the original contract (signed by you) from the original creditor that proves you owe it. In addition, you are requiring a break down of the amount they claim you owe – including the original creditor default amount and the resulting interest and fees. If they fail to provide this information within 30 days you will consider their claim invalid.

If they send a response letter they will not provide the information you requested (at least I’ve never heard of any collector providing such a response). If so – write one final letter and explain that their claim is not valid and was evidenced by their inability to provide the information you requested and for them not to contact you again.

Now you can wait for a summons for civil court (there’s no guarantee they will pursue a civil judgment). In fact there’s a decent chance your debt will simply get sold to another collection agency and this process starts over. See also, How to avoid a lawsuit from a collection agency.

The Sworn Denial

If you receive a summons for civil suit it will say something like ‘we, the collection agency, are taking the debtor to court, and we swear that the amount of money we claim he owes is correct.’ This is called a sworn account or an affidavit of debt. Basically the company says “Yeah we promise that the dude owes us this amount of money.” Now you need to write up a letter of sworn denial, have it notarized, file it with the court, and send a copy to the collection agency.

For a good illustration explaining the necessity of the Sworn Denial click here.

This needs to be a statement in writing that you FILE with the court where you have been sued. It can be a simple statement, but it needs to be typed, signed, notarized, and filed with the clerk of the court and a copy sent to the collection lawyer. It needs to be a graduated denial. In other words, it needs to say, I deny this is my debt and if it is my debt, I deny that it is still a valid debt and if it is a valid debt, I deny the amount sued for is the correct amount.

When a sworn denial is filed, the debt collection attorney can not rely upon a sworn affidavit of account, but must instead produce a live witness to testify about the debt. The requirement of a live witness changes the dynamic of the collection action considerably. The likelihood that the action will go no further now increases again.

Request a Discovery

The next step is to request a Discovery. In law, discovery is the pre-trial phase in the lawsuit in which each party (YOU) through the law of civil procedure can request documents (copy of the contract or agreement upon which the debt is based) and other evidence from other parties or can compel the production of evidence. With the Discovery you are requesting the collection agency produce the paperwork which indicates that you owe this debt. This would include an original signed contract and an explanation of the dollar amount.

If the debt is a credit card debt, it is likely that the debt collection attorney will not be able to secure a copy of the original agreement or if he is, he will not be able to do so timely. Most credit card signature agreements are scanned or if older, microfilmed and stored away in electronic archives. If it is an old debt which has been sold to a debt purchaser the likelihood of retrieving the original signed agreement decreases dramatically. If you are being sued in a small claims type court where discovery is not permissible, ask for the agreement at trial.

Go to Court

From Debtcollectionlawyer.blogspot.com

The vast majority of debt collection suits proceed to default judgment because no one shows up to dispute them. Show up and ask for a trial. And remember, the worst thing that can happen is the same thing that would have happened if you hadn’t appeared at all, a judgment. You can’t make it worse. If the attorney doesn’t have his live witness available, oppose the case being continued. Tell the judge you’ve taken off work to be there and are ready to go forward. If the judge does continue the case to a new trial date, show up again.

You will need to educate yourself. You won’t be able to equip yourself to spar with an attorney, but knowing a little is better than knowing nothing. You will need to read the Rules of Procedure that govern the court and the Rules of Evidence for that jurisdiction. Look them up online. The Rules of Civil Procedure will govern how the trial is conducted. The Rules of Evidence will govern what the Judge is allowed to see and hear. If you do have a trial and the creditor produces a live witness, attack the witness first and the debt second. The witness can only testify from personal knowledge.

Generally, the witness has no personal knowledge about you or your account, but only knows what’s in the file he got from the collection department. If he is going to testify without personal knowledge, but from the records and documents of the business, then he has to have a basis to do so. He needs to be the regular keeper of those books and records and be familiar with how they are kept and their contents.

Don’t simply accept his answer when the debt collection lawyer asks him if he is the regular keeper of those books and records and be familiar with how they are kept and their contents and he says yes. Ask him how long he has been with the company, in that job, what he does on a daily basis, when he first saw your file, if he knows from personal knowledge if it’s a complete file, etc. You must destroy his credibility and ability to testify about the papers he has in front of him. If you can do that, then the debt collection attorney has no case. If the witness is actually a good witness and you can’t prevent him from testifying from your file, then you need to know your defenses to the debt.

The best defense is the Statute of Limitations. The Statute of Limitations is the time limit that an aggrieved party has in which to file a lawsuit. It is a drop dead deadline. Find out what your state is and whether the creditor is beyond that date. If they are, ask the court to dismiss the suit.

Appeal the Judgment

If you feel like the judgment wasn’t fair you have the right to appeal it. You should appeal the judgment immediately (ask the court for the exact amount of time). An appeal can take a long time to work its way through the system – months or years. The elapsed time is valuable and no collection action such as garnishments can occur while the appeal is pending (unless you live a jurisdiction that requires you post an appeal bond to stop collection during an appeal).

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

How to stop bill collectors from calling you

Debt Prison — Fri, 06 Feb 2009 02:20:50 +0000

This website 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.

How do you stop a bill collector from calling you constantly… especially if the person they want to talk to doesn’t even live there? Such is the case with FSK over at FSK’s Guide to Reality. It seems the collection agency wants to get in touch with FSK’s sister, and she doesn’t live with FSK. Despite telling them repeatedly that she doesn’t live there, they continue the constant bombardment of phone calls. The interesting thing about this situation is that the collection agency is not calling a number where they can reach the debtor. There are ways to stop the phone calls – but you have to get serious with them. You should be able to stop the phone calls without getting a lawyer involved.

To file a complaint with FTC regarding a collection agency click here or call toll free at 1-877-FTC-HELP.

A bill collector has to stop calling your place of employment if you request them to – this request should be done verbally and in writing. Why are they calling despite the verbal request to stop? This is harassment and harassment is what pays their bills! They’re hoping FSK (or anybody) will pay this debt to end the phone calls.

I have an amusing anecdote about a debt collector. My sister gave my parent’s phone number on a credit application, or they somehow got it. According to my sister, she legitimately canceled a service but they kept billing her anyway. Now, a collection agency owns the debt. They’re using a dirty tactic you haven’t mentioned on your website.

The debt collector calls *ALL THE TIME*. I told them “She doesn’t live here anymore. Please stop calling this number.” Whenever I say “Please stop calling”, they immediately disconnect the phone call, pretending they didn’t hear. The debt appears to keep getting passed to different collection agencies, or the agency keeps trying different tactics.

If I tell Agency A “Please stop calling”, and the debt is sold to Agency B, then does my “Please stop calling” request still count?

I’m pretty sure this falls under “abusive debt collection practices”. However, it isn’t practical to sue. The person they’re calling *DOES NOT LIVE HERE*, and they hang up the phone whenever I say “She doesn’t live here” or “Please stop calling”. By dropping the call and pretending to not hear, they’re probably technically not violating the law. They have plausible deniability “I never heard FSK say ‘Please stop calling!’”

Well let’s see what we can come up with for this nasty, nasty problem. First of all, every time the debt moves to another collection agency you have to start all over again with any requests… just as though they are the first collector to get their hands on your debt. This means writing ‘cease and desist’ letters and recording/documenting their calls (if you want to sue them).

There are a couple of options here that will work for FSK and these pesky collectors. The first is to identify who the collector is. One way to do that is to ask them. Now there’s only certain information that they’ll give to someone, over the phone, whom is not the debtor. However, according to the Fair Debt Collection Practices Act the collector is required, if you ask them, to identify their employer.

(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;

Cease and Desist Letter

You can also request their address, but there is nothing in the FDCPA that requires them to provide you with the address. You could ask them what state they are calling from and then look the address up. You want their address so you can write them a ‘limited cease and desist’ letter. The letter should be sent registered U.S. mail with return receipt. This way you have proof that they received the letter.

I would like to request, in writing, that no telephone contact be made by your offices to my home or to my place of employment. If your offices attempt telephone communication with me, including but not limited to computer generated calls and calls or correspondence sent to or with any third parties, it will be documented and considered harassment. All future communications with me must be done in writing and sent to the address noted in this letter by USPS.

Now bear in mind that this letter would only by legal if it is signed by the debtor. This letter should slow the phone calls down or eliminate them. Another way to get their address would be for FSK to ask his sister to get a free copy of her credit report at http://annualcreditreport.com. The collection agency’s name and address may be visible on the credit report.

Documenting the Calls

If they continue to call you can document the calls using a program like “phone tray” which works by plugging your phone line into the back of a pc. Phone Tray then works like a caller i.d., documenting all calls and call times in a format that can be printed off. Now you can document all of their calls on paper. Also, you can purchase a phone recorder like this one. It’s around $45.00 and has a variety of uses besides recording bill collectors. Some states require you to inform the other party that the call is being recorded. Twelve states require, under most circumstances, the consent of all parties to a conversation. Those jurisdictions are California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, Pennsylvania and Washington.

You can answer the calls and tell them to stop calling and record the conversations. At this point you should have documented the calls on paper and possibly have phone recordings which clearly demonstrate these facts.

At this point, after ten or so calls, I would make copies of the caller i.d. archive and audio of the phone conversations. Now you need to send these copies to the collection agency using registered mail. You would also attach a letter which explains that the collection agency has continued calling despite requests to stop. You consider this harassment and hope to avoid a legal suit against their office if they will simply stop calling your home.

This should stop the calls and if not you can always opt to have a law office write letters on your behalf.

If the debt gets passed to another collection agency then this process starts all over.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

Settled Debt is Taxable Income

Debt Prison — Tue, 03 Feb 2009 01:42:26 +0000

The amount of debt you settle may be taxable by Federal and State Government. Most people are not aware that if the amount of settled debt surpasses $600, the IRS considers this taxable income. If you have settled with a creditor on a debt, they should send you a 1099-C tax form. This form will list the amount of forgiven debt and the interest. This was a surprise to me: the idea of our government demanding payment from those of us who can least afford to give (sarcasm intended). The IRS last updated Publication 908, which states in regards to settled debt, or forgiven debt, if a debt is cancelled or forgiven the debtor generally must include the forgiven amount in gross income for tax purposes.

See also, all of my articles on collection agencies.

Now keep in mind that debt that is discharged due to bankruptcy is not considered forgiven debt, according to Publication 908. So if you filed bankruptcy on some debt, those forgiven debt amounts are not considered income by the government. However,

If the amount of debt you owe is greater than your assets, meaning you are insolvent, the IRS does not require you to report the forgiven debt. But, you cannot exclude any amount of forgiven debt that is more than the amount by which you are insolvent.

So if you owed Bank of America $6,000 and they settled for $2,500 (you lucky dog), then you could expect a 1099-c from BOA explaining the forgiven debt of $3,500. See also, How to Settle Your Debts on Your Own.

What if you decide not to report it?

Hey no problem if you don’t want to claim this forgiven debt as income… however, you should know that the IRS was also given a copy of the 1099-c by BOA… so they know about the income. Maybe they’ll just flag you for an audit.

3 Instances when you don’t have to claim forgiven debt

This is from www.3debtconsolidation.com

There are 3 situations under which forgiven debt is NOT included in your taxable income:

1) Battled Contest
If you dispute an amount charged on your credit card and win the debt settlement, you are excluded from the Discharge of Indebtedness (DOI Income) rule. For example, Visa might say you owe $1500 in credit card debt due to a recent purchase of expensive shoes. You know you haven’t purchased those shoes and dispute the bill and the court case goes on for weeks. In the end, you agree to pay Visa $150 to reach a debt settlement. Since your debt owed has legally been reduced from $1500 to $150, you would be liable for the DOI income rule. However, since you won this case by a protest or a dispute (in court or verbal settlement), you are NOT required to include this amount as part of your taxable income.

2) Bankruptcy Declaration
When you’ve declared bankruptcy and are making for example only 10% of the original debt payments you owed, the other 90% is excluded from the Discharge of Indebtedness Income rule.

3) Insolvent Financial Condition
When you are insolvent, meaning your liabilities owed exceed your total assets, you are not required to pay any tax on any debt reduction or debt settlement benefits you receive.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

How to Avoid a Lawsuit From a Collection Agency

Debt Prison — Wed, 14 Jan 2009 19:53:56 +0000

The first thing you need to understand is that most large collection companies have a lawyer at their disposal who writes letters on their behalf and handles any disputes. Some lawyers work exclusively for collection agencies, while others are hired only when needed. These lawyers also represent the collection agency in the likely event a debtor sues them! If the collection agency is not located in your state, there is a very good chance they will not attempt legal suit. Most likely they will call, mail letters, and when you fail to respond… they’ll sell the debt to another collection agency for pennies on the dollar. In order for them to sue you (out of state), they would have to employ the services of a lawyer where you live. This can be very expensive and will usually void the benefits of a civil judgment. It is only when they have a debtor in their state that they prefer legal suit. A good candidate for legal suit is one with at least a balance of $500, at least one asset, and the debt is not in dispute. See also all of my articles on Collection Agencies and make sure to read How to avoid paying a debt.

To file a complaint with the Federal Trade Commission regarding a collection agency click here or call toll free at 1-877-FTC-HELP.

Many Judgments are Never Collected

There’s a good possibility that even with a judgment a collection agency will never be able to collect on the debt. Many debtors are in such a position financially that they cannot legally be collected on. So even with a judgment to repay the debt… the collection agency and court can’t enforce it. To learn more about this read Restrictions on Wage Garnishment for Debt Collection.

Many debtors move to another state which creates more legwork for the collection agency. They have to determine where you moved and then request for the new state to enforce a judgment acquired from your old state. Some female debtors get married and change their last name. This can slow down the enforcement of a judgment. Also, some states don’t consider assets joint – so a person can nullify a judgment by putting all assets in their spouse’s name, not working, or hiding income (hiding your income is illegal). See also, What is a Junk Debt Buyer?

**Some states will consider debts and assets as joint accounts even if your spouse’s name is not on the account. In California they can collect on your spouse’s assets to satisfy a civil judgment.

Is your debt past the Statute of Limitations?

In my home state of Mississippi the Statute of Limitations (SOL) is three years, this is the lowest SOL in the United States – who says Mississippi is last in everything? So if I stop paying on my VISA credit card in August of 2008, the creditor or collection agency has until August of 2011 to get paid or sue me in civil court for the debt owed. If I can put off paying on the debt, or acknowledging I owe it, for three years and the collection agency doesn’t get a judgment… then I no longer legally owe the debt. They cannot take me to court and be awarded a judgment, provided I show up and inform the court that the SOL has expired on the debt. See also, Debt Past the SOL and Collection Agency still sues.

Is the Collection Agency located in your State?

Most collection companies will not file a civil suit for debt collection on a debtor that lives in another state. Most collection agencies have a lawyer on staff or one they regularly work with. Since the collection agency has to sue you in the state where you live, they aren’t likely to hire a lawyer in your hometown to represent them in the case… if they are located out-of-state. They also are not likely to send their lawyer across state lines to collect a debt. Besides, in order for a lawyer to cross state lines he has to be licensed in that state. Most lawyers are only licensed in one state.

The Amount of the Debt

The lower the dollar amount of defaulted debt the less likely the collection agency will pursue legal action. Very seldom will a collection company file suit on a debt of less than $500 and most likely $1,000. Obviously it’s a lot of time and expense involved in a civil court suit… so they don’t like to bother with court unless they feel confident of a decent pay off. However, I should make you aware that some of my readers have been taken to court for less than $1,000.

How many assets do you have?

The more reliable assets you own, the more likely the collection agency will pursue a legal course of action. If the collection agency knows that you have a home, land, or a vehicle which is paid for – they can win a judgment, then via a writ of execution they can be awarded a lien on said property or force a ‘Sheriff’s sale’. A job is considered an asset since they can seek to garnish your wages or bank account.

Is the debt in dispute?

A collection agency cannot file suit on a debt that is being disputed. If you requested validation of the debt, and their information is insufficient (they didn’t accurately prove you legally owe them the debt), their case can be thrown out of court.

Don’t apply for new credit

One of my readers contacted me about a bill collector who was threatening to file suit if she didn’t cough up a payment by the end of the month. The bill collector informed her that he had been watching her credit report and noticed she had recently applied for credit on a vehicle purchase. When you apply for credit on new purchases the collection agency rightly figures you have money to pay them! The information you put on the credit application is also an opportunity for your credit report to get updated with your current address, spouse, and asset information. A collection agency can acquire your credit file and read up on your latest hits.

TIPS for Avoiding the Collection Agency Lawsuit

1. Get any property you own out of your name.

2. Quit your weekly paycheck job.

3. Go into business for yourself (no wage garnishment).

4. Maintain a story of no job, no assets, and a gloomy future.

5. Move to MS (SOL 3 years) or TX (SOL 4 years).

6. Always deny any knowledge of the debt.

7. Do not answer their phone calls.

8. Record their violations of the FDCPA and sue them (or threaten to).

9. Avoid a court summons until the SOL has passed.

10. Leave the United States with no forwarding address.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

Why Phone Conversations with Bill Collectors is a Bad Idea

Debt Prison — Tue, 13 Jan 2009 23:06:05 +0000

A highly trained bill collector knows how to get the most money out of defaulted debtors. While you are nervously thinking of what to say they are taking notes… updating your credit file. A good bill collector normally has an outgoing personality and tough outer shell. Therefore collectors learn early on not to take the job personal. They also learn how to take everything you say to build a case against you. A bill collector will listen carefully to everything you say (while at the same time recording the conversation), as well as the way you say it, to develop a plan of action which will most likely generate a payment from you. See also all of my articles on Collection Agencies.

Bill collectors are not your friend, and though they may appear concerned, they are really only concerned about their paycheck. Collectors work off of commission, often receiving 10 to 25% of your payment to the collection agency. So if they get you to cough up $100… they just made $25 buckaroos. These collectors also have a monthly quota to achieve. If they fail to meet the monthly collection quota they can be let go. A collection agency needs bill collectors that can produce dollars while maintaining a level of conduct compliant with the Fair Debt Collection Practices Act.

The only time I would consider speaking with a collection agency is when I have an offer for them. For example, I would give the dollar amount paid monthly, the total number of months to be paid, and the conditions of how I wanted this reflected on my credit report. They would then have to agree with those terms, put them in writing, sign the contract, and send me a copy. This would be a no debate discussion… here are the terms… period. If you don’t agree with those terms then contact me when you do.

Controlling the Conversation

The bill collector needs to stay in control of the conversation to steer you towards a payment. Maintaining control is their number one priority. Using a sort of psychological authority, since you owe them money, they proceed to make demands in a civil tone. A good collector is looking for verbal cues from you which will indicate what buttons he needs to push to separate you from your cash.

Collecting Asset Information

While the collector is buddying up to you… he’s updating your file with any asset information you provide. For example, if you say times are tough because you are paying on a house or vehicle note… well you just gave them an asset to add to your file. They will also inquire as to any land, homes, vehicles, savings accounts, or stocks, that perhaps you could sell to satisfy this debt. If you tell them that you have a job they will rightly figure that you can produce some monthly payment amount.

Lump Sum Demand

A collection agency will almost always demand a lump sum payment the first time you talk with them. They do this because many debtors are intimidated and cough up the lump sum. However, they do not need the lump sum and can be worked down to a rational monthly payment plan. Their goal is to get you on the phone, intimidate you with fear tactics, and proceed to collect as much moolah as possible. Did I mention that talking with bill collectors on the phone is a bad idea? A bill collector wants you on the phone – they don’t want you ignoring the calls, and instead, writing those pesky debt validation letters.

Legal Suit

Through the process of updating your file they will determine if they stand a good chance of collecting the money by pursuing a civil suit. If they know your house is paid for; this is a perfect asset for them to seek a lien against via a court judgment. If they know that you have a decent job they will seek to garnish your wages, and if possible, take money directly out of any banking account you have. A good candidate is one with at least one asset, at least a $500 balance, and the account is not in dispute.

Here are some good tips I found at wikihow.com for talking with collection agencies on the phone (if this article didn’t convince you not to):

You must keep a calm, reasonable and well mannered tone of voice. Any yelling, name calling or other verbal tactics will damage the image you’re working to project.

If they speak to you in any way that you find objectionable, give them one warning, as mentioned in your opening statement. The second time you should ask to speak to their supervisor. When you’re connected with the supervisor start again from step one.

Write down everything, including: the date and time of the call, name and position on the rep calling you, what they want, what you’re offering, etc.

Many times the names of the collectors are not their real ones. One way to figure it out is to send the signature receipt letter addressed only to that one person. If they sign back with their signature on the letter, they must be that person (otherwise it becomes a federal offense of mail fraud).

Sometimes you just can’t win because they won’t listen to reason or acknowledge that you legally are not obligated to the debt. In this case – you should establish a long paper trail indicating that they did not wish to collect on the debt in good faith. When they file your collection with the credit agencies, mail copies of your paper trail to all three, with documentation that they violated the Fair Debt Collection Act and demand removal of the claim from your credit report immediately.

Be very careful about making any payments if the debt is past the statute of limitations or about to be since that may restart the clock and you may then owe the full amount even if the collector told you that you would only have to pay a small amount and then they would leave you alone.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts