A recent reader at Sample Debt Validation Letter questioned as to whether or not requesting debt validation would prevent a collection agency from pursuing a judgment. Since his debts were nearly past the Statute of Limitations he was hoping to prevent payment and a possible appearance in civil court.  Debt validation often works on Junk Debt Buyers.  Junk Debt Buyers (Debt Acquisition) often buy packages of defaulted debt from an original creditor or another collection agency. Therefore as this debt is passed from collector to collector, some crucial details regarding your debt may become lost through the various transfer of hands.

If you need immediate advice on bankruptcy or debt settlement, then please call 877-231-4384. This is a toll-free number. A representative will help evaluate your financial problems for free and can even connect you with a local attorney. You can also fill out our free bankruptcy evaluation form by clicking here.

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.

Some collection agencies have no legal representation in your state. The smaller the collection agency the more likely they will not have legal representation. If their office is located inside your state then obviously they have legal representation. However, if the collection company has no legal representation in your state, they won’t bother suing you in civil court. They will not attempt a judgment. The only circumstance that may cause them to attempt to file suit, would be if they acquired knowledge that you, the debtor, has access to monies or assets which they could acquire. And the monies and assets are significant enough to warrant their time and expense.

Dear Debt Prison,

Let me start by saying thank you for the website. It was extremely insightful and I had no clue that there were so many rights afforded to consumers, especially those who had gone through hard times. To make a long story short, I have received a letter from a collection agency, (Nelson, Watson and Associates, LLC) who claim to represent Palisades Acquisition. I checked my credit report and Palisades is on there and dinging my report.  However, there is no mention of the other collection agency anywhere and the amounts are vastly different (hundreds of dollars).

I won’t lie about it this was my fault. About 2 to 3 years ago, after being laid off, I went to a free counseling service. They very subtly told me to get my student loans and such paid current as I would never get out of it. However, they advised to let the smaller balances go to see if they would be written off (not morally right, I just didn’t have it). I was told to get a pre paid credit card that reported to the Credit Bureaus. They helped me plan a budget and told me in time the smaller balances might drop off. It would still affect my credit, but in time I could rebuild. I did everything they asked and things are improving, and my credit score is going up, very slowly but is improving.

I found your website and am very curious about the Debt Validation process and what the success rate is, if any. Also, if there are any negative repercussions that can come from this. In theory it sounds correct, however, I am a newbie at the collection game and am a little gun-shy. This account is also approaching the SOL for the state of Texas, where I live and while I know this was wrong I want it to go away. I am frustrated because things are finally starting to look up and here I am hit up again for money that is almost past the statue of limitations.

If I may I have a couple of quick questions….. I checked my credit report last night and Nelson, Watson and Associates are not on it anywhere, however, Palisades Acquisition is….. but Palisades Acquisition is not the original lender, it was originally XXXXX XXXX. In essence it appears to have changed hands three times. I feel that I have two decisions, I can attempt to settle, however, like you said, it starts the SOL clock all over and I am about three months away from paying one of my student loans off and maybe a DV could stall them until then, and then I could take that money and apply it towards the new bill…. I thought about what you said about the appearance of looking undesirable to them. I really don’t own much, but I do have a decent job and I don’t want my wages garnished. Any thoughts you wanted to throw my way would be appreciated. Thank you again and good luck towards your own endeavors to get debt free. You’re an inspiration to all of us in prison block D (debt)…. Can you believe all this trouble is over a $600.00 tab I racked up a few years ago?

Best Regards, Terry

Debt Prison response….

Debt validation is often used to get rid of junk debt buyers.  JDB’s are agencies that often buy debt past the SOL or was absolved by bankruptcy.  Since a lot of people don’t know what their rights are… many just pay up when they shouldn’t… and that’s how the JDB s make their money.  Or maybe you never heard anything about this debt before and you want to know exactly from where and when it originated.  Many consumers who take the time to research and write a debt validation letter (those who know their rights) end up never hearing from the agencies again (though the agency may sell the debt to another CA).

Debt validation is used to insure that the CA actually obtained the legal right to collect the debt from the original creditor.  It should also be clear how much is owed and the dates of default etc etc… In your case the CA probably has the right and can produce such paperwork.  You have the right to ask them to validate in which case they’ll send a letter stating that you owe certain creditor x amount of dollars.  Likely this is what they’ve already done with the first letter you received.  Debt validation won’t get rid of a legitimate collector with good paperwork and a SOL on their side.  And remember that any response from you – admitting you owe the debt or are willing to make payments – resets the clock on the SOL, which in TX is 4 years on a contract.

You could choose to ignore the letters in which case the CA may seek a civil judgment against you.  If you receive a summons for court you can go show up and dispute any part of the amount you feel like is questionable. If you are looking to prevent the CA from pursuing and want to stall them you could try a simple debt validation letter like this one only if the original letter didn’t already answer these questions.

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

This is a basic DV letter and the original letter may have provided this info.  If you are hoping to stall a civil court date I doubt such a letter alone would prevent them from filing.  One thing that might keep them from filing suit is if they believe it would be a waste of their time.  If they believe.. that even with a judgment against you it would be difficult to collect the debt… they may not bother suing you.

I’m not giving legal advice, but rather my opinion. I forget to throw that in sometimes.. not that it’s necessary but in the world we live in today it seems you can get sued for anything.

Yes it sounds like the Watson Assoc group works debt collection. And PA is a collection agency with a heck of a fancy name… Yes I would request validation of the debt immediately. Now likely this company has gotten these letters before and is expecting it. I would request validation by sending a registered letter (keep a copy of the letter for your records). I would use a simple letter like the one I emailed you before. You just want to make sure that PA has the legal right to collect this debt and that their paperwork is in order. Also, I would contact the original creditor and ask them if they sold the debt to PA.

Now you stated that the original amount was $600. You can dispute any amount above the $600 if you feel it is unfair or not legitimate. You can dispute any part of their claim you’d like and even your credit report. For example, if the original amount was $600, but now its $1500 due to interest and fees… well I’d inform them (if they validate) that I am willing to pay $600 through monthly payments (or lump sum if you could afford it) and nothing more. If they won’t agree to your terms you can just ignore them. If they pursue civil action, that would be another opportunity for you to lower the amount by persuading the judge that some of the balance is not legitimate. “Hey your honor… this debt was originally $600 and now its $1500… this isn’t right” You could explain about your struggle with debt and how you had to make hard choices and couldn’t pay all your debts back at once. As a result you’ve been focused on paying one back at a time. Meanwhile the creditors and collectors ran up your balance with interest and fees. Any paperwork you have would be helpful.

Just bear in mind that civil action is not the end of the world, but may be another opportunity to lower the amount you repay. Also, if the amount is $1500 they may not even pursue a civil suit because of the time and expense involved. So you can further delay payment (possibly) if you dispute any part of their claim. Also, if the law firm seems hell bent on going to civil court.. you could write a letter to them explaining your desire to cooperate if only they’d come around and agree to your terms. You could tell them that their terms are unjust and unfair, and that if they’d agree to dismiss the part of the debt you feel isn’t fair… you’d glad begin payment on the debt.

However, agreeing to repay the debt under any circumstances is a last resort just prior to civil court. And if you do write such letters make copies, send registered mail, and make sure you show these to the judge so that it appears that were trying to satisfy this debt but the CA’s are unreasonable.

Protect your family — let a bankruptcy lawyer help you explore whether Chapter 7 bankruptcy or Chapter 13 bankruptcy will offer you the most financial clarity. The first step to financial renewal is completing this free evaluation form.

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* The Fair Debt Collection Practices Act

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* How to settle your debts on your own

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* Sample Debt Validation Letter

Reverse Mortgages are, in my opinion, a last resort for homeowners age 62 or older.  If an agency is offering to help you find a reverse mortgage lender for a ‘small percentage’ of the loan then just stop talking to these people.  HUD provides this information without cost, just call 1-800-569-4287 for the name and location of a HUD approved housing counseling agency in your area.  Also, if you are being urged to take out a reverse mortgage to obtain a deferred annuity then stop talking to these people as well.  Deferred annuities are a bad idea for most seniors because they can restrict access to retirement savings well beyond one’s life expectancy.  You can also receive free information about reverse mortgages by contacting AARP at 1-800-209-8085.  Considering that 45% of reverse mortgage borrowers are single women, getting the right advice from objective parties is critical to honest information.  Please do your research and closely analyze the pros and the cons before making a decision about a reverse mortgage.

The problem here is that there are vast seas of people in various industries (and possibly family members) who would love nothing more than to get their hands on your hard earned money.  A financial decision involving hundreds of thousands of dollars and probably the loss of your home should be made with caution.  So let’s take our time, do our homework, so that we can make an informed decision.  Separating the good information from the bad can be difficult because of all the people trying to get their hands on your money.

If you need immediate advice on bankruptcy or debt settlement, then please call 877-231-4384. This is a toll-free number. A representative will help evaluate your financial problems for free and can even connect you with a local attorney. You can also fill out our free bankruptcy evaluation form by clicking here.

A reverse mortgage should only be considered if your income is such that you cannot pay your bills and you plan on living in your home until your death.  You are willing to tap the equity in your home using a reverse mortgage – but only with the complete understanding that your home will likely be sold at the time of your death by the lender – or by a family member selling the home to repay the?reverse mortgage.

What is a reverse mortgage?

From the AARP website “A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash.”  Let’s put this into practice.  Your home’s market value is $250,000 and you only owe $100,000.  This leaves you $150,000 of equity that could possibly be tapped using a reverse mortgage. Let’s say your current house note is $900 per month.  A reverse mortgage could approve a $100,000 loan and supply this in $900 per month increments to you.  You could then use this $900 per month payment from the reverse mortgage to pay your house note.

This is how the commercials for a reverse mortgage can say things like “eliminate your house note,”  or “a reverse mortgage will get rid of your house note and provide you with cash for any use you see fit.”  While all of this is true these commercials fail to mention the “Cost” of this reverse mortgage.  You didn’t actually think they were just going to give you the money with no future financial obligation on your part?

These reverse mortgage loans often have very high fees (more on this later) and interest continues to be added over the life of the loan until it is repaid or you die and your estate has to reconcile the debt against your home.

The good things about a reverse mortgage

The reverse mortgage loan is a mortgage against your house which is paid by a lump sum, monthly payments, or a line of credit – usually some combination of these three. Your qualification for the loan is not dependent on your income or credit rating. Only the value of the home versus equity is considered.  The reverse mortgage does not have to be repaid until you die or move out and you get to remain in your home (keeping the title).  The lender cannot come after your other assets such as other properties or investments, the loan only applies to the house.

The bad things about a reverse mortgage

From consumerlaw.org (you should click on this link) “Reverse mortgages are high-cost loans.  Origination fees and insurance premiums typically eat up $25,000 or more of the total proceeds of a common reverse mortgage on a $250,000 house….Interest charges, which pile up over the life of the loan get added on top of that.”

If you take out a reverse mortgage and then later on decide to move you could be left with less cash than if you had simply sold the home in the first place without acquiring a reverse mortgage.

If you are not in love with your current home perhaps you could just sell it instead.  If you were left with $100,000 cash after the sale, could you move into an apartment instead and just keep the cash on savings?  At a rent of $700 per month that much money would last you about eleven years if applied only to rent.  As you can see there are many options to consider.

**Remember do not take out a reverse mortgage to buy other financial investments.  The fees and interest of the reverse mortgage kill any profit you may earn from investing. Also, it’s true that a reverse mortgage allows you to pass the home on to your heirs – but keep in mind that the price tag of the mortgage will still be attached to it.  What good is passing on a home to heirs with an $110,000 debt unless your estate has enough assets to cover this debt, leaving your heirs with the likely choice of renting out the home or selling it altogether?

This brings me back to my original statement.  Don’t take out a reverse mortgage unless you are cash poor, need money for monthly bills, and you are not bothered by the idea of your home being sold at the time of your death.

The USA Today has an article describing how reverse mortgages could be unwise, especially in early retirement.  In the article they interviewed Ernestine Boach age 62, who had taken out a reverse mortgage to buy deferred annuities since a financial adviser told her it would be a “wonderful deal for me.”?  To keep her home Ernestine ended up taking out a loan in the amount of $140,000 to pay off the reverse mortgage so she could keep the house in the family in the event of her death.

“I was naive,” she says “I still am.  I don’t understand all these policies.  But I hope this story helps someone else.”  Indeed, that makes two of us.

Protect your family — let a bankruptcy lawyer help you explore whether Chapter 7 bankruptcy or Chapter 13 bankruptcy will offer you the most financial clarity. The first step to financial renewal is completing this free evaluation form.

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