Debt Collection: Don’t Standby While You’re Being Sued

Posted on March 10, 2022 by The Debt Collector

It would seem that human instinct is to hide from collection agencies. We don’t answer the phone when they call and we fail to respond when they file suit against us. As natural as it seems, hiding from the problem is the worst way to deal with it. And quite honestly, responding to a lawsuit from a collection agency could be the fastest way to make it all go away. That’s because in many cases, collection agencies don’t have the right to sue you!

This is a problem the industry created for itself and I doubt anyone will feel sorry for them. Just the same, let’s take a look at how debt collection has grown in recent years and how all the selling and trading of debt from one company to another can actually benefit the consumer.

The Debt Business is Booming

The debt collection industry has grown tremendously over the last decade. In the late nineties, the debt purchasing industry was in the range of $10 billion. Today the debt purchasing industry has grown to more than $115 billion. Debts are typically sold or assigned to third party debt collectors when the original creditor feels the debt is no longer collectible. The original creditor is the party with whom the debtor receives an extension of credit or to whom the original debt is owed. These include credit card companies, banks, and mortgage companies, just to name a few. The original creditor sells the debt in portfolios or in bulk to third party collection agencies for around four cents on the dollar. The debt collection agency will then attempt to collect on the debt for the full amount allegedly owed to the original creditor.

The collection agency purchasing the debt generally acquires merely an electronic file containing the debtor’s name, account number, personal contact information, and any personal or professional references the collection agency may have utilized in their efforts to collect the debt.

However, what’s often not included in those files is essential information necessary to prove the debt is owed or providing the collection agency with “personal knowledge” of the account. This information is required by law in order to sue on the debt. Nonetheless, it is generally not purchased as part of the debt portfolio. This information includes, for example, the original contract, terms and conditions, account statements, charge slips, etc.

The more times the original debt is sold, the less likely the collection agency holds the documents necessary to file suit. Further, the more times a debt has been sold, the more likely errors have occurred. Most of the time the third party debt collector lacks personal knowledge necessary to sue on the account. In other words, without all that paperwork, they can’t sue you successfully. Which isn’t to say they can’t file suit – they can and sometimes do. But we’ll come to that shortly.

First, let’s consider the matter of statute of limitations. Collection suits are typically filed based on the legal theories of breach of contract or account stated. If the original signed contract and terms and conditions are signed, and the creditor or collection agency has possession of the contract (not likely), they have ten years from the date of charge-off (or default in, some cases) to file a collection suit. If the creditor or collection agency does not hold the original contract, they are filing the collection suit based on an account stated theory (majority of collection cases utilizing mostly billing statements to prove up the debt). A collection suit file based on an account stated theory must be filed within five years of the date of the charge-off or default.

What if They Sue Me Anyway?

Knowing all of this, some collection agencies won’t even attempt to sue the debtor because they don’t have the necessary information or the statute of limitations has passed. In fact, some collection agencies purchase old debt knowing it is passed the statute of limitation to sue and rely on aggressive collection tactics to scare you into paying the debt.

In those instances when collection agencies due file suit, they win an overwhelming majority of the time by default judgment. This means that the debtor failed to respond to the suit by filing an answer and appearing at the hearing. Sadly, many times these suits should not have been brought in the first place. Had the debtor merely responded, the creditor or collection agency would have been required to appear in court and present evidence that they properly owned the debt and that it is legal that they brought the suit. Or, the debt collection suit may have been dismissed for being filed passed the statute of limitations period.

Unfortunately, once a judgment is entered – even a default judgment – it is difficult to undo the damage. The creditor or collection agency will attempt to collect the judgment through wage garnishment, bank account levy, or other measures.

You Have Rights

What many consumers do not realize is that original creditors and third party collection agencies alike are required to conduct their debt collection practices within the regulations of the the Federal Fair Debt Collection Practices Act (FDCPA) and any state laws that apply. Keep in mind that collection agencies do not care about “customer service.” They are not attempting to hold onto you as a customer. The object is to collect on the debt in the most efficient, cost effective way possible.

Many times the debt collector’s business model does not involve being in compliance with the FDCPA because very few consumer protection attorneys file suits against creditors and collection agencies for violating consumer’s rights. In addition, it is unfortunately known that the penalties collection agencies face for failing to comply with the regulations are extremely low. Since the penalties are not severe, many collection agencies continue to utilize illegal collection practices including threat, coercion, and humiliation (contacting third parties). In other words, dealing with lawsuits is cheaper than making sure that the business is in compliance with the law.

I do cautiously state that not all creditors and collection agencies engage in illegal debt collection practices. It is my opinion, however, that companies that do operate legally are the minority in the industry. It is important to remember that, as a consumer, you have rights and you should require a creditor or collection agency prove it owns the debt and that you owe the debt.

If you think you are a victim of any type of illegal collection practice, you should seek the advice of a Iowa consumer protection attorney or contact your Attorney General’s office. A suit may be brought against a creditor or collection agency for even one debt collection violation. Many states even have laws that compel the creditor to pay your attorney fees and court costs if they are found to have violated your rights.

Sam Marks graduated from Drake Law School after completing undergraduate work at the University of Iowa. After passing the bar, he developed a general law practice that included work in criminal, family and juvenile law. As time passed, he began focusing specifically in the areas of bankruptcy and consumer protection.

Sam is frequently asked to provide lectures to attorneys, business professionals and the public on the topics of bankruptcy and consumer protection and how these issues affect other aspects of the law. He enjoys these presentations and the opportunity they provide to discuss current events the legal system.

Contact Sam through his website at MarksLawDM.com

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Understanding Re-Financing

Posted on March 1, 2022 by The Debt Collector

Understanding the process of re-financing can be quite dizzying. Homeowners who are considering re-financing might initially be overwhelmed by the number of options available to them.

However, after taking some time to educate themselves about the process, they will likely find the process is not nearly as daunting as they had imagined. This article will discuss some of the options available to those interested in re-financing as well as some of the important factors to consider in order to determine whether or not refinancing is worthwhile.

Consider the Options

Homeowners have quite a few options available to them when they are considering the possibility of re-financing their home. The most significant decision is the type of loan they will choose. Fixed rate mortgages and adjustable rate mortgages (ARMs) are the two main types of mortgages the homeowners will likely encounter. Additionally there are hybrid loan options available.

As the name implies, a fixed rate mortgage is one in which the interest rate remains constant throughout the duration of the loan period. This is an especially favorable type of loan when the homeowner has credit which is sufficient enough to lock in a low interest rate.

ARMs are mortgages where the interest rate varies during the course of the loan period. The interest rate is usually tied to an index such as the prime index and is subject to rises and falls in accordance with this index. This is considered a riskier type of loan and is therefore often offered to homeowners who have less favorable credit scores.

Although ARMs are considered somewhat risky there is usually a certain degree of protection written into the loan agreement. This may come in the form of a clause which limits the amount the interest rate can increase, in terms of percentage points, over a fixed period of time. This can protect the homeowner from sharp increases in the interest rates which would otherwise considerably raise the amount of their monthly payments.

Hybrid loans are mortgages which combine a fixed element with an adjustable element. An example of this type of loan is a situation where the lender may offer a fixed interest rate for the first five years of the loan and a variable interest rate for the remainder of the loan. Lenders typically offer a lower introductory interest rate for the fixed period to make the mortgage seem more enticing.

Consider the Closing Costs

The closing costs associated with re-financing should be carefully considered when deciding whether or not to re-finance the home. This is significant because when homeowners re-finance their home they are often subject to many of the same closing costs as when they originally purchased the home. These costs may include, but are not limited to appraisal fees, application fees, loan origination fees and a host of other expenses. These costs can be quite significant. The closing costs will be significant when the homeowner considers the overall savings associated with re-financing.

Consider the Overall Savings

When deciding whether or not to re-finance, the overall savings is one factor the homeowners should carefully consider. This is important because re-financing is typically not considered worthwhile unless it results in a financial savings. Although some homeowners refinance to lower monthly costs and are not concerned with the overall picture, most homeowners consider whether or not they will be saving money by refinancing.

The amount of money the homeowner will save when re-financing is largely dependent on the new interest rate in relation to the old interest rate. Other factors come into play such as the remaining balance of the existing loan as well as the amount of time the homeowner intends to stay in the home before selling the property. It is important to note that the amount of money saved by negotiating a lower interest rate is not equal to the entire savings. The homeowner must determine the closing costs associated with re-financing and subtract this sum from the potential savings. A negative number would indicate the new interest rate is not low enough to offset the closing costs. Conversely a positive number indicates an overall savings. With this information the homeowner can decide whether or not he wishes to re-finance.

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How To Get Out of Debt Without Losing Time and Money

Posted on March 1, 2022 by The Debt Collector

I don’t have to tell you that time is money. Compound interest is proof of that. When you’re serious about getting out of debt, some gurus would have you get ‘gazelle-like’ and use a snowball or avalanche to get out of debt. While you live on beans and rice like no one else, it’s ironically like the all the third world countries, interest is being added to your debts. The experts won’t put a time limit, but you should. Here’s why.

Life moves by quickly. That’s time. Financial goals need to be met like buying a car or a house, or saving for retirement. The time you take to get out of debt slows down your ability to meet other goals. The more money you spend getting out of debt slows down this process even further. What do you do when you’re stressed out and backed into a corner? You do everything you can to avoid the devastation of facing a possible bankruptcy because that would the be the worst thing ever, right? Read on.

Choices are the cornerstone of freedom we have in our country. That’s great news that you actually have choices when it comes to getting out of debt. First, we’ll explore each option. Then, we’ll look at the numbers using an example of what it would cost under each method. From there you can make a better choice of the option that is right for you.

A debt avalanche (also known as “debt stacking”) targets debts with the highest interest rates first. A debt snowball plan, in contrast, prioritizes your smallest debt first no matter the interest rate. Each time the smallest one is eliminated you move to the next smallest.

Alternately, consolidation is a new loan that rolls all the debt into the new loan. The average annual percentage rate (APR) on a consolidation loan is around 18.56%. To put that into perspective, the average range of interest rates charged on consolidation loans typically falls between 8.31% and 28.81%. Negotiating and settling debts for less than what is owed requires that you pay some of the debt and then pay taxes on the cancelled debt. The main problem with debt relief companies is the fact that they cannot stop lawsuits and it wreaks havoc on your credit report due to late and missed payments.

You can follow the gurus and use a snowball or avalanche method and repay your debts as you lose weight on beans and rice. Other options include consolidation and negotiated settlements, paying less that what you owe. Paying less than you owe does come with a tax bill for the cancelled. Each method has its pros and cons and affects credit availability. All the while interest continues to accrue, your credit score drops as you fall further behind and you may even get sued. What if you could find a way to repay your debts with all of these benefits rolled into one? Let’s look at the numbers.

Let’s use the example of someone who has a total of $30,000.00 spread over two accounts and a student loan. In addition, you are able to set aside an extra $200 toward debt payments after making the minimum payments on all three accounts. 15000

  • Credit Card A has a balance of $15,000, a starting minimum payment of $285, and an interest rate of 22.25%
  • Credit Card B has a balance of $8,400, a starting minimum payment of $150, and an interest rate of $18.85%
  • The student loan has a balance of $6,600, a monthly payment of $246, and an interest rate of 6.2%
  1. Avalanche will cost you $881 per month for 5 years paying a total of $44,528
  2. Snowball will cost you $936 per month for 4 years paying a total of $44,898
  3. Consolidation will cost you $552 per month for 10 years paying a total of $66,240
  4. Settlement will cost you $475 per month for 5 years paying a total of $28,500 including fees and taxes
  5. Chapter 13 will cost you $500 per month for 5 years paying a total of $35,000 including fees

Now that I’ve laid out the numbers, you can see that the least expensive ways to eliminate debt fall between negotiated debt settlement or a chapter 13 bankruptcy case payment plan. Even though debt settlement appears cheaper than bankruptcy, if a lawsuit is filed, the program will typically remove that debt from their program and leave you hanging. Also, if you’re looking to preserve or improve your credit score, this program is not right for you because the debt relief agency won’t make a payment on that debt until you have enough money in reserves for them to negotiate a lump sum settlement. So, even though it appears to be the cheaper way, it may not be the best way based on ruined credit score, tax consequences and you may still wind up dealing with debts on your own if you’re sued.

A 5-year payment plan in chapter 13 may be proposed to repay less than what you owe too, depending on the amount of assets you own and your income. So, the total amount you owe could be even less. Some of the benefits of chapter 13 include zero interest and no income tax consequences on the cancelled debt. Even better is the improvement to the credit score because bankruptcy protection means that you can’t be sued while paying debts through bankruptcy and since you’re making payments, you should see your credit score improve while you’re in repayment.Now that I’ve laid out the numbers, you can see that the least expensive ways to eliminate debt fall between negotiated debt settlement or a chapter 13 bankruptcy case payment plan. Even though debt settlement appears cheaper than bankruptcy, if a lawsuit is filed, the program will typically remove that debt from their program and leave you hanging. Also, if you’re looking to preserve or improve your credit score, this program is not right for you because the debt relief agency won’t make a payment on that debt until you have enough money in reserves for them to negotiate a lump sum settlement. So, even though it appears to be the cheaper way, it may not be the best way based on ruined credit score, tax consequences and you may still wind up dealing with debts on your own if you’re sued.

About Christine A. Kingston

Consumer protection and bankruptcy lawyer of Surf City Lawyers representing families facing financial difficulties, burdened by debts including taxes, student loans, credit cards, medical bills, law suits, fallen behind on home mortgage payments, or facing auto loans they can no longer afford. We stop wage garnishments and foreclosures dead in their tracks. The firm has helped clients eliminate $1.5 million in student loan debt and helped reduce principal mortgages through the bankruptcy process. The law firm is passionate about helping clients achieve financial freedom from their debts and fights oppressive debt collectors.

Call us Today to schedule your no obligation consultation: 714-533-9210 or visit their website http://www.surfcitylawyers.com

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A Few Secrets to Getting Out of Debt Quickly

Posted on March 1, 2022 by The Debt Collector

Are you looking at your pile of bills and wondering how you got so far into debt? Every case is different, yet we are all pretty much the same.

The answer is as simple, as consumers we have started to spend more than what we make for an income.

This is pretty easy to do, especially in the world we live in now. More than ever there is a need for things from vacations, to new entertainment gadgets, to even the unexpected emergencies. It is pretty difficult to go a day without spending money. Or even worse, without using credit cards.

Here are a few reasons that Americans are overspending. First of all, for some it is just an addiction. If they have the means, they want to spend it. One problem is that they have not created a budget, so there is mismanagement of monthly funds.

With the current state of our economy, some people’s income is taking a hit. Combine that with an increase in gas prices, groceries and any other living expense. Another situation that can financially hurt you is any change in your personal life. Either a divorce, loss of job, medical emergency or death can impact your life and spending habits.

Not to worry, whatever your reason is there is a way to get out of debt. This requires a commitment from you. It is possible to reach your goal. Let’s take a look at a few steps that will get you on your way.

First of all, you need to start with a plan and saving your money. With proper planning you can really get somewhere. This is your finances we are talking about here, don’t you want to be in charge and responsible? Start with a budget. What is coming in? And more importantly, what is going out? Where exactly is your money going, that is the key to a budget. Once you take a look at it, you can make smart adjustments and work with that plan.

Saving your money now, will only put you in a better standing when it comes time to retire. Five percent is a great amount to get started, but this will of course vary depending on your situation. Obviously, the average younger person is saving less.

It is OK to get some help. There is a market out there that is set up to help people who are in financial hardships. Just don’t put it off, once you have decided you would like to get the help. The longer you wait; you are just accumulating more interest and continually using credit cards to get by.

The next step is to stop your spending! If you are trying to get out of debt, but still spending money then you are going nowhere. Sometimes this can be a sign of a more serious problem. People are addicted to many things, shopping, gambling, drinking and there is professional help available.

Those who are addicted to spending their money are looking for the feeling that comes when they get something new. Believe me, I understand that. It is possible to break away from the need to spend all that you have.

Recognize now, that you might want to open up the lines of communication with your creditors. They are usually the people that you are trying to avoid, but that comes at a price. This is a huge mistake that people in debt make. It is a good idea to talk with them and explain the situation you are in.

If this seems too overwhelming, there are companies that can help. A debt settlement program will work on your behalf to negotiate what you owe the creditors. There are many reputable companies who can give you a free quote, online and in seconds. This is comforting to those looking for debt relief, because you can search the Internet on your own time.

Finally, you need to get out of debt denial. You know that your spending has created a situation, but that’s OK it is possible to get out of it. Start with the budget and go from there. Take control of your finances and most importantly, don’t let them control you. With a budget, a plan and a goal, you will be on your way to living a life that is free of debt.

Christina Costa, a freelance writer, recommends eQuoteGrabber.com for debt relief [http://www.equotegrabber.com/debt] where you can receive help with all of your personal debt settlement needs in seconds! Visit [http://www.eQuoteGrabber.com]

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