Debt Prison

* What You Should Know About Credit Cards

* Do we have private property in the USA?

Can you go to jail for not paying your child support?

By Debt Prison on March 31, 2008

Time in prison is just one of many possible consequences of failing to pay your child support. Recently I came across this on the U.S. Department of State website which states that if you are behind on “child support payments in excess of $2,500, you are ineligible to receive a U.S. passport. If this applies to you, Passport Services strongly recommends that you contact the appropriate State child support enforcement agency to make payment arrangements before applying for a passport.” While I was in a sporting good store recently I witnessed a man being turned down for a hunting license, thanks to a new State mandated computer system that all licensees must adhere to. He was denied the hunting license because he is behind on child support. So you can’t hunt, fish, or even leave the country. It’s also been brought to my attention that the government can withold child support payments from your tax refund! Feel free to leave comments or questions at the end of this article.

In research for this article I interviewed my Aunt, whom was a Child Support Enforcement Officer. Since 1985 she was an Employee of the State of Mississippi but her position is funded by a Federal Program which insures that parents receiving government aid are financially assisted by the state mandated wage garnishment, of the non custodial parent. These were time limited positions for child support enforcement.

Polybabydadic

The majority of her time was spent in determining paternity. This is how it works. The mother gives a name, or five names (in some cases), and child support enforcement sets off to locate the potential fathers. Once an address is obtained for these men, a letter is sent instructing them to come to the appropriate location for a paternity test. Sometimes married men (or their wives), received these letters. Once in the office the potential father could accept paternal responsibilities. This was a rare occurrence. Normally the potential father would ‘deny’ that he is the father.

DNA Testing

DNA testing used to require the withdrawing of blood, but more recently ‘swabbing‘ has been used. The baby, mother, and potential are all swabbed to obtain a sample of their DNA. The DNA is then sent off to a laboratory and analyzed. The mothers DNA ‘markers’ are noted and then subtracted from the DNA of the baby. The remaining DNA should be a match with the real father.

Once Paternity is established, the father’s wages were assessed. There were guidelines for how much a father will pay. It’s based on a percentage of his income per child. If the father doesn’t have a job then the judge would set the child support based on a minimum wage job, at 40 hours per week.

Divorces

Mississippi passed a law in the 1990’s (which is often ignored) which states that all divorces involving children must have a child support withholding order. A form would then be filled out by a Child Support Enforcement Officer and mailed to the employer of the non custodial parent. This was a wage garnishment form designed to help the government insure that babies in Mississippi are being taken care of. Also, if the custodial parent is on some form of government assistance like Medicaid or Welfare, there is a state law which mandates the withholding order. This one is strictly enforced.

Licenses

Besides not being able to obtain a hunting or fishing license. You could also be denied a Drivers License when you stand in line for one of these. My Aunt relayed a story about a certain lawyer that would never pay his child support. The only way they could get him to pay was to threaten to remove his license to practice law. The Child Support Officer could use the same threats with a medical doctor. The ability to disrupt the lives of the non custodial parent seems to have no boundaries.

What if you leave the state?

Leaving the state won’t help you avoid paying child support. You may prolong it, but you can’t avoid it by skipping the state. Thanks to the Uniform Reciprocal Enforcement and Support Act, your arrest warrant for failure to pay child support follows you anywhere in the United States. For example, one of the arrest warrants my Aunt had issued resulted in a man being arrested in California. He was driving a tractor trailer loaded with produce. Although this was a routine traffic stop, once the man’s license was entered into the police computer, his warrant for failure to pay child support in Mississippi popped up. He was arrested and his employer’s produce sat in the hot California sun, spoiling before making it to market.

How you are tracked

The government tracks its citizens thanks to a few interconnected circumstances. This tracking is made possible by your Social Security Number, which is really how the government sees its citizens. Using your Social Security Number to obtain employment, results in a W-2 being issued to the I.R.S.. Large companies have to report this information every three months. Smaller companies may only report this information at the end of the year. Thanks to the Homeland Security Act, this process most likely alerts them as well. But the end result is that a Child Support Officer knows where you are, and if they’re aggressive, you’ll be arrested.

Time in jail

Time in jail is only pursued if the Child Support Officer has a father or mother who refuses to cooperate. You won’t go to jail if you are trying to pay your child support (actually paying, not just talking about paying). Once the Officer feels that they have wasted enough time trying to get you to pay, they have a warrant issued to bring you before a judge. Sometimes they may just lure you to the court with a subpoena, without mentioning that you’re going to be arrested when you arrive. My Aunt relayed a heart breaking story of having to place a mother in jail who wouldn’t keep a job and pay her child support. Since the split with her previous husband this woman had given birth to another child. Inside the courtroom, the mother was placed in handcuffs and escorted to jail, leaving her one year old behind crying.

Once in jail, you’re stuck there until you get a job. Now I know this sounds crazy, but my Aunt said that you couldn’t leave jail until you could prove that you had a job. Normally family members took care of this obligation for their incarcerated loved ones. The Child Support Officer actually does the legal writing. They have a lawyer at their assistance that really does nothing more than just sign whatever gets placed in front of their face. So your life of freedom is really in the hands of the Child Support Officer.

The squeaky wheel gets the oil

My Aunt said she averaged carrying around 800 ‘cases’ at any one time. Also, she would only make appearances in court once a month. So she would try and accomplish all she could on that day. She made it very obvious, in our conversation, that the custodial parents who were the most assertive with her, took priority over people who compained little. So if your Ex loves the idea of harassing you, expect to hear from the Child Support Enforcement Officer often.

Oh yeah, I almost forgot, it’s of no consequence for the female to have you in court as often as she’d like. The judge always makes the man pay the court costs.

Related Articles

* Can you go to jail for not paying your taxes?

* What happens to your debts when you go to prison?

History of U.S. Credit Cards

By Debt Prison on March 31, 2008

It’s estimated that the average American family has eight different credit card accounts. How did this happen? Having just watched the Frontline special “Secret History of the Credit Card“, I was quite amazed at the evolution of the modern Credit Card Industry. It seems that South Dakota was the State where the credit card industry really began to prosper. Sioux Falls South Dakota is one of the major credit card processing locations in America, processing millions of pieces of mail daily. From credit card offers to incoming payments, the Post Office in Sioux City is quite the hot spot.

Why South Dakota?

Prior to 1979, South Dakota had many laws dictating the interest rates that loan agencies and banks could charge for certain items. For example, they had one interest rate for new cars and another for used cars. At the time South Dakota, like all of America, was in a recession. So to encourage banks to loan money they removed these caps on interest rates. Meanwhile in New York, the Chairman of Citibank Walter Wriston, was looking for another state in which to do business. New York had ‘usury’ laws which permitted a credit card company from charging more than 12% interest. Walter claims that at the same time Citibank was going broke because they were borrowing the money at 20% from Federal Reserve District Banks.

In 1981 Citibank moved its credit card division from New York to South Dakota. Almost simultaneously there was a U.S. Supreme Court decision ruling that a Bank could ‘export’ its interest rate to other states (The Marquette Decision). This allowed South Dakota to become the credit card capital of America. In other words, if state law in South Dakota allowed banks to charge 25%, then they could send out credit card offers to all 50 states with wild interest rates, protected by South Dakota law. Also, Delaware copied South Dakota’s usury laws and soon Wilmington, Delaware became the credit card King of the East.

For the first time in U.S. history there was no limit to the interest rates that banks could charge nationwide. This permitted credit card companies to expand; soon becoming the most profitable sector in overall banking. Citibank has been more profitable than Microsoft or Wal-Mart.

Why are credit cards so profitable?

Currently about 145 Million Americans have revolving accounts with credit card companies. In 2003 alone 1.5 trillion dollars was charged onto credit cards. Approximately 55 million Americans pay off their credit card balance at the end of each month, preventing the banks from making profits off of them. The top ten credit card companies charge some of their customers 25 to 30% interest, some even pay more than this. Meanwhile interest rates from the Federal Reserve have been at or near record lows since 9/11, enabling these companies to make sick profits off the 90 million Americans who don’t pay their balance at the end of each month.

On top of this already highly profitable situation, Americans are carrying a record high amount of credit card debt. The average American family is carrying around $8,000 in revolving credit card debt. Not to mention that the savings rate of Americans is at it’s lowest since 1933 (The Great Depression). During the late eighties Andrew Kahr (a banking consultant) convinced many credit card companies to lower their minimum payment from 5% of the balance to 2%. This allowed the debt to ‘revolve’ longer as the balance would often increase. In Andrew’s words “Having a lower minimum payment allows you to offer higher credit lines.” Often customers would carry a higher balance and pay the minimum, allowing the credit card company to maximize their profit making potential. Every month about 35 million Americans pay only the minimum payment.

Many borrowers seem alright with the idea of high balances so long as they can pay the minimum payment. And at 2% of the balance this may not prove too difficult.

The Fine Print

Credit card companies use the three major credit history report agencies (Expirian, Transunion, and Equifax) to target borrowers who don’t pay their balances off at the end of each month. Fair Issac reviews credit histories and issues the FICO scores banks use to determine loan eligibility. Your FICO score often determines how much interest you will pay on a credit card. As the issuer of the credit card, the bank can change the terms of your credit card agreement at any time, and for any reason they see fit. There’s no law that prevents the issuer from changing the conditions of the loan.

Universal Default Rate

If you were to miss a car payment or get behind a month on your mortgage, this can trigger a Universal Default. This loop hole allows your credit card issuer to raise your interest rate for being a month behind on your car note, house note, or any other financial obligation they become aware of. It’s in your credit card contract. These banks rationalize that if you’ve fallen behind on another creditor, you are now considered high risk to them as well (credit card issuer). Also, if you have high balances with other credit cards, you could fall into the ‘high risk’ zone. This agreement allows the credit issuer to raise your interest rate on items already purchased. So if you bought a flat screen TV. last year, and your interest rate was 9%, they can increase it to 20% just six months later if they’d like. What other organizations are allowed to do this?

Smiley VS. Citibank

In 1996 the U.S. Supreme Court ruled on Smiley vs. Citibank. The Supreme Court ruled that credit card companies could increase the ‘fees’ associated with their debtors. So what might have been a $10 late fee has now become a $35. Since the Smiley ruling, credit card issuers have doubled the amount of revenue they bring in from fees. Late Fee’s, Over the limit fees, return check fees and on and on. And once these fees are applied, the bank now has the option to increase your overall interest rate – often doubling it as well.

The Office of the Comptroller of the Currency (OCC) is part of the Treasury Department. This office regulates the National Banks, including the ones that issue credit cards. The acting Comptroller of the Currency in 2004, Julie Williams, stated that the OCC has three main purposes.

1. To make sure the banks don’t fail.
2. To insure the integrity of how the banks operate their corporate governance.
3. To make sure that they deal fairly and honestly with their customers.

This office has the ability to take enforcement actions against banks if they deem it necessary. When asked if she could give an example of when she brought a large institution to task, Julie responded “the action we took against Providian.” During the late 1990’s San Francisco based Providian was experiencing double digit growth. They were offering credit to the riskiest of customers with the lowest of credit scores. Much like the sub prime housing market, Providian was targeting customers that had no business seeking credit in the first place. Providian would receive payment and deposit the check, but not apply the payment to their customers account, sometimes for weeks. This would result in late fees and over the limit fees for Providian customers. Almost 50% of Providian’s profit was made from fees, not interest on the revolving debt.

Pat Wallace, head of the better business bureau in San Francisco, says that the OCC was contacted and offered no help. In fact, it wasn’t until the local media got involved that the OCC contacted the San Francisco District Attorney’s office. But the OCC didn’t exactly help. They informed this D.A. that the OCC was the Federal Authority for these National Banks, and therefore, “You don’t have any jurisdiction.” Meaning that the D.A. could not prosecute Providian for fraud. Eventually Providian was slapped with a 300 million dollar judgment, which the OCC took credit for. The OCC’s main order of business seems to be to restrict local prosecutors from suing National Banks for their ‘loan shark’ practices. The OCC is trying to eliminate the individual States Attorney Generals from pursuing legal action against these banks.

In 2004 the OCC declared itself the ‘regulator’ of all National Banks. This is an attempt to insulate the National Banks from the consumer protection laws of individual states. The OCC trotted out the Providian case as proof of their determination to protect consumers. The Credit Card Industry receives more complaints than any other industry in the country.

Watch the entire PBS investigation by clicking here.

Related Articles

* Reasons not to file Bankruptcy or Settle Your Debts

Get Everything in Writing: Collection Agencies and Their Lies

Sample Debt Validation Letter

By Debt Prison on December 8, 2007

There are many debt validation letters floating around on the web that are ridiculous – I used to have one posted on here. 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. Found below is a sample debt validation letter of an accused debtors request for validation of debt from a collection agency.

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. See also all of my articles on Collection Agencies. This article was last updated in July of 2009. Other articles at DebtPrison.net you may want to review are:

How to settle your debts on your own

Can you go to jail for not paying your credit card debt

How to deal with collection agencies

The validation process is outlined in the Fair Debt Collection Practices Act so you should take the time to read it. In this Act it states that the collection agency is only required to supply you with the name of the original creditor and the amount of the debt. However, if you are sued in civil court by a collection agency, you certainly have the right to request a copy of the original contract (which you signed) that indicates you ever entered into a financial agreement with the creditor. For an example of this defense please see DP reader wins civil suit against collection agency. If they fail to provide this ‘proof’ of contract, the judge will likely dismiss the case. If you have any questions please join the forum. Comments are closed to their high volume.

You should consider requesting Debt Validation in the following circumstances:

The debt is past the Statute of Limitations.

You have no knowledge of the debt.

The dollar amount they claim you owe appears higher than it should.

The debt is disputed (you don’t feel you legally or morally owe it).

The debt is on its second, third, or forth collection company.

The debt is over $1,000.

Bear in mind that unless you are willing to record phone conversations, hire a lawyer, and sue a collection agency… it may prove wise to simply ignore their phone calls and letters. But what if they take me to court to try and acquire a judgment? For a collector to actually file a suit against you in civil court, they are most likely betting that they have the information they need to prove you owe them, or that you are not informed enough to know your rights. For many people who choose to ignore them – the debt gets passed on to another collection agency. Yes they will threaten legal suit, but unless you receive a summons for court, it’s nothing more than a threat.

A collection agencies initial letter to you should indicate the original creditor and the dollar amount you owe. If your name, original creditor, or dollar amount appears incorrect you may want to consider debt validation. However, debt validation is not simply a means of getting out of paying your debts. In fact, a debt validation letter will draw attention to your account. Therefore, if you owe the debt, you may be better off simply ignoring their calls and letters. Whether or not this is a good idea will depend on many factors. You should use debt validation only when necessary. Since you probably don’t know anything about the collection agency… you won’t know if they:

Don’t have legal representation in your state in which to represent the collection agency in civil court.

Don’t have a track record of suing debtors.

Don’t have a track record of winning judgments.

If you plan on long and intensive deliberations with collection agencies you may want to consider purchasing a phone conversation recorder. You want to make sure that it’s legal to record phone conversations in your state. Also, if recording the call I would inform the collector they were being recorded only if my state law requires me to. 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. Many collection agencies send out a letter to everyone that reads the same. They like to get debtors on the phone so they can intimidate, confuse, lie, manipulate, and harass you into payment. Therefore do not talk to these bill collectors on the phone. If you haven’t received a collection attempt letter and a collector calls you… tell them to hold while you get a pen and paper. Ask for the persons name, company name, and address. You want to write these down so you can investigate their company using google or another internet search engine.

After getting the collector’s name and company, inform him/her that you must receive correspondence from them via mail (they have to mail you a letter defining the debt) and that you are not at liberty to discuss this matter over the phone. Don’t give them your address or any other information over the phone. Tell them you will be awaiting their letter and not to call back. Promptly hang up and don’t speak with them again on the phone. All future correspondence should be via mail. If your only desire is to stop the phone calls you should send a ‘Limited Cease and Desist Letter’. This means you are still permitting them to contact you, however, it is only allowed via mail – no phone calls.

Limited Cease and Desist Letter

Your name
Your address

Beehive Collection Agency
458 St. Claude
Suite 103A
New Orleans, LA 70062

Today’s Date

Re: Account # XXXX-XXXX-XXXX-XXXX

Dear Collection Representative,

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.

Best regards,

Your Name

What is Debt Validation?

Debt validation can only be applied to a collection agency - not the original creditor. For example, you have a credit card account with Capital One that is in default. You cannot ask Capital One to validate the debt. This is because you have been essentially receiving validation from them already in the form of monthly billing statements. However, you can and should under the above mentioned circumstances, ask any collection agency or ‘law firm’ to validate the debt in writing (that they claim you owe).

How do you know that this so-called collection agency isn’t actually just a group of scam artists who randomly call people using the phone book. They just keep calling saying that “Yes Mrs. Smith we are a collection agency trying to collect on a debt of $2,000. How soon can you make a payment?” If they are lucky you will volunteer some information, which enhances their story, and now you think a debt with Sears is actively being collected by these folks on the phone. This could never happen could it?

When you ask a collection agency to validate a debt, you are asking them how much money is owed and to whom it is owed. So the collection agency should send you a response letter that would state something like “you owe $2,800. The creditor or original creditor is/was Bank of America. We are representing Bank of America in an effort to collect on this debt.” Often you will receive a similar letter in the first place. This is how collection agencies begin the collection process (collection letter and phone calls).

The validation process

If you receive a phone call from a collection agency you should follow these instructions:

* Deny any knowledge of the debt.

* Grab a pen and write down the name of the collection agency and their address.

* Inform the collector that they will be receiving a validation letter in a few days and not to call back (then hang up immediately). If they call back don’t answer.

* Immediately write this letter and mail it out (snail mail).

* Send the letter as a registered letter so they have to sign for it and you’ll get a receipt showing where they signed for it.

* Paperclip the registered letter receipt to a copy of the letter and never lose it.

Now if they respond to your letter and the information appears to be correct (you honestly owe the money) you should contact the original creditor to verify that they assigned this debt to said collection agency. Or they may tell you that they sold the debt to a collection agency. You want to insure that this collection agency legally possesses the authority to collect on this debt.

Sample Debt Validation letter:

Date

Your Name Address City, State Zip

Debt Collector’s Name Address City, State Zip Re: Account Number

Dear Debt Collector:

I am writing in response to phone call/letter received from you on date xx/xx/xx. Pursuant to my rights under federal debt collection laws, I am requesting that you provide validation of this debt. Note this is not a refusal to pay, but a request that your offices provide me with evidence that I have a legal obligation to pay you.

Sincerely,

Your Name

There’s no need for you to threaten to sue the collection agency or to ask for a long list of crap that they aren’t required to provide for you under the FDCPA. Their failure to provide you with a long list will not make you judgment proof when you stand in front of a judge. However, you can request a copy of the original contract with your signature. You can wait until the day of court to pull this ace from your sleeve if you’d like, since most lawyers representing the collection agency likely won’t have a copy of the original contract on them the day of court. This can postpone their case or their failure to produce such a contract can result in the case being thrown out by the judge. Much will depend on the judge and his interpretation of the facts and your character. Or you can request a copy of such contract in your intial debt validation letter. This will let the collection agency know that you know your rights and won’t be a ‘roll-over’ debtor who simply coughs up cash.

After you receive the collectors response letter

If you further wish to dispute the debt write another letter immediately. If you’d like you can basically repeat the first letter, but state that this is the second time you have asked them to validate and their initial response was insufficient and the debt is still disputed “please provide me with the following information.” Tell them they have 30 days to respond to this letter or their claim will be considered invalid.

Or you may actually not owe the money. In this case immediately respond stating that their claim is disputed “you do not owe the money because etc, etc…” Then explain that they should dismiss this claim entirely and not report it to credit reporting bureaus. Failure to comply will result in you filing suit against their company. Send this letter registered, print an extra copy, and paperclip the receipt to the copy. Save these items – never lose them. When I say never I mean never. Keep em locked up tight.

If the collection agency fails to properly validate the debt after two request I would write a letter like the following:

Beehive Collection Agency
458 St. Claude
Suite 103A
New Orleans, LA 70062

Today’s Date

Re: Account # XXXX-XXXX-XXXX-XXXX

Dear Collection Representative,

Not only is this debt legally disputed, but you have been unable to validate this debt as described under the FDCPA. Therefore, I obviously do not owe you any money of any kind. 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. I also expect all collection letters of any kind to promptly end. As my rights indicate under the law, I have the right to demand you stop harassing me about this bogus debt. This includes all phone calls and letters. Any further communication with me, will be documented, and forwarded to the FTC as well as your State Attorney General. Please note that this letter is being sent to you registered mail. I am keeping a copy of this letter with the return receipt attached.

Best regards,

Your Name

Remember – if you feel intimidated by this process and have some change to spare, go visit a local lawyer in your town who you trust. Ask for one hour of legal counseling and make sure to speak with a lawyer who specializes in civil court cases.

Often the Debt Validation Letter will result in the collection agency dropping the claim or selling it to another collection agency (because they can’t properly validate the debt). If they drop the claim that should be the end of it. Or they may sell the debt to another collection agency and this process starts all over again. If they report incorrect information to the credit reporting bureaus go online to the websites of Experian, Transunion, and Equifax. Follow the instructions for filing a dispute. You would want to see the outcome of this dispute before seeking legal counsel.

If you have any questions or comments just drop me a line below. Remember that the best way to handle collection agencies is to read the Fair Debt Collection Practices Act and continue reading online about other’s personal experiences. Take care and I hope this article helps!

A Debt Validation Letter for a debt you do not owe

Collection Agency Name
Street Address
City, State, Zip Code

Re: Dispute of Alleged Collection Amount
Account: Account Number
Amount: Dollar Amount
Creditor: Name of Original Creditor

Attention: Account Manager

It has been brought to my attention that you are attempting to collect on an account that is in legal dispute. Therefore, please consider this response as my legal dispute and request for you under public law 95-109, 15 USC 1692g. S 809 to obtain verification of this alleged debt or a copy of a judgment against me. I furthermore request the name and address of the original creditor stating that this alleged liability is mine so that civil action can be implemented to resolve this erroneous accusation, if necessary.

Any further attempt to collect and/or continue to falsely report this disputed information on my personal credit file without complying to the above stated provisions will be deemed as non-compliance and you will be held liable under 15 USC 1692 (k) (civil liability) to one or more of the following:

All actual damage sustained by a consumer as a result of such failure;

(A) Included above, additional damages allowed by the court, not exceeding $1,000; or

If a class action is filed, such amount for each named plaintiff, recovered under subparagraph (A) of the stated Title, and an amount not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and

All cost accrued by the consumers’ successful action to enforce the foregoing liability, along with attorney’s fee.

It is my intention to resolve your inaccurate reporting of this activity contained on my file amiably. However, rest assured I would pursue all legal rights therein to resolve this matter.

If this liability is proven to be due, it is my intention to retire it immediately. I look forward to your response within the next 30 days. Thank you for your cooperation.

Sincerely,

Your Name
Your Address

Debt Validation Letter for bogus Medical Service

Your Name
Your Address

Name of Collection Agency
Collection Agency Address

RE: (Original Creditor)
Account#: (put acct # here)
Amount Due: (dollar amount here)

Dear Collection Representative,

I have recently been made aware of an account that has been placed with your office for collections. Please be advised that I am unaware of ever having an account with the above mentioned creditor and dispute its validity. Therefore, please provide me with a copy of the itemization along with any documents I personally signed which would in any way obligate my responsibility for payment. I expect that this information will be sent to me within the next 30 days. If you fail to send the requested information within this timeframe, I will assume that this account will be deleted from all credit files will all credit reporting agencies and all collection efforts will cease.

I look forward to hearing from you so we may resolve this matter amicably.

Best regards,

Your Name

Here’s a follow up debt validation letter after 30 days have passed

Your Name
Your Address

Name of Collection Agency
Collection Agency Address
Attention: Collection Manager

RE: (Original Creditor)
Account#: (put acct # here)
Amount Due: (dollar amount here)

Dear Collection Representative,

This letter is to inform you that it has been over 30 days since my initial request for documentation (see enclosure) of validation for this account. As of this date I still have not received the information requested. Furthermore, I have been informed by the credit reporting agencies that your company continues to confirm this account as correct and owing. As you have not followed through with my previous request, I assume this account will now be removed from my credit report, as the law requires. Furthermore, please be advised that if you do not remove this account and notify me immediately in writing of your actions, I will not only file a formal complaint with the FTC, but also with the Office of Consumer Affairs and possibly seek legal counsel to determine what other actions I may take.

I look forward to hearing from you.

Best regards,

Your Name

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* The Fair Debt Collection Practices Act

How to deal with Collection Agencies

By Debt Prison on December 8, 2007

Handling Collection Agencies because of debts you’ve failed to pay can be intimidating. The outcome will depend on you. The level of action one can harness is different for each and every individual. DebtPrison.net does not administer legal advice. The information provided here is readily available online at various websites and discussion groups across the internet. If you are in trouble with bill collectors keep educating yourself about debt and collection. And most importantly, make the disciplined lifestyle changes necessary to insure this never happens again.

See also Debt Prison related article Get Everything in Writing: Collection Agencies and Their Lies.

See also all of my articles on Collection Agencies.

In house collection vs. collection agencies

There are three different scenario’s creditors use to collect on past due debt. Some creditors have their own in house collectors. This means that when you fail to make payments someone from their ‘collection division’ tries to contact you. So if you have a past due account with Bank of America – someone from Bank of America is calling you trying to collect. This is the best scenario because a third party hasn’t gotten involved. If at all possible you want to remain inside this scenario. It’s always better to deal directly with the original creditor. In this case - Bank of America. See also, Restrictions on Wage Garnishment for Debt Collection.

Another method creditors can use is to assign the collection to a collection agency. Let’s say it’s been three months since you’ve made a payment to Citibank. They weren’t able to get in touch with you so they assign the debt over to Beehive Collection Agency. Beehive begins the collection process (2 to 3 phone calls per day). Beehive’s goal is to get you back on track with the original creditor. If they can get you to make a payment they will receive a percentage of said payment. That’s how Beehive makes their money. During this process the legal rights of the debt are still owned by Citibank.

The last scenario is when Discover Card sells your debt to a collection agency. Discover Card hasn’t heard from you in six months and has given up on collecting this debt from you. So Discover sells this debt to Beehive for 20 cents on the dollar. If you owed Discover Card $5,000 Beehive pays discover $1000 for the legal rights to the debt. In essence, Beehive has bought your debt from Discover. Since this debt is only six months old Beehive figures they can get more than $1,000 out of you. At this point Discover Card would have reported this ‘write off’ on your credit report. Keep in mind that Beehive can also add negative marks on your credit report. And if Beehive can’t collect, they can sell it to another collection agency for 3 cents on the dollar. This new collection agency can plot additional negative strikes to your credit report. Hence, the first scenario is where you want to be if possible.

Methods described in this article are for dealing with collection agencies in the second or third scenario. The original creditor has assigned or sold your debt to an outside collection agency. This bill collector is trying to collect for the original creditor or now owns your debt – not Discover Card. You can no longer deal with Discover if they sold the legal rights to Beehive. However, you should contact Discover Card and make absolutely sure that they sold (not assigned) the debt to a collection agency. If they sold it they no longer have any legal authority over the debt. If they assigned the debt you should try and deal with the original creditor instead of the collection agency. If the original creditor is still in possession of the debt then you should read these articles Reasons not to file bankruptcy or settle your debt and How to settle your debts on your own.

If you legitimately owe a debt you should try and satisfy it. The information I provide assumes you cannot satisfy the debt and are therefore seeking the path of least resistance.

Should you simply ignore their calls?

Often, it’s better to simply ignore their calls and letters. If you owe $1,000 or less on a debt there’s a good chance they won’t bother taking you to civil court to pursue a judgment. However, some collectors have sued for amounts under $1,000. Also, you are more likely to get sued if you have continued applying for or are currently using credit to make purchases. A collection agency is able to gain access to your credit report, therefore they are aware of any new credit you’ve applied for. From their perspective, if you can afford to apply for new credit, certainly you are able to make payments on your old debts.

I would also research the collection ageny on the internet to see what information I could dig up on them. Recently a family member contacted me about a debt of $6,000, that was being collected on by a collection agency, which was utilizing a lawyer. Many collection agencies have a lawyer on staff who writes their letters and handles disputes. So I researched this lawyer and collection agency, only to find a ton of information at various websites and forums. Most of the information I found came from x-employees, who hated the company, and was blabbing about how the company operates. As it turns out, according to these employees, the collection agency would only sue a debtor who lived in Texas (where their office was located) – so in Mississippi he was assumed to be safe from legal action. As a result, I advised my family member to simply ignore the calls and letters for now. Most likely the debt will be passed on to another collection agency. In which case, the new agency will be researched, and then another decision will be made regarding how to handle their calls and letters.

Dont talk to collection agencies on the phone

Talking on the phone with bill collectors is not wise. They do this for a living and you probably dont. If you answer the phone and its a bill collector tell them to hold so you can find something to write on. Find a pen and paper and ask the collector for his name. Next, ask for the name of the collection agency, their address, their phone number, the reference number for the account, the amount of the debt, and who the original creditor was. Do not answer any questions or admit to knowing anything about this debt. Just get the described information and then hang up immediately. The reason you dont want to talk with them is because they may be recording the conversation and can use what you say against you in civil court. These discussions are best held on paper. Ask the collection agency to send a letter defining the debt to your address. Then promply hang up.

Request for the collection agency to validate the debt

As described under the Federal Trade Commissions Fair Debt Collection Practices Act (this is my easy to read version) you have the right to request validation of the debt by the collection agency. If the collection agency hasn’t mailed you a letter within 30 days you can either request they validate, or you can choose to ignore them. You can write a letter like this one. This forces the collection agency to ‘prove’ that you owe the debt. It’s possible that the collection agency doesn’t have all the paperwork necessary to prove you owe them the money. The older the debt is, the more likely the information they possess will be insufficient. Also, once the debt gets old enough (usually 4 to 6 years) it will have passed the Statute of Limitations in your state. This means that no one has the legal right to collect this debt from you. You’ll notice that in the validation letter is a limited cease and desist clause. This is the section that outlines that communication with you should be accomplished strictly through the mail; they are not to call your home anymore or your place of employment. Failure to comply puts them in violation of the Fair Debt Collection Practices Act.

For a listing of the Statute of Limitations in each state click here.

In the letter you are also warning that they may be in further violation if this debt is reported to Credit Bureaus (Equifax, Experian, and TransUnion). If they can’t legally validate the debt and they report it to the CB’s then they could be sued.

You should mail the validation letter immediately after receiving the phone call from the collector. If you don’t hear from them within 30 days write a new letter, and include a copy of the first one. The second letter should explain that this is the second time you have requested they validate the disputed debt. This is their last opportunity to prove that you owe the debt. Mail the second letter with USPS as a registered letter. When the receipt comes back, staple it to a copy of the second letter.

Keep good records

Send the validation letter as a registered letter. This way they will have to sign for the letter and USPS will return the receipt to you. Staple the receipt to a copy of the validation letter. Keep copies of all correspondence in a file under lock and key. In the event you end up in civil court, a flawless paper trail is essential to winning and avoiding a judgment. If it’s legal in your residing state, record any phone conversations you have with them. Although you shouldn’t be speaking to them - perhaps they didn’t obey the ‘limited cease and desist.’ It would be nice to have a taped recording of their willing violation of law.

If the collection agency can’t validate the debt

Often the collection agency won’t be able to validate the debt, if that’s the case then you simply don’t have to pay it. If they sued you in civil court they would most likely lose because they failed to adhere to Federal Law and correctly validate the debt. The collection agency must have sufficient evidence that you legally owe them the money. If they can’t prove this to you, they certainly couldn’t persuade a judge to rule in their favor. If the collection agency won’t validate the debt 30 days after the mailing of the second letter, you should be in the clear. Take the time to read the Fair Debt Collection Practices Act.

By making a payment on this debt you are admitting that you owe it. So don’t make any payments unless you are absolutely positive that you are still legally required to pay this debt. Making a payment also resets the clock on the Statute of Limitations - even if the Statute has passed! If the debt has passed the SoL then you don’t have to pay it, you can’t be taken to court. Some collection agencies are buying debts that people have filed bankruptcy on. They might pay only 1 penny on the dollar for this debt. Then they begin calling the debtor. Using threats and intimidation the collector tries to convince the debtor to pay up. Some people aren’t aware of their rights and give in. No one can force you to pay a debt that’s been legally wiped away by bankruptcy.

The collection agency legally validates the debt

There are two ways a collection agency can collect money on a debt you legally owe. First, you can pay them. Second, they can win a judgment against you in civil court. I’ve been in civil court four times while representing my previous employer. Let me give you some advice. Make sure you have all the evidence you need to support your case. If you can’t legally show why you are not required to pay the debt then don’t go to court. The judge will just slap a judgment against you. This judgment could lead to garnishment of wages and even liens on personal assets (land, vehicles, or home). So if you are clearly in the wrong then try and work out a solution with the collection agency. One solution is to pay the debt in full through an agreed payment plan (or simply ignore their calls and letters). The other solution is to try and settle the amount of debt you owe. Often collection agencies will settle for 50 cents on the dollar and sometimes less. For advice on settling your debt on your own click here.

What if the collection agency takes you to court?

If the collection agency doesn’t have the proper paperwork the case can be dismissed by the Judge. Most collectors won’t bother with court unless it’s a large amount of money - usually in excess of at least $1,000. You should bring the paper trail into court. Bring copies of your bills and income statements. There should be a very good reason why you have not been able to satisfy this debt. And you better be able to prove this to a civil court Judge. If your case is dire enough the Judge could declare that you no longer owe the debt. The Judge will most likely do what is logical and fair. If the collection agency can prove that you owe them, explain to them why you can’t pay. If they believe you the account may be sold to another collection agency.

The collection agency could assign your case to a ‘law firm’. These people will call you and threaten with lawsuits and court. They will ask you why the debt hasn’t been paid. If this happens it doesn’t change anything. Your circumstances at home won’t change just because a ‘law firm’ has been assigned your debt? And I’m not even convinced that some of these people are lawyers at all. You should ask them who they are, write down the name of their office and look it up. If you have the money it would be a good idea to seek legal advice from a local lawyer that you trust.

Most likely you won’t go to jail for failing to pay debt! I would take the time and explain to the law firm why I could not satisfy this debt. If your circumstances are dire enough they may just write it off – that could be the end of this battle. Just because a law firm is involved doesn’t mean that one will lose in civil court. Someone very close to me was contacted by a lawyer in regards to the remaining balance on a repo. Ford Motor Credit had to repossess a truck and charged my relative for the money they lost. My relative explained in detail why they could not repay the debt. The law office dropped the case and it was written off. If you legally owe a debt that you cannot pay - explain in detail the reasons why. Often this will be enough for the collection agency or law firm to drop the account. Go to other websites on this subject. There’s a lot of good, free information on the web. Good luck. Go forth and be debt free!

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

Related Articles

* Reasons not to file Bankruptcy or Settle Your Debts

* What You Should Know About Credit Cards

* Restrictions on Wage Garnishment for Debt Collection

Can you go to jail for not paying your credit card debt?

By Debt Prison on December 8, 2007

Many people have emailed me asking if they could go to prison for not paying their credit card debt. It seems that some collection agencies are trying to intimidate debtors with the threat of arrest and imprisonment. A collection agency representative might comment “if you don’t start making payments on this we can take you to court and put you in jail.” There’s a lot of information on this subject and I will attempt to organize it in an intelligent manner. The correct answer to this question is - it depends!

See also all of my articles on Collection Agencies.

See also DebtPrison related article How to deal with Collection Agencies.

Failing to make payments on debt is not considered a crime in the United States. The U.S. hasn’t utilized a debtor’s prison since the 1850’s. Some countries will still place a debtor in prison for failing to make payments. However, the U.S. government has a vested interest in making debt a desirable circumstance, therefore debt is not criminalized. In order to go to prison you must be convicted of criminal behavior. Laws regarding these issues will vary state to state. See also DebtPrison related article How to settle your debts on your own.

Here are your options with debt you’re defaulting on:

1. Settle your debt (but you’ll need some cash).

2. File bankruptcy (an often nightmare).

3. Ignore it and possibly go to jail for contempt of a court order (very rare).

4. Start paying it back in full.

What will most likely happen

It’s always been my understanding that your creditor can take you to civil court and obtain a judgment against you saying that you owe the debt. Through the judgment the collector can then garnish your wages or even get liens against your assets. But getting to this point of wage garnishment or liens against assets is time consuming and usually never occurs. That’s because the collector has to go through a process that I’ll explain later in the article.

Going to jail for contempt wasn’t something that I thought could occur, but then I’ve read some comments from my readers below. I’m assuming there’s more to the cases than just the average default. It seems that in some rare cases an arrest warrant can be issued for contempt of court. I think this is somehow related to your not showing up in court, but from what I’ve read these arrest warrants are very uncommon.

This was stated by Sherri below in the comments “They tried to take me to court in 2000 ish. I tried to set up a payment plan and the guy told me he would not allow a payment plan and wanted me to ask friends and family to pay the bill. This week I got a letter in from the sheriffs dept stating it was a warrant for arrest. The attached paperwork was showing a court date for 12/20/07. In which I NEVER received any paperwork stating I had a court date in Dec.”

And this was stated by Deb “I owe around 3,000 in credit debt, and a sheriff keeps banging on my door leaving me a note from the sheriffs dept, what the hell is this all about? And can they arrest me in my own home?”

I have no way of knowing specifically what occurred in the two above mentioned cases that led to the Sheriff’s Dept. getting involved. In general, the negative outcomes (negative credit reporting, wage garnishment, liens, or jail) often depends on the amount of money involved and the aggressiveness of the creditor. The more money involved (almost always in excess of $1,000) the more likely the creditor or collection agency will pursue legal action.

Usually the process follows these guidelines:

You have defaulted on your payments. Your creditors collection division calls you daily to try and talk you into making a payment. After a year or two they give up on the phone calls and letters. They can’t get you to pay so they (this could now be a collection agency, not the original creditor) sue you in civil court. This can happen even if you are in a debt settlement program. It’s a lot of trouble and expense for them to sue you, so normally they won’t bother unless they figure they can get some money out of you.

Keep in mind that there are rules that collection agencies must follow according to the Fair Debt Collection Practices Act. If they don’t follow the rules you can actually hire an attorney and file suit against them! For example, if they have your phone number, they are not allowed to call your family, friends, or employer (if you request them not to). Also, you can write a cease and desist letter which instructs them to only communicate with you via U.S. snail mail.

Scenario 1 – You don’t show up and the judge rules in favor of the creditor and against you. This judgment is an acknowledgement that you owe the money. I’ve read that 80% to 90% of judgments are never collected! This is because the judgment is usually just an acknowledgement that you owe the money, and that is all. In order to collect another court date must be assigned to perform a ‘writ of execution’. If they summons you for this, and you don’t appear, they may issue a bench warrant for your arrest.

A writ of execution is a common court order granted by a court in an attempt to satisfy a judgment obtained by a plaintiff. When issuing a writ of execution, a court typically will order a sheriff or other similar official to levy property owned by a judgment debtor. Such property will often then be sold in a sheriff’s sale, and the proceeds remunerated to the plaintiff in partial or full satisfaction of the judgment. It is generally considered preferable for the sheriff simply to confiscate money from the defendant’s bank account. If the judgment debtor owns real property, the judgment creditor can record the execution to “freeze” the title until the execution is satisfied.

If you don’t show up for this one you may be arrested for contempt of court. This is the part of the process where the facts will be laid out. This is the part where they get your employment information for wage garnishment or asset info for liens. But bear in mind, most collections will not get to this point. It really just depends on how aggressive they are on your particular case. And many people are actually in a position where they cannot be collected on. Perhaps you are disabled and on limited income. Chances are they can get a judgment but will never be able to collect. There is also a federal minimum (I think this figure is 30 hours of minimum wage pay per week), which if you make below, they cannot collect. For example, if minimum wage is $5.80 per hour, times 30 hours, comes to $174/week or $702 per month. If you make that or less they cannot touch you. Money that is in IRA’s, custodial accounts, trusts, annuities, and insurance contracts are often untouchable. See also, Restrictions on Wage Garnishment for Debt Collection.

Scenario 2 – You go to defend yourself against the creditor. You explain why you do not owe the money. Or you explain that you owe the money and cannot pay it because of personal circumstances. The judge may or may not rule in favor of the creditor. If you don’t owe the money or really can’t pay – just walk into court and defend yourself, you’ll be glad you did.

Please understand that the garnishment of wages depends on many factors such as: your level of income, possibly your spouses income may be considered, and the number of dependents you have. To read about someone’s personal experience in using debt settlement companies read Tell Debt Settlement Companies to Kiss Your Ass. If this article doesn’t convince you to stay away from these companies, I don’t know what will.

Can you be arrested at airport returning to U.S.?

I’ve seen this question come up quite often. Some people moved away from the United States into another country. However, they left behind tens (or hundreds) of thousands of dollars of debt. Now they need to re-enter the U.S. for a vacation or to visit family. They are worried about an outstanding arrest warrant related to the debt. If you are concerned about this possibility try performing an information search on yourself at a site like this one. Perhaps avoiding entering the state where you used to live would be a good idea. Now if you have a warrant for fraud (related to your debt) the possibility for arrest may carry a bit more weight since this is a criminal, not civil arrest warrant. Keep reading to learn more about fraud and other issues related to debt and jail.

Fraud

Also, if you obtained debt by committing fraud you can go to jail. For example, let’s say you just moved into a new apartment. Mail for the previous tenant is still arriving at your apartment. A credit card offer comes in the mail for the previous tenant. You fill out the application, mail it in, and start using this new credit card which is in someone else’s name. This is fraud and if convicted you could serve time in prison. This happened to my cousin. He moved out of his apartment and the following tenant received his mail and ran up thousands of dollars in retail charges. He had to get a lawyer involved and it took years to get this completely removed from his credit report.

Perhaps you have ‘borrowed’ your sister’s credit card to go out and spend a couple of grand without her knowing about it. In this case you could be fined and or imprisoned for fraud. This type of conduct is also considered criminal in nature.

You could possibly be looking at prison if you ran up thousands of dollars of debt on credit cards with no intention of paying it back. Recently the federal government changed the law regarding filing bankruptcy on credit card debt. The new law makes it harder to erase the debts you owe to credit card companies. Before this law went into effect, bankruptcy courts received a record number of new filings. Broke Americans were all trying to file for bankruptcy before the new law kicked in.

At the time I had an acquaintance that had in fact, filed bankruptcy on debts to various creditors, worth over $60,000. We were discussing the new law and he suggested that I run up tens of thousands of dollars in credit card debt. When the bills came due I would simply file bankruptcy before the new law took effect. Many people did exactly that. If the credit card company can prove that this was your intention, then some judges would find you guilty of fraud – taking out loans that you had no intention of repaying. However, it is usually difficult to prove that someone had no intention of repaying the debt. For example, if you applied for six credit cards, maxed out the limits for a total of $15,000, and then never made a payment, you could be in serious trouble. It would be obvious that your intent was criminal.

In general if it can be proved you received money or goods by deceptive practices you may be eligible for a criminal conviction.

You could also be imprisoned for the following:

If you violate a court order (a judgment against you to pay child support).

If you are convicted of willfully failing to pay your income tax to the government.

If you are attempting to hide assets or income to avoid paying a debt for which there is a judgment against you.

Bankruptcy related acts that can result in criminal penalties include:

If you defraud tenants

If you forge a bankruptcy judges signature

If you commit perjury during the creditor’s meeting

Keep in mind that there is a difference in a judgment (civil court decision about money you owe another party), and a verdict (criminal court conviction of a crime). In a civil court case the outcome will largely depend on the judge and his interpretation of the circumstances.

Simply defaulting on your debt is not a crime

If failing to pay your debts equaled prison time then half the people you know would be in jail. Even the author of this article, although my debt is caught up now and will be soon be paid off in full. Many people have lost their jobs or had unexpected medical issues force serious changes to their financial lifestyle. Through no fault of their own a debtor may no longer be able to make the minimum payments. This is not a crime and one cannot go to jail for these reasons. Like I said earlier, collection agencies will do anything they can to convince you to send them a payment. If you have credit card debts or medical bills that you can no longer pay, you can’t go to jail. This is why we have debt settlement, bankruptcy, and ruined credit scores.

Although you can’t go to jail for failing to pay your debts, there is a list of negative consequences you may be eligible for;

Collection Agencies can call your phone several times a day.

They can even call your place of employment, asking for you or where they can find you.

They can call your neighbors and ask them if they know where you are.

They can sue you in civil court for the balance of debt you owe them.

They can win a judgment in civil court against you for the debt owed.

Through the judgment they can garnish wages from your paycheck.

Through the judgment they can garnish your banking accounts.

They can (in some states) get a lien against your assets (house) and sell it to pay off the debt.

They can report the collection information to credit bureaus which lowers one’s credit score.

So the short answer is no – you can’t go to jail for simply not paying your debts, unless you are in contempt of court (very rare). But, creditors and collection agencies can make your life a living hell. So it’s in your best interest to get this situation handled in a manner that benefits you.

Remember that some debt collectors will scare you anyway they can to force you to pay up. The best advice I can give is to educate yourself about your options. Take the time to read information across the web about debt and collection. There are a lot of articles out there – most of them are accurate and truthful. Please feel free to leave questions or testimonials at the forum. Go forth and be debt free!

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

Related Articles

* The Fair Debt Collection Practices Act

* Get Everything in Writing: Collection Agencies and Their Lies

* Reasons not to file Bankruptcy or Settle Your Debts