Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

Debt relief ads seem to be everywhere: on television, on the radio, and in newspapers and magazines.  These companies use different terms to describe their services like counseling, consolidation, negotiation, mediation, settlement, reduction, relief, elimination, and so many others.  They all make promises – some more bold than others.  A few of these companies are legitimate.  I want to discuss the majority of these companies that are not legitimate and how to identify debt relief scams.

There are several simple warning signs to identify debt relief scams.  One warning sign is when the company requires a large up-front fee.  The company may even disguise that fee by calling it a “first payment.” Many consumers are surprised when that “first payment” is paid to the debt company and not paid to creditors.  That can also result in a thirty day delinquency on a credit report – just the kind of damage the consumer was trying to avoid!

Another warning sign is if the company makes promises that your credit score will not be affected by their program.  The truth is that there is not a legitimate debt relief program available that can guarantee that your credit report will not be adversely affected.  Any time a debt is not paid according to the terms of the original contract, the creditor is entitled to report adversely.  The creditor may fail to report, or may agree to not report at all, but there is no way to prevent a creditor from reporting truthful information to a credit bureau.

Finally, if the company claims that it can protect you from lawsuits or creditor harassment, run away!  The Fair Debt Collections Practices Act (FDCPA) provides that third party collectors (e.g. collection agencies) cannot contact a debtor directly once an attorney is representing the debtor.  However, the FDCPA does not apply to original creditors (e.g. a credit card company), and it does not apply to non-attorney debt relief companies.  If your creditor wants to sue you over a delinquent debt, only a bankruptcy filing can prevent it.  Additionally, the debt relief company cannot represent you in court – only a licensed attorney can do that!

You can protect yourself from these scams by consulting an attorney.  Only an attorney can explain your legal rights and help you choose the best course of action to resolve your debt problems.  For more information on how to protect yourself contact Fears | Nachawati toll free at 1.866.705-7584 or by e-mailing info@fnlawfirm.com. 

A recent survey by the Consumer Federation of America found that debt collection issues are the fastest growing category of consumer complaints.  The survey polled 34 state, county and city consumer agencies in 19 states and uncovered many abusive debt collection practices.  The complete report, including proposals for consumer protection laws and tips for consumers to protect themselves, is available at the Consumer Federation of America web site, www.consumerfed.org.

The results of this survey are not surprising to many bankruptcy attorneys.  People in debt can face a multitude of unethical practices employed by debt collectors.  Fortunately, there are some consumer protections that are available.  One of the most important consumer protections is the federal Fair Debt Collections Practices Act (FDCPA).  This law restricts third party debt collectors from employing abusive or unethical practices when collecting a personal, family, or household debt.  The law restricts these collectors from:

*  Contacting a third party who does not owe the debt;

*  Making a false threat of civil or criminal legal action;

*  Making repeated telephone calls or calls at unreasonable times (before 8:00 AM or after 9:00 PM); or

*  Making phone calls to an inconvenient place (e.g. contacting you at work in violation of your employer's policy).

Under the FDCPA the collector must state that the communication is from a debt collector and that any information obtained may be used to collect the debt.  Additionally, the debt collector must provide certain information concerning the debt, including:

*  The amount of the debt;

*  The name of the creditor (and original creditor);

*  That the debt will be assumed valid unless you dispute the debt within thirty days; and

*  That if you dispute the debt, the debt collector must provide verification of the debt.

One of the most beneficial aspects of the FDCPA is that once you are represented by an attorney, the debt collector can no longer contact you directly.  All communication must be made to the attorney.  That means that once you employ bankruptcy counsel, you should no longer be called at home or at work by third party debt collectors.

A violation of the FDCPA is a serious matter and may be litigated in federal or state court.  If you are being hounded by creditors, investigate your legal rights.  An experienced bankruptcy attorney can explain your legal rights and help you choose the best course of action.  Contact bankruptcy law firm, Fears | Nachawati, for a free consultation at toll free 1.866.705.7584 or via e-mail at info@fnlawfirm.com. 

If a debt collector is harassing you over a debt that you thought was dead and buried, you may be dealing with a zombie debt.  The usual scenario is an unexpected phone call or letter asking for payment on a debt that is either outside the statute of limitations or is in some other way legally uncollectible (e.g. discharged in bankruptcy).  The collector may even offer a “special deal” like a 75% discount for immediate payment.  What the collector will not reveal is that the debt is legally uncollectible – meaning it is unenforceable in a court of law.

Zombie debt collection is big business.  Zombie debt collectors buy old debts for pennies on the dollar, then try to collect as much as possible.  If the zombie debt collector buys an old $1,000 credit card debt for $20, and one phone call settles the debt for $100, the zombie debt collector makes a nice profit.  Since the debt is not legally enforceable, guilt and scare tactics are all the collector has to coerce payment.

Some zombie debt collectors actually violate the law by attempting to collect.  For instance, trying to collect a debt that was discharged in bankruptcy is a serious violation of the federal court discharge injunction.  Threatening a lawsuit for a debt that is past the statute of limitations is a violation of the federal Fair Debt Collections Practices Act (FDCPA).  Zombie collectors not only rely on ignorance of the law, they thrive on it!

Some individuals want to pay these debts.  While admirable in intention, the result may be extremely harmful.  Unpaid debts that have dropped off a credit report may be reported for another seven years after the payment date.  That dead and gone debt may reappear as an entirely new (and legal) negative item on your credit report – and substantially harm your credit score.

So what should you do if you encounter a zombie debt collector?

·                    Know your rights!  Your attorney can explain the statute of limitations or other legal restriction to the collection of an old debt.

·                    Do not give any personal information to a zombie debt collector.  Nothing good can result.

·                    Do not make a payment on an old debt until you learn your rights.  What may seem like an honest act of payment on an old debt may turn into a nightmare on your credit report.

Remember, zombie debt collectors are the bottom feeders of the collection industry.  They have been known to employ the worst ethical practices to obtain payment.  Don’t be haunted by zombie debts.  Contact bankruptcy firm Fears | Nachawati for a free consultation by calling 1.866.705.7584 or by e-mailing info@fnlawfirm.com and chase them back to the grave!