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Can a Creditor Collect on Discharged Debt?

By Debt Prison on January 2, 2009

Original creditors and collection agencies will often collect on discharged debt, charge offs, debt absolved by bankruptcy, and even debt that’s been settled. This is debt that can’t legally be collected on via a civil court judgment. However, collection agencies won’t let a little thing like your legal rights stand in the way of their profits. See also, What is a junk debt buyer?

Often creditors will continue to report a discharged debt as a ‘live’ debt on your credit report, making it appear that you still owe the debt and that it’s active. They do this in hopes that you’ll need new credit for a purchase (like a home), and you’ll have to come back and pay them to get your credit report cleared up. If you sue the creditor, they’ll claim they have no record of the discharge, or that the court didn’t notify them of the bankruptcy.

A couple of months ago I wrote an article about a debtor who was trying to settle a debt with Chase Bank. Chase had ‘assigned’ the debt to a collection agency and the CA agreed to settle the debt. Desiring to guarantee this debtor handled the settlement properly I gave her the following instructions:

1) She contacted the original creditor to insure that the collection agency legally represented them (the creditor).

2) She documented the names and positions of the representatives and supervisors with whom she spoke to on the phone (original creditor).

3) She requested that the collection agency fax her a statement saying that this settled amount would 100% satisfy this debt and that the loan would be reported as ‘paid in full’ to credit reporting bureaus.

4) She then called the original creditor to insure that they agreed to these terms and documented the phone call with their names, their positions, their supervisor’s name, and date of conversation.

Despite following these instructions Chase Bank still sent her a bill the next month for the settled amount. She had to fax them a copy of their settlement agreement twice before the matter was settled. What if she hadn’t kept a copy of the settlement? Chase Bank would have continued to bill this consumer for the settled debt. Later on, Chase would have sold this debt to a collection agency and likely reported it as a charge off on her credit report.

If you have an agreement with a creditor make sure you get it in writing before you pay them. Otherwise, they will act as though no agreement occurred, they will still attempt collection on the debt, they will report the debt to credit reporting agencies negatively, and then they will sell the debt for pennies on the dollar to a collection agency.

Yes creditors and collection agencies are collecting on discharged debt. They accomplish this by using loop holes in the law, or by going around the law altogether. The best way to fight abuse from collectors is to keep a paper trail of all documents related to the debt. In order to make creditors follow the law – you may have to employ the services of a law office. Sometimes there’s just no way around it.

How long can collectors try and collect on a debt?

Collection agencies are collecting on debts far past the Statute of Limitations and other debts that have been legally absolved for years. Two weeks ago I was contacted by a reader who had a collection agency trying to collect on a debt from 1989. The State in which she lives has a Statute of Limitations of 4 years. That means this CA is trying to collect on a debt which is 15 years past the legally allotted time for debt collection in her state. The debt doesn’t even appear on her credit report. See also, Debt past the SOL but collection agency still suing.

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

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Debt past the Statute of Limitations and Collection Agency still suing?

By Debt Prison on December 8, 2008

If your debt is past the Statute of Limitations a collection agency or creditor can still sue you in civil court as an attempt to obtain a judgment. So why does the Statute of Limitations (SOL) exist and how can you use it towards your defense? If you have any questions pertaining to this article please leave a comment at the end of this page. See also, Debt Prison related article Sample Debt Validation Letter.

A statute of limitations (pertaining to debt) is a statute in our legal system that sets forth the maximum period of time, after certain events (default on payments), that legal proceedings based on those events may be initiated. The SOL for defaulted debt will vary state by state which you can look up by clicking here. The SOL can vary wildly… in New York it’s 6 years but in Ohio it’s 15 years (sucks to be in Ohio). The date on which you miss your first payment starts the clock on the SOL. For example, in Texas the SOL for defaulted debts is four years. So if you miss your first payment on August 30, 2008 – your creditor has until August 30, 2012 to file suit and still be within the SOL. So why would a collection agency or creditor file suit on defaulted debt after the SOL has expired?

You need to show up in court to defend yourself

Though the debt may be past the SOL… someone needs to show up in court and explain that to the judge. That someone should be you. So if your debt is past the SOL and you get served a summons for a civil suit from a collection agency – just make sure you walk into court on the assigned day and explain to the judge why the debt is past the SOL. The judge will then dismiss the case. It would be a good idea to take any paperwork into court with you to help support your defense.

If you fail to show up in court and defend yourself the collection agency will likely win a default judgment. So you want to make sure you show up in court to prevent the default judgment. Also, it would be a good idea to converse with the collection agency and try and convince them to drop the suit before the court date. Since their appearing in court and having their case dismissed would be a complete waste of their time…. not to mention yours. Sometimes it’s worth a phone conversation to convince the plaintiff that their case won’t stand up in court and therefore should be dropped.

Can the collection agency still sell my debt to another agency?

Selling debt is becoming a world wide industry. Junk debt buyers are buying up debts on which the SOL has expired and even debt that was absolved due to bankrtupcy. Why would a company buy such debt? Because many people will become intimidated and pay the debt. Most people simply don’t know their rights.

But can’t the clock on the SOL get reset?

Yes…. the clock on the Statute of Limitations can be reset by a couple of different circumstances. First, if you make any payment (no matter how small) on the defaulted debt the clock on the SOL will be reset. So in Texas the collection agency would then have a fresh four years to drag you into court to obtain a judgment. Also, in some states if you acknowledge, over the telephone, that you owe the debt or that you will try and make a payment – the SOL just got reset! So be careful what you say over the phone.

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

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* Reasons not to file Bankruptcy or Settle Your Debts

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How To Stop Bill Collectors From Harassing You

By Debt Prison on December 1, 2008

A reader at Sample Debt Validation Letter asks how to get a collection agent to stop harassing her. Of course the quick and easy solution is to pay them! But if you find yourself unable to pay, there are a few things you can do to make life easier for yourself. Always keep in mind, that no matter what they say or how they say it, the goal of a debt collector is to get YOU to cough up some cash. And often they’re willing to do and say anything to accomplish this task.

I had a lady from a collection office call me and harass me about a credit card I have. She even called my cell phone and left me a very rude message saying that she hoped her attorney sued me for every dime I had. She then sent another message on my cell saying she was giving me 24 hours to call her back.

Who can I report her to? And how do I get her to quit harassing me? The debt is an old credit card and has a balance of 2800.

Rhonda

Stop talking with these people on the phone.

First of all, once you enter the world of defaulted credit card debt - what good is it doing to talk to these people on the phone? If you had the money you’d pay them (right?). But since you don’t have the money… discussing your personal crisis with these bill collectors… will leave you angry, embarrassed, or scared. And possibly all three. Therefore, when I defaulted on my credit card debt I wrote them registered letters (kept the receipts) and explained to them my situation. Here’s how the phone calls work.

“Hello”

May I speak with Barry?

This is him.

Mr. Barry this is Jahid Patel calling from Citibank.. you are 60 days past due on your account. Can you make a payment today over the phone and get this balance up to date?

Nope

Well Mr. Barry… can you make any payment today… how about $100

Nope

Well Mr. Barry how about $50 could you afford to pay that today?

Etc, etc, etc”

Now bear in mind this is an extremely civil example of how the conversation would go. Once I had a collector call me at my job (damn I gave them my number when I got the credit card). She asked me if I could make a payment right now. I said no that I was at work and preferred to discuss this matter through the mail. Within about 10 seconds she proceeded to tell me that this was going to their ‘legal department’… which I promptly told her “Great.. get on with it” and that was that. It never went to their legal department.

The point I’m trying to make is that if you don’t have any money to pay them with.. write these bill collectors a letter (registered) and don’t talk with them on the phone. The only purpose it serves is for them to get you on the phone and proceed to tell lies and intimidate you. Being in Debt Prison is difficult enough without these types of conversations further ruining your day.

Should you change your phone number?

Changing your phone number may not be a bad idea if you have multiple creditors with whom you’re defaulting on. This way you’ll force them to deal with you via snail mail. However, if your particular phone number is important to you then there are other options.

If you have a home phone and a computer there’s a little trick that you may find beneficial. I had a desktop computer that I left on all day. I also had a phone line plugged into the back of it. I downloaded phone tray for free. Phone tray is a free caller i.d. and call blocker combined into one. Once a bill collector calls you, you can program their number into phone tray and then select how you want their call to be blocked. I always gave them the “We’re sorry, the number you are trying to reach has been disconnected or is no longer in service.” Phone tray has a variety of audio cuts that you can use. The only problem I encountered is that the phone would still ring once if it was a bill collector. So if the phone rang more than once, I knew it was actually someone I wanted to talk to.

Cease and Desist

You can also write a collection agency (not the original creditor) a ‘Limited Cease and Desist’ letter. This informs them to only contact you by snail mail. Keep a copy, send the letter registered, and attach the usps receipt to your copy of the letter. Keep all correspondence within a folder under lock and key.

I would also 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, considered harassment, and I will have no choice but to seek a legal course of action against your office. All future communications with me must be done in writing and sent to the address noted in this letter by USPS.

You can also throw in the kitchen sink and write a Debt Validation Letter. I recommend the kitchen sink if you feel that the collection agency isn’t treating you fairly.

Other options for Rhonda

1. Call her back and tell her you’re broke because you had to wine and dine her husband.

2. Tell them to get a judgment if they can because you are ready to shut them down in front of the local Judge who happens to be your brother.

3. Tell them at every dime they wouldn’t be getting much cause as a woman in the USA you only earn 60% of wages of fellow male co-workers.

Now on a serious note… talking on the phone with bill collectors is usually a bad idea 90% of the time.

Don’t call her back unless you can pay all of the debt back in one final swoosh.

If it goes to court you can go and represent yourself (not as scary as it sounds) in which case the judge may declare you owe the money and you can pay a little each month until the judgment is satisfied.

But there’s not much you can do about her rude manner. She’s got your number and it’s her job to call and push and push until they get a payment. Put yourself in their shoes… how would you collect money from people who didn’t or couldn’t pay? The other option is to record the conversations if it’s legal in your state. Inform the collection agency that you have a recording of their violations of the Fair Debt Collection Practices Act. And that you are prepared to file suit against their company if these violations continue.

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

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