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Archive for the ‘collection agency’ tag

Forgotten Debts

April 22nd, 2019 at 7:00 am

What do you need to do, what efforts is worth taking, if there are debts you don’t have any records on or you’ve forgotten about?  

 

Several blog posts ago we introduced the law that debts “neither listed nor scheduled” risk not being forgiven in bankruptcy. Section 523(a)(3) of the Bankruptcy Code. This follows the bankruptcy principle that debts are forgiven—“discharged”—unless a debt fits within a specific exception. Debts “neither listed nor scheduled” is one of the exceptions.

Related to this exception to discharge we’ve recently looked at:

  • how to add a debt after filing your case that you didn’t originally list, and your timing for doing so
  • an exception to this discharge exception, that is, your unlisted creditor’s debt still being discharged if it still finds out about your case, and does so on time
  • debts sold or assigned to collection agencies

This leaves one last question for today about unlisted debts:

What do you do if you don’t know all of your debts because you’ve moved or lost track of them for any other reason?

This practical question gives us the opportunity to apply the principles we’ve been digging into these last few blog posts.

The Potential Consequences of Not Listing Debts

Start with the assumption that you will continue to owe any debt you don’t include in your bankruptcy debt schedules. Obviously, filing any kind of bankruptcy is a big deal. The discharge of debts is a legal right, but one that you can exercise very seldom. Hopefully it’s something you’ll only need once in your life. You want to do it right.

Chapter 7 “straight bankruptcy” generally takes about 4 months from start to finish. It costs pretty much the same in fees and damage to your credit whether you include all your creditors or miss one or two. You vastly increase its effective cost if afterwards you continue owing a debt or two that you could have discharged. Plus, instead of getting the peace of mind of a full fresh start, you’d be saddled with potentially avoidable debt.

Chapter 13 “adjustment of debts” involves a payment plan lumping together all your debts. Most unsecured creditors have to share out of a pool of money based on what you can afford to pay. That is often a small percent of what you owe, perhaps even 0%.  If you neglect to list a debt in your schedules, it can’t participate in your plan. So, instead of paying that debt the same percentage that you’re paying others, you’d have to pay it in full. Since all your money is earmarked for your other creditors, you’d have nothing to pay the unlisted creditor. So when it forced you to pay—such as by garnishing your paychecks—that would disable your Chapter 13 plan. Frankly, that would be a mess.

So, of Course, Do All You Can to Know and List All Your Debts

We don’t want to scare but rather to motivate you. It’s worth the effort to figure out who you owe and to find their accurate addresses.

One obvious place to start is with a credit report. Talk with your bankruptcy lawyer about getting free ones from all three of the major consumer credit agencies.

But it’s very important to know that a credit report is NOT necessarily a complete list of your debts. For some people it might be. But for others their credit reports would be woefully incomplete. Financial institutions and major consumer creditors will quite reliably be on your credit reports. But medical providers and various other kinds of creditors—not so much.

It IS worth sifting through ALL of your paper and computer files (and piles!) to find any other debts. Scour through your memory about possible obligations you haven’t thought about lately. Think about old unpaid landlords and utilities, possible bounced checks, or unpaid personal loans from friends or family.

Possible Claims, Ambiguous Amounts

Consider situations where you may or may not owe anything. Are there any old or more recent unresolved vehicle accidents? Might you have caused personal or property damages to some person or business? Are there any unusual possible claims against you, for defamation, embezzlement or other misuse of funds or of trust? Could there be any claims come out of an old or not so old divorce, non-marital relationship, any family fight, or the closing of a business? Are there any almost forgotten threats against you to pay for anything whatsoever?

Bring any of this stuff up with your bankruptcy lawyer, preferably at your first meeting. Some situations may genuinely not warrant including as a possible debt. Your lawyer is the person who knows how to protect you, and to guide you through the tough judgment calls. You need to ask the questions so that he or she can give you the right advice.

Debt Amounts

 It’s generally not that important to know how much you owe—a sensible estimate is often good enough. But again talk with your lawyer, because sometimes—depending on the type of debt—the amount is important.

Collection Agencies

If you know the original creditor but not a subsequent collection agency, start by listing the original creditor. It may well pass on your bankruptcy filing information to the collector (although you can’t count on this). Also, the original creditor may actually still owe the debt. The collector may have only a temporary collection agreement.

You still do want to list any and all collectors on an account. That’s because it’s hard to know who owns the debt. That may take not just looking through all your papers but also doing internet research and making phone calls. Your bankruptcy lawyer and his or her staff will be your guide.  

Very Old Debts

Most debts can get old enough that the creditors can no longer collect on them. Most states have statutes of limitations on the collection of debts.

But those laws are often complicated, with different lengths of time for different kinds of debts. There are different triggers that start the time running, and other events that can suspend (“toll”) the time from running. The time limit can sometimes be extended simply by you being out of state or hiding from collection.

Even if a statute of limitation arguably applies you’d rather not have to defend a collections lawsuit on this basis.

Talk with your bankruptcy lawyer about what to do to best protect your from old and very old debts.

 

Debts Sold or Assigned to Collection Agencies

April 15th, 2019 at 7:00 am

What happens if you list a creditor in your bankruptcy case but, unknown to you, it sold the debt to a collection agency that you don’t list? 

 

Our blog post two weeks ago was about needing to list all your debts in a bankruptcy case in order to write them off. This is part of a series of blog posts about debts that may not get discharged (written off) in bankruptcy. The law says that bankruptcy does not discharge debts that are “neither listed nor scheduled” in the bankruptcy documents. Section 523(a)(3) of the Bankruptcy Code.

Special Scenarios

This raises some practical questions, including the following:

  1. Is a debt covered if you don’t list it but the creditor still learns about your bankruptcy case?
  2. What happens if you list the creditor but it had previously sold the debt to a collection agency?
  3. What do you do if you don’t know all of your debts because you’ve moved or lost track of them for some other reason?

We addressed the first of these last week, and discuss the second one today.

Debts Listed but Sold to Collection Agency

So you list the creditor on your bankruptcy schedules but after filing learn it sold the debt to another entity. Let’s assume you know the name and address of the new creditor or collection agency.

Debts Sold Before Your Bankruptcy Filing

Let’s start with the situation that the debt was sold to the new entity before you filed the bankruptcy case. You only find out about it after your filing. You either receive a new notice about it or dig up an older one you hadn’t found earlier.  What should you do?

There’s a decent chance that when the creditor you listed gets the bankruptcy notice it will forward it to the new owner of the debt. That would seem to be the sensible and business-like thing for it to do. Then the new owner would learn about your case even without being listed on your bankruptcy schedules. It would be covered by your bankruptcy case and the debt would likely get discharged. (See our last blog post about the creditor’s “actual knowledge” exception.)

Three Problems

There are three problems with this.

First, the listed creditor may simply not bother to pass on your bankruptcy notice to the new debt holder. The creditor no longer has any interest in the debt. It doesn’t owe you any favors. Why shouldn’t it just throw away the bankruptcy notice, and not inform the new debt holder? Then this new debt holder—the creditor you actually owe—may well never find out about your bankruptcy. You could easily continue owing the debt. It’s not safe to rely on the listed creditor to tell the new debt holder. It’s way too risky.

Second, even if the listed creditor does pass on the bankruptcy notice the new debt holder may not receive it. Or that debt holder may simply say it never received it. Good luck getting proof that it did. Collection agencies sometimes attempt to collect debts (purposely or inadvertently) that a bankruptcy has legally discharged. Without proof that the collection agency received notice of your bankruptcy filing you may still owe the debt. At the very least you’d have a much harder time getting them to stop trying to collect on the debt.

Third, even if the new debt holder does receive notice about your bankruptcy filing, it may not happen fast enough. You have no control when your listed creditor would get around to passing on information about your filing. There would be some delay between the time the creditor receives the bankruptcy notice and when it forwards it. In some situations the timing when the new debt holder receives the bankruptcy information is crucial. See our last blog post for a discussion about this timing issue.

Formally Adding Creditors to Your Schedules After Filing

So instead of relying on your listed creditor to inform the new debt holder it’s better to take the initiative.

First, you can formally add the new debt holder to your bankruptcy schedules, after your original filing. Your lawyer does this through an “amended schedule.” This is generally the safest option. Here’s one local bankruptcy court’s information about this procedure.

You do have to pay a modest additional filing fee (currently $31—see item #4 in the court fee schedule).  Plus your lawyer might charge you for the extra service (although not necessarily).  

Another option may be to contact the debt holder—either yourself or your lawyer—without using an “amended schedule.” This contact may fulfil the requirements of the “actual knowledge” exception. What’s critical is to have appropriate evidence of this contact in case you need proof of it later. There may be timing considerations. Also, you may be required to use an “amended schedule” based on local bankruptcy rules.

 Don’t decide this on your own. Talk with your bankruptcy lawyer for advice about resolving the situation the safest and most cost-effective way.

Debts Sold After Your Bankruptcy Filing

Creditors should not sell or assign your debt after they get notice of your bankruptcy case. At least they shouldn’t without informing the new debt holder about your bankruptcy case.

But sometimes they do sell the debt after getting notice about your bankruptcy case, whether intentionally or out of carelessness. Then the discussion above applies. If your bankruptcy case is still active, your lawyer should probably file an “amended schedule” adding the new debt holder.

The creditor’s sale or assignment of the debt can also occur between the time you file bankruptcy and the time the creditor receives notice of it. It may sell or assign the debt after you file bankruptcy but before it knows about your filing.

Again, the discussion above applies. You could hope that when this creditor gets notice of your bankruptcy filing it will inform the new debt owner. There’s a decent chance that it would do so, since the sale had just happened. Its file on you may still be open or would have just been closed a short time earlier. But again, your listed creditor may still not bother to inform the new debt holder. So, talk with your bankruptcy lawyer as soon as you find out about new debt holder. Remember that timing can be extremely important. In most situations filing an “amended schedule to add the new debt holder is the appropriate solution.

 

Preventing a Judgment Lien against Your Home

June 1st, 2016 at 7:00 am

Letting a creditor get a judgment against you is dangerous, for a lot of reasons. One of the biggest dangers is a judgment lien on your home.  

 

 We just finished a series of 4 blog posts about income tax liens. The first one was about how much better things can be for you if you prevent a tax lien from being recorded against your home by filing a bankruptcy case before that happens.

It’s a similar situation with creditor judgments and the judgment liens they create against your home. You can prevent them from happening and can really help yourself if you do so.

Creditor Judgments Happen Quickly

Let’s get really practical. It’s all too easy to get a judgment against you and a judgment lien against your home.

If you get behind on payments to a creditor, that creditor usually has a right to sue you pretty much right away. Some creditors do. But often they don’t, instead sending your account to a collection agency. And then it’s often sent to a second or third collector until it’s hard to keep track of who is collecting for what. Then when you’re not expecting it—sometimes even years later—you get a lawsuit in the mail or handed to you by a process server.

Then you have only a few days or at most a few weeks to act. The papers you get say you are being sued and that you need to pay the entire balance. You likely don’t have the money being demanded, or any way to get that money. You probably believe that you owe the money anyway so it seems pointless to dispute the lawsuit. Certainly doesn’t seem to make sense to find and pay a lawyer to fight the lawsuit. And it just feels like too much hassle to write up any kind of response to the lawsuit or to respond in any other way.

So when you don’t do anything by the deadline, a “default judgment” is entered against you. That means that essentially the creditor gets what it asked for—for the court to formally confirm that you owe the debt, along with whatever extra charges are requested by the creditor.

You may well not even know that a judgment has been entered against you because often you’re not told.

Collection after Judgment Entered

A judgment is much more than just confirmation that you owe the money that the creditor says you owe. It empowers the creditor to use a list of tools to force you to pay that debt, which is often much, much bigger than you thought because of all the additional charges and fees.

Those creditor tools include actions against you, your income, and your assets. Examples are garnishment of your wages and bank accounts, possible levies on other personal property such as your vehicle, and being ordered to personally go to court to answer questions about your income and assets.

The Judgment Lien on Your Home

A less well known but sometimes even more dangerous creditor tool is the judgment lien. A judgment lien in effect involuntarily turns what you own into collateral securing the judgment amount.

In some states the lien happens automatically upon the court’s entry of the judgment. In other states the creditor has to take the extra step of recording the judgment with the appropriate county or state entity.

In some states a judgment lien applies to both your personal property and your real estate. (“Personal property” is everything you own that isn’t real estate.)  Understandably a judgment lien on your home is the scariest.

Foreclosing on Your Home with a Judgment Lien

Depending on your state’s laws, the amount of the judgment, the amount of equity, and other factors, a judgment lien could result in the forced sale of your home by the creditor to pay the judgment amount.

But not necessarily. In some states your home can’t be sold at all or only if the judgment amount exceeds a certain minimum.

But even if your home isn’t sold by the creditor to pay off the judgment lien, the lien would usually have to be paid off if you ever wanted to sell or refinance your home.

This could jeopardize the sale or refinance altogether—because you thought you had a certain amount of equity in your home but find out that you had less as a result of the judgment lien.

Plus a judgment lien is terrible on your credit score. And it lasts for a long time—usually 7 to 10 years—and usually can be renewed for at least one more such length of time.

Stop a Judgment Lien from Hitting Your Home

If you are sued by a creditor, file a bankruptcy case before your deadline to respond to stop a judgment from being entered. Then the creditor won’t get a judgment lien on your home.

Or at least no judgment can be entered without the bankruptcy court’s permission. Usually the court won’t give permission. That’s especially so if the underlying debt is one that will be discharged—legally written off—in the bankruptcy case.

After that the debt is gone and the creditor can take no further action against you or your property.

Conclusion

By filing bankruptcy you usually avoid having to pay any or at least most of the underlying debt. You avoid having a judgment lien imposed on your home. You avoid having to deal with a judgment lien as you try to sell or refinance the home. And you avoid the risk of losing your home to foreclosure of the judgment lien.

Don’t let a creditor get a judgment against you. See a lawyer to find out about bankruptcy, and then, if appropriate, file a bankruptcy case before a judgment lien can be imposed on your home.

 

Tips for Dealing with Debt Collectors

April 24th, 2015 at 9:53 am

Texas bankruptcy attorney, overdue bills, Texas chapter 7 lawyer, As anyone with experience can relate, debt collectors can make life stressful. The sound of a ringing phone is enough to cause anxiety, and although some collectors may be easier to work with, their persistent efforts can feel overwhelming.

Many debtors are surprised to find out that there may be several options available to help them climb out of debt. Some of these can stop the actions of collections agencies almost immediately. In the meantime, here are three tips for dealing with collector calls:

Answer the Phone

According to Creditcards.com, one of the most important steps when dealing with debt collectors is to be responsible and answer the phone. It is equally important to respond to any written notices. Even if the debt seems like it is not yours, do not let it stagnate. Ignoring calls and attempts to contact you can hurt your ability to work out a payment arrangement.

Note the Details of Each Call

There are several laws governing what collection agencies can and cannot do. It is important to take notes about each call just in case the collector is breaking the law. While on the phone, you should jot down:

  • The name of the collection agency;
  • The name of the agent you spoke with;
  • What time of day he or she called you;
  • The total balance owed;
  • Payment dates;
  • Any threatening or abusive language; and
  • Contact information.

If a collection agency has knowingly violated consumer laws, it may be required to pay you money. The only way to prove inexcusable activities, however, is to keep proper records of each conversation and transaction.

Do Not Agree to Payments You Cannot Make

The offer of scheduling a payment just to stop the calls seems tempting — even if you are not sure you can afford it. However, you should not make empty promises with debt collectors. Your credit report may show missed payments. It is better to ask the collector to call you another time when you have reviewed your finances fully and can schedule a realistic payment.

If you would like to end creditor harassment or inquire about other debt relief strategies including bankruptcy, contact an experienced San Antonio bankruptcy attorney. Call the Law Offices of Chance M. McGhee at 210-342-3400 for a free initial consultation.

Call today for a FREE Consultation

210-342-3400

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