Debt Prison &#187; debt

* What is a Junk Debt Buyer?

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

Leaving offers no escape from debt in the UAE

The Real Debt Prison in United Arab Emirates UAE

Debt Prison — Wed, 04 Feb 2009 03:10:13 +0000

Sporting 1.5 million souls (70% of which are randy men) the United Arab Emirates, or UAE, is home to one of the earth’s most popular regions for debtor’s prisons. If you’re a man, you’ll need a lot of debt, to buy junk with so you can outmaneuver and outrun those other young bucks, who are competing with you for the handful of beautif women not ‘married-off’ already in some sort of a family arrangement. The other women, the immigrant workers, are probably indebted to their employers and you’ll have to buy them off…. just for a date in your new Escalade, which you signed away your life for. What a bargain… just kidding. Defaulted debt in the UAE won’t die until the debtor does. There is no debt settlement or bankruptcy. I was originally going to write this article about just the debtor’s prison in the UAE, but after a little research I realized that I needed to include more information regarding their issuance of credit.

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.

Your word is credit

The UAE doesn’t have credit reporting agencies like Equifax (yet) because they still try and manage the country’s affairs pretending as though they live in a desert wilderness, void of any skyscrapers or pocketbook hustlers. The credit industry, if you want to call it that, doesn’t believe it’s their business to hover over your credit report. These reporting agencies are impersonal and are not part of a legitimate business contract between two human beings… hence they do not exist. You can literally get personal loans for up to $68,000 with nothing more than your word and a blank check.

The rising personal wealth, real estate boom, and bubbling petroleum brooks, will often lead average consumers in the UAE to bite off more debt than they can chew. In the UAE, like much of the Arab world, you are expected to honor your word. Who they hell do these Arabs think they are? We certainly don’t need any of that type of attitude floating around here in the U.S.. Yes you are expected to honor your word, and with it, you can have access to much more credit than you should logically have. In this regard, the United States and the UAE are similar.

Their system of personal checks

In the UAE, if your check bounces they will put you in jail. Credit is extended to you in a series of IOU’s. For example, if I want to buy a car for $10,000 and make payments for two years then I will have to write 24 checks – in advance! I will give the creditor 24 checks in the amount of $416.66 and dated in advance for each month I would be making payments. The bank then deposits each check in the month for which it was written.

It is illegal to write a blank check in the UAE… or at least to have such a blank check, signed by you to be cashed. Therefore when taking out large personal loans, the bank will require you to hand them a signed check with a blank amount. Their logic is simple enough: fail to pay them and they cash the check – which leads to your arrest and imprisonment. They may simply make you serve 3 months for the charge of writing a blank check. But if you cannot pay the loan, or find someone to pay it for you, the prison may become your new home. In fact, as I write this article 30-40% of those imprisoned in Dubai’s central jail, are there for not having paid their debt.

A good portion of the law enforcement’s time is wrapped up chasing defaulting debtors. In the UAE there is no such thing as filing for bankruptcy.

Here’s how the imprisonment would play out

You’re new in town, and hoping to impress the only three single (of age) female immigrants left in Dubai. You borrow $50,000 for some new duds and a used BMW. You’ve got a good-paying job building skyscrapers which provides a much needed shadow for those baking in the sun over at the debtor’s prison. Well times get tight because you blew too much money impressing the one remaining single female (the other two were deported because they had hepatitis) and your boss, who frequently abuses foreign infidel workers (like you), drops your pay so he can afford a new vacation to America… where he’ll cheat on his four wives.

The creditors begin calling you - and since you don’t have the money to make your monthly payments you ignore their calls. Finally the creditor, tired of trying to convince you to pay the debt, files suit against you. You ignore the court summons because you are broke, so the court puts out a warrant for your arrest. The debtor is arrested and sits in jail until the debt is paid. The debtor could also have ended up in jail, if the tired bill collector, submitted your blank check to the bank. Either way you are arrested and sitting in jail until the debt is paid. You cannot get out of jail so you can work and repay the debt. You will remain in jail until a relative, charity group, wealthy businessman or even a member of the ruling family pays the debt. It’s a good thing you built that skyscraper for the shade is oh so cool.

Planning on leaving the UAE with defaulted debt to escape payment? I wouldn’t go back because they’ll blacklist your passport and arrest you at the airport upon reentry. Straight to jail with your sorry butt! In fact the entire Middle East can be a problem for you since neighboring countries may extradite you back to the Dubai creditors. Debt in the UAE never dies, it never goes away.

If you want folks to honor their word the UAE’s debt prison may seem a logical course of action. I think it certainly makes people think twice before using credit, and that I believe is a very good thing. The largest problem for all of us, including those in the UAE, is the reverence a bustling economy places on the availability of credit. We need to save and pay cash, not splurge and use credit. An artificial economy which relies heavily on the relaxed availability of credit… has the side effect of creating a debt prison for those attempting to chisel out an existence in an impelling world.

Related Articles

Dealing with Financial Institutions in the UAE

Prison time for not paying debts in Dubai

Drowning in Debt: ArabianBusiness.com

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

* What is a Junk Debt Buyer?

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

Can a Creditor Collect on Discharged Debt?

Debt Prison — Sat, 03 Jan 2009 02:57:25 +0000

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.

Related Articles

* What is a Junk Debt Buyer?

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

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

Debt Prison — Tue, 09 Dec 2008 01:34:34 +0000

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.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* Reasons not to file Bankruptcy or Settle Your Debts

* Restrictions on Wage Garnishment for Debt Collection.

Will debt follow you abroad?

Debt Prison — Thu, 04 Dec 2008 04:17:12 +0000

Can you avoid paying your debts by leaving the United States and will your debt or credit report follow you to another country? If you leave, will you be arrested when you return to the United States? Can you be arrested in the country you’re moving to for the debt you leave behind in the U.S.? Can you be deported back to the U.S. for debt? Apparently these are complex questions and there is little information on the web that provides a complete explanation for leaving debt behind. So I’ve created this article to piece together the bits and pieces to form a reasonable answer. Now bear in mind that I’ve fitted this article together from information I’ve gathered. As far as I know the information I provide here is accurate and I’ll provide links indicating the source. The correct answer to this question is… it depends on the circumstances! Fraud (criminal charges) related to debt I’ve already addressed in Can you go to jail for not paying your debts.

Debt can only follow you if it knows where you are

Let’s assume that you are a debtor with $50,000 in credit card debt and you can no longer make the minimum payments. Your goal is to make a fresh start. Filing bankruptcy is one option. Leaving the country is another… but also staying in the U.S. and avoiding being located by the collection agency can provide resolution. Here’s why.

If you default on your payments your accounts will likely move into the hands of a collection agency or ‘law firm’. Either way they still have to follow the law in order to force you to pay. This means taking you to civil court to obtain a judgment. But before they win a judgment against you in civil court, you have to be served a summons. They can’t service you if they don’t know where you are. Therefore, if the court cannot service you the collection agency or ‘law firm’ will be unable to obtain a judgment in their favor. Now all of these bill collectors will likely hit a brick wall if they can’t locate you.

How is a civil court summons usually served?

The plaintiff (creditor/collector) has a duty to notify the defendant (you) that a law suit has been initiated. This notification is performed via the serving of a summons which must be performed according to a set of guidelines. Generally these guidelines require that a third party (deputy/constable) physically present a written summons to the other party. Generally, the law suit can not continue until the defending party has been properly notified by the service of a summons.

Normally the collection agency will provide the court with your last known address. So if you no longer live at that address the summons will not be served and the court date postponed. The suit will then sit idle until the collection agency provides another address where you can be served the summons.

UPDATE: 9/14/2009 on summons and service

Some version of this applies in most or all states…

How do I serve the defendant?

There are 3 ways to “serve” the defendant with papers to start your case:

Personal service:
Personal service means that someone gives the Summons and Complaint to the defendant.

Service by mail:
This means that someone mails the Summons and Complaint to the defendant. And,

Service by publication:
This means that you publish the Summons and Complaint in the newspaper that the defendant’s most likely to read. You have to ask the court’s permission to do this. Usually you have to try personal service a few times first.

This means they can have court against you and gain a default judgment even if they cannot personally hand you the summons. From what I’ve read this is rare… but does happen sometimes. If they have reason to believe you have valuable assets in the U.S. then this scenario becomes more likely.

***If a collection agency gets a judgment against you, even if the judgment is about to expire (SOL on the judgment), they can go back to court and get the judgment renewed! This just happened to my best friend. He thought the judgment was about to expire and then he got a summons for more court…. to renew the SOL on the judgment.

However, sometimes you can have the same name as another person – this can create problems for you.

THEN the attorney went to the county in which we both live and put a lien on my fathers house thinking it was my house. Amazing because I don’t own ANY real property and his house is in HIS name with HIS SSN. The Attys office believes his house is mine because his address is on my credit report (our stuff gets mixed up all the time on our credit reports). Their using his address as “my last known address”

I can’t believe you can go put a lien on someone’s property that easy…and then THAT person will end up having to pay an attorney to fix the problem. My father should be able to sue the attys office for placing a lien on the wrong property.

As you can see, sometimes credit history can be attached to the wrong person. And sometimes the court may think they served the correct person when they haven’t. If the court served the court summons to the wrong person then the creditor will likely get a default judgment against you. Since you won’t know about the summons – you won’t know the judgment occurred. For the sake of discussion here… we’re assuming you didn’t receive bad service and that the court was unable to deliver the summons. In which case, the collection agency’s claim against you is dead in the water. That is, unless they can find where you are!

The goal of avoiding debt payments, default judgments, and wage garnishment can often be accomplished if the collection agency cannot locate you before the Statue of Limitations expires on the debt! Whether you go abroad or stay in the U.S. – that is the only legal way of avoiding repayment on defaulted debt. You have to prevent being served until the SOL on the debts has passed. Granted, an aggressive collector may opt for the ‘post your summons in the newspaper’… in which case the court may consider you served.

So whether you stay in the U.S. or move to another country…. their harassment of you will only end when they no longer know where you are.

See also, Debt Prison related article Debt past the SOL but Collection Agency still suing.

What about tolling a debt?

Concerning the Statute of Limitations the issue of tolling was mentioned. Tolling means to stop the running of a statutory period (the SOL) for a certain period of time. However, in order to toll a debt (in California), you must leave the state before the cause of action accrues. In other words, you’d have to have left before you defaulted on your debts. Therefore, for the toll (to stop the SOL clock) to occur you would have to leave the country with your debt in good standing – this means you haven’t defaulted yet. For California:

If, after the cause of action accrues, he departs from the State, the time of his absence is not part of the time limited for the commencement of the action.

Creditors only see your social security number

One of the ways that banks/collectors locate us is by utilizing a successful tracking system. In the United States the system is successful because the government forces all businesses to adhere to certain legislation. Examples are the I-9 form, the W-4 form, and the 1099. Therefore, your taxes due, your credit report, your credit history, and even your income history all are traced by utilizing your social security number. Therefore, becoming a working immigrant of another country or a naturalized citizen could mean no longer utilizing your SSN. As a result, leaving the country in exchange for a new life may seem appealing to many folks.

Can a bad credit report follow you to a new country?

The short answer is no. The long answer is… if you allow it to. Some credit reporting agencies (Equifax – Transunion) may have offices in other countries. For example, Headquartered in Atlanta, Georgia, Equifax Inc. employs approximately 6,900 people in 14 countries through North America, Latin America and Europe. If applying for credit in a foreign country (with a U.S. based CRA) your U.S. credit report may be pulled by utilizing your SSN.

In several scenarios, people have found that the United States TransUnion and the Canada TransUnion share the same data in their systems. In result, there may be a possibility of a Canadian financial institution pulling your U.S credit history. This could be good for people with positive credit and bad for those with not so good credit. Equifax may do the same and share their data between countries. We have found that Experian has no effect in foreign credit because it only conducts reports on U.S residents.

So don’t apply for credit in your new country.

How to leave the United States

To learn more about this concept please visit this link.

** If you are $2,500 or more behind on child support payments you cannot receive a passport.

I think it’s also important to point out that collection agencies follow leads they get from people they call on the phone. So if they have your old number and your old room mate still lives there…. the old room mate could give them all of your forwarding information into your new country. Though they won’t know if it’s accurate… they’ll give it a shot and see what turns up. So make sure there are no people they could call who would give them any information (of any kind) as to your whereabouts. One of my readers had a room mate do just that up in New York. Now the collection agency has his phone number and address in Canada. However, in Canada he received a clean credit record and fresh credit.

What if you leave the United States and the collection agency finds out where you are?

Let’s suppose the collection agency achieved a judgment against you to repay the debt. And for arguments sake, let’s assume they’ve located you in another country. Have you ever heard of a long arm statute? Well neither had I. Normally this is a statute that is applied when the court of one state needs to obtain jurisdiction in another state. In that case they try and implement the long arm statute. But can this statute be applied internationally? The short answer is yes. But the long answer is…. it depends on the other country. Some countries may allow a U.S. court to obtain jurisdiction through their court system. Now at this point… I’m thinking you must have owed this creditor a truck load of money because the price tag for your harassment is getting expensive!

If the collection agency has a judgment and your new address… the agency could push for long arm jurisdiction through the court system. This request would be made possible through your new country’s U.S. Embassy or other such legal representation. The new country may then decide to assist the U.S. court in exercising the judgment. Some countries arrest defendants for debt… while others do not. Does this mean if your new country cooperates with the U.S. court you may be arrested until court is held? Maybe, I honestly couldn’t find a definite answer to that question. But the best solution would be to select a country which is favorable to debtors.

However, I failed to find an actual source where this situation occurred concerning overseas arrest for U.S. debt collection. But for fun you can read up on Personal Jurisdiction.

Can you be arrested returning to the United States for old debt?

I honestly don’t know, but based on what I read on other sites and forums the following is my opinion.

If you had an old judgment the court may have issued a ‘bench warrant’ to force you to show up and explain why you haven’t satisfied the judgment. If you are returning to the United States can you be arrested by Immigration or police at the airport upon entry? I found nothing suggesting you would. You just want to make sure that you don’t do anything that would cause the police or immigration to run your passport or drivers license through their database. The best general answer I could find on this subject:

The answer depends on where the bench warrant was issued, for what and if the warrant is in the same jurisdiction as the airport and if you are flying international or domestic.

You can be arrested anywhere in the jurisdiction covered by the warrant. If you are trying to leave the country and they run your passport or driver’s license and the warrant comes up the person will certainly be arrested.

I also found nothing to suggest that you could be deported back to the U.S. for a judgment regarding a civil suit for debt collection. The worse that could happen would be your new country participating in enforcing a judgment against you to repay the debt. A very unlikely event. I didn’t find a single source where this enforcement has occurred under these circumstances. Now I’m not assuming that everything I’ve implied here is 100% accurate. I’m only presenting this information based on what I was able to find.

So why do collection agencies call debtors in new countries?

Harassment is a very effective tool. Intimidation, caused most often by lies and emotional persuasion, convince debtors to pay up… even when there’s no legal reason for them to… and even when they don’t legally or morally owe the debt. Collection agencies are collecting on debts that were wiped out by bankruptcy or the Statute of Limitations years ago. They wouldn’t do this unless some people pay up.

If you have further information on this subject or if you believe any information in the above article is incorrect – please let me know by joining the forum or send email to info [at] debtprison [dot] net.

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

Related Articles

* Reasons not to file Bankruptcy or Settle Your Debts

* Restrictions on Wage Garnishment for Debt Collection.

How To Stop Bill Collectors From Harassing You

Debt Prison — Tue, 02 Dec 2008 03:45:37 +0000

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.

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When Can I Start Settling My Debts?

Debt Prison — Tue, 02 Dec 2008 01:18:43 +0000

A reader at How to settle your debts on your own wants to know when he should start trying to settle his unsecured debt. He also wants to know which one to settle first. Now bear in mind that you can’t miss a payment in October and expect to settle your debts in November or December. Credit card companies and collection agencies aren’t stupid! If you could afford a lump sum settlement that soon after having missed a payment…. then common sense will tell you that the debtor can afford to continue making the minimum payments.

My wife and I owe more or less $40,000 on our credit card debt and an unsecured loan. We plan to settle our debt on our own. We stopped paying our credit card bills two months ago and they immediately started calling and harassing us. Also, I lost my job so my wife is the only one working and we can’t afford to pay the minimum monthly payments. We’ve got a $25,000 unsecured loan and more or less $15,000 in credit card debt. I don’t know when will I start sending them letters and who’s the first one I will talk to and negotiate with. And I’m worried that if I don’t take action in the near future they will sell my account to a collection agency! Please help – thank you very much!!!!

Angelo

Hey Angelo,

First off it’s too early to even start discussing settlement with these guys. That’s because you need a cash lump sum to settle with the collectors. And if you could afford a lump sum you could afford the minimum payments. You’re gonna have to let this thing sit for at least a year most likely. Meanwhile you can just tell them that you’re broke for the time being and will make payments when you have money… but for now you’re living from check to check to eat.

Sometimes the original creditor will not settle the debt – they sell it off to a collection agency instead. If they sell or assign the debt to a collection agency then I suggest you exercise your rights under federal law and write them a Debt Validation Letter. This is just to insure that the collection agency is following correct procedures.

Now let me ask you this question…

Would you rather have to deal with this crap (collectors calling, judgments, wage garnishment) for the next three to ten years… or would you rather get a job (or two jobs) and work like crazy to pay this debt off in full. That’s about your only options…
Now if you can’t or are unable to work then the best thing to do is settle with these guys later on. But in the meantime you might want to change your phone number and deal with your collectors through the mail only. And then there’s always the possibility of getting a judgment slapped on you in civil court. Bear in mind the better record keeping you undertake the better off you will be. See also, How to deal with collection agencies.

Also, is there anything you could sell to help get you out of this jam? Can you sell your cars, your houses? Can you downsize to cheaper cars or cheaper houses? Can you move in with a relative and pay no rent? You and the wifey need to have a serious discussion and think of these types of questions.

If you do decide to settle I would use the ‘debt snowball’… starting with the smallest debt and working my way towards the largest. I’d initially try and settle for 50 cents on the dolllar with the debt of lowest balance. Bear in mind that I would try and settle based on what the balance is RIGHT NOW. Not what it will be in one or two years.

That’s because once the credit card companies and collection agencies get through tacking on their satanic onslaught of fees, penalties, and interest… these debts could easily double in balance before you’re ready to settle them. So what may be a credit card balance of $4,000 today… may be 8 or $10,000 in two years. I would inform them that I’ll settle for 50 cents on the dollar based on the original default amount… in this case I’d offer $2,000 for the initial defaulted debt of $4,000.

Good Luck and Happy Holidays!!!

Barry

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Restrictions on Wage Garnishment for Debt Collection

Debt Prison — Sun, 30 Nov 2008 16:13:23 +0000

Many debtors that have defaulted on their credit card debt or other unsecured loans are concerned about their wages being garnished. Often collection agencies will threaten to turn your debt over to their ‘legal department’, or take you to civil court to get a judgment, or garnish your wages. Well what can they really do and how much of your wages can they actually garnish? Relax… I found this very important information for you… at no charge.

The U.S. Department of Labor has developed The Federal Wage Garnishment Law, Consumer Credit Protection Act’s Title 3 (CCPA) - which defines how much of a person wages can be garnished by debt collectors via a judgment. The best way to overcome your defaulted debt is to gain knowledge. The more you know about what can happen in the ‘real world’ (not the world of phone calls with debt collectors and their often empty threats) the more likely you’ll be able to get out of debt, salvage your credit report, and get on with a happy life.

Here’s what you need to know from the above mentioned Act

What are the restrictions on wage garnishment?

The amount of pay subject to garnishment is based on an employee’s “disposable earnings,” which is the amount left after legally required deductions are made. Examples of such deductions include federal, state, and local taxes, the employee’s share of State Unemployment Insurance and Social Security. It also includes withholdings for employee retirement systems required by law.

Deductions not required by law—such as those for voluntary wage assignments, union dues, health and life insurance, contributions to charitable causes, purchases of savings bonds, retirement plan contributions (except those required by law) and payments to employers for payroll advances or purchases of merchandise—usually may not be subtracted from gross earnings when calculating disposable earnings under the CCPA.

The law sets the maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by the employer. For ordinary garnishments (i.e., those not for support, bankruptcy, or any state or federal tax), the weekly amount may not exceed the lesser of two figures: 25 percent of the employee’s disposable earnings, or the amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage (currently $6.55 an hour).

For illustration, if the pay period is weekly and disposable earnings are $196.50 ($6.55 × 30) or less, there can be no garnishment. If disposable earnings are more than $196.50 but less than $262.00 ($6.55 × 40), the amount above $196.50 can be garnished. A maximum of 25 percent can be garnished, if disposable income earnings are $262.00 or more. When pay periods cover more than one week, multiples of the weekly restrictions must be used to calculate the maximum amounts that may be garnished. The table and examples at the end of this fact sheet illustrate these amounts.

What about child support and alimony?

Specific restrictions apply to court orders for child support or alimony. The garnishment law allows up to 50 percent of a worker’s disposable earnings to be garnished for these purposes if the worker is supporting another spouse or child, or up to 60 percent if the worker is not. An additional 5 percent may be garnished for support payments more than l2 weeks in arrears.

Are there any exceptions to the law?

The wage garnishment law specifies that the garnishment restrictions do not apply to certain bankruptcy court orders, or to debts due for federal or state taxes.

If a state wage garnishment law differs from the CCPA, the law resulting in the smaller garnishment must be observed.

The world of defaulted debt is no different from any other aspect of our lives. The more information and truth you acquire on the subject… the sooner you’ll be able to escape from Debt Prison. If you are new to the world of defaulted debt please take the time to read my best articles listed below.

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