Unsecured Debt and Default

Unsecured debts

Most debts are unsecured, that is, there is no collateral for them. For example, your credit card company can not come a repossess your car if you miss payments. A secured debt has collateral, two examples are a car loan and a mortgage. Your house can be foreclosed and sold, a car, repossessed and sold.

Unsecured creditors only have a few options on default

They can stop doing business with you, by cancelling your credit card or cancelling an agreement with you. Often another credit card company will be willing to extend you credit or another merchant will do business with you. 

Credit reporting

Nearly all creditors make reports to the major credit bureaus (Experian, Equifax, and Transunion). Negative credit reporting will lower your credit score. The impact of negative reporting is just one factor to consider in deciding whether or not to prioritize a debt. 

If a creditor turns your account over to a debt collector, a common strategy of debt collectors is to make negative credit reports. Paying a debt in collections will not have a drastically improve of your credit score. The damage is done with the reporting, paying it does not do much to help. So if there is a debt that is more important to pay you should take the hit on your score and pay the most important debt first.

Contacting you

A creditor may contact you and ask you to pay. Typically, original creditors do not spend a long time trying to get you to pay. Most would much rather send your debt to a third-party debt collector to make collection attempts. 

Third party debt collectors

Third party debt collectors are subject to the Fair Debt Collection Practices Act. They have to treat you with fairness, honesty, dignity, and respect. It is illegal for a third-party debt collector to lie, be dishonest, curse, be disrespectful, or to make any other misrepresentation to you.  

Debt collectors like to call consumers deadbeats (sometimes worse). Don’t listen to them. The most common reason debts wind up the hands of debt collectors is job loss, illness, divorce, or unexpected life events. The debt collection industry knows this. They know how to take advantage of you. Making the right choices in the face of their threats is your best strategy. 

Don’t let a debt collector harass you into a bad decision. Make well thought out decision about which debts to pay first. 

Filing a lawsuit

Original creditors and third-party debt collectors can file a lawsuit to collect a debt. Most of the time original creditors leave this job to the third-party debt collectors. These collectors make mistakes, do not have records, or are otherwise sloppy with their collection cases. 

It is important to respond to a lawsuit. Most consumers, when they are sued, do nothing. This results in a default judgment. A default judgment means that you did not answer. Given that debt collectors do not have the best records, its important to answer a lawsuit so that you can fight it and at least have a shot at it not turning into a judgment. 

Judgment Collection and the Texas Homestead Exemption

If there is a judgment against you, then it can be used to access your bank accounts and to take any non-exempt property. Texas homestead exemptions exempts most property from collection on a judgment. The Texas homestead exemption applied to much more than your homestead. As you can guess it covers your homestead. For an urban homestead it covers not more than 10 acres with any improvements (houses) in that property. 

Most people don’t have one acre, much less anything approaching 10 acres. Most people’s homes are not subject to being taken by a judgment. The Texas homestead exemption also covers personal property in your home. All home furnishings, including family heirlooms, provisions for consumption (food, clothes, etc), tools, equipment, books, boats, or motor vehicles used for work. It also includes two firearms, athletic and sporting equipment, a car or motorcycle for each member of the family that is a licensed driver. The law is so old that it also covers: two horses, mules, or donkey and a saddle, blanket, and bridle for each, 12 head of cattle, 60 head of other types of livestock, 120 fowl, and your household pets. 

All of these things are exempt from judgment garnishment or from a creditor taking them. So if a debt collector or other creditor calls or sends you a letter telling you that they are going to take your exempt property, they are lying. That lie is a violation of both Texas law and the Fair Debt Collection Practices Act. 

Conclusion

Unsecured debts make life easier. A credit card keeps you from having to keep cash on hand and you can make payments on things without having to establish credit at every merchant you go to. But, if you are too late on payments, then they can come back to haunt you. If nothing is done, these debts first land in the hands of debt collectors, then a court, and eventually get turned into a judgment. The Texas homestead exemption protects Texans from having their homestead and personal belongings (including horses and chickens) from being taken by a judgment creditor. 

If you have problems with a debt collector, whether they are collecting a debt or a judgement, give us a call and lets talk about how we can help you. 


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Ripped of by a Credit Repair Scam?

Ripped off by a credit repair scam?

Today your credit score is more vital to your life than ever before. Many times, people seek help from credit repair organizations to help improve their credit and their ability to get credit. So they can buy a car, or a home. Some businesses engage in practices and acts that take advantage of people who are seeking help in repairing their credit.

Unfortunately many for profit credit repair services are a scam. In 1996 the US Congress passed the Credit Repair Organizations Act. CROA was designed to keep credit repair business from ripping off consumers. Even though the law was passed more than 20 years ago, credit repair businesses act like it does not exist.

How Credit Repair Businesses Get Paid

The main way that CROA protects consumers from unfair and deceptive acts and practices is by limiting the way that someone offering credit repair can get paid. They can’t get paid in advance. That's right, a credit repair organization may not “charge or receive any money” “before such service is fully performed.” They can’t take your money until they have fixed your credit. Anyone who charges you before trying to repair your credit is doing it illegally.

False Representations

A credit repair business cannot make false representations. They cannot advise you to make a false representation, to alter your identification, or engage in any act that attempts to defraud consumers. They cannot make untrue or misleading representations about their services.

Credit Repair Disclosures

A credit repair business is required to provide disclosures before any contract or agreement is made between you and the credit repair organization. The complete language of the disclosures is here: https://www.law.cornell.edu/uscode/text/15/1679c.

These disclosures must be on a separate page and must be provided in writing. The credit repair organization must keep a copy of your signature on file for 2 years stating that you received this document.

Attorney’s Fees

CROA requires that the organization pay your attorney’s fees if you are successful. It does not require you to pay the other side’s fees if you are not.

Finding Someone to Help Fix Your Credit

Since most business that offer credit repair are scams, how can you find someone to help you fix your credit? Non-profit organizations are a good place to look for help. Google some local charitable organizations who help with credit counseling.

If you have been ripped off by a credit repair organization then give us a call. We’d like to get you what you deserve and keep other people from dealing with the same scam.

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Debt Statute of Limitations

Collection of Time Barred Debts

The law puts limits on how long you can wait before you sue someone. In Texas the limit for most cases 2 years. For some cases the limit is 4 years. Most personal injury cases have to be filed within 2 years. Breach of contract and fraud cases must be filed within 4 years. This period of time is known as the statute of limitations. A claim that is beyond the statue of limitations is “time-barred.”

Filing suit on a debt after the statute of limitations has passed is not illegal but is easy to defend. Responding that the claim is time-barred should have it dismissed quickly. You may also be able to recover attorney’s fees for the other side failing to do any basic research on the case they filed. Filing suit on a time barred debt is a violation of the FDCPA. 

What about threatening to sue on a time barred debt?

 If a debt collector sends you a letter, or threatens you over the phone to file a lawsuit on a time-barred debt, then this is a violation of the FDCPA. They are threatening to take an action they can not legally take. It is also a misrepresentation of the legal status of a debt. 

What about a collector that offers to settle a time barred debt? 

That’s a violation too. If a debt collector uses the word “settle” in attempting to collect a time-barred debt, then it can violate the FDCPA. If a collector attempts to collect a time-barred debt without disclosing that the debt is time barred, then this can violate the FDCPA too. 

Effect of making a payment on a time-barred debt. 

If you make a payment on a time-barred debt, it restarts the statute of limitation. No matter how small the payment. A common tactic is for a debt collector to ask for a “good faith” payment of $5. Oops, the statute of limitations just restarted. For up to 4 years. They can now call, mails, and otherwise contact you for payment for another four years. This is why always verifying the debt to make sure that the debt is not time-barred is a best practice when dealing with debt collectors.



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Debt Collectors are Driving Older Americans to Bankruptcy Court

Older Americans are more likely to file consumer bankruptcy than ever before 

There has never been more older Americans in bankruptcy than there are now. This is not by design. Older Americans used to struggle with debt an finances. With the passing of the Social Security Act of 1935 and Medicare and Medicaid in 1965 older Americans transitioned from “pauperism and poorhouses” to “pensions and retirement.” The 1970s, 80s, and 90s were the golden age of golden years. Now this landscape is shifting. Full Social Security benefits don't begin until 70 (they used to start at 65). For those on Medicare, out of pocket spending on health care consumes about 20% of their income.

Older Americans are carrying more debt that ever. In 2001 about half of households headed by someone 60 had some debt, in 2013 over 60% do. The median amount of this debt has increased from $18,385 to $40,900. 

With benefits being whittled away, older Americans have fewer places to turn. Bankruptcy offers the last option to salvage the financial life. But it does not offer the same benefits for someone 65 as it does for someone 30 years old.

Why Older Americans File Bankruptcy

The reasons behind most bankruptcies are fairly constant over time: job loss, decline in income, and medical problems. For filers over 65 the top reasons cited are:

Aggressive debt collection practices (71%)
Decline in income (69%)
Medical expenses (62%)

Bleak is an Understatement

Over half of older bankruptcy filers reported that their financial problems forced them to forego medical treatment. Bankruptcy is not the first choice for these filers. Many struggle for as long as five years before deciding to file. Five years of missing medical treatment to pay aggressive debt collectors is sad.

The report concludes by showing that the prospects for older Americans are declining and increasingly bleak. Filings by people 65 and older is up 500% from the rates in 1991. It is harder and harder for seniors to get work. While they wait for things to bad enough to file for bankruptcy, their retirement accounts and savings are depleted. When they finally arrive in bankruptcy court the fresh start is meaningless. They can’t find well-paying jobs to rebuild their assets. They are unlikely to leave anything for their children. 

Dealing with Debt Collectors

Bankruptcy is not the only solution. Aggressive, unscrupulous debt collectors are subject to penalties under the Fair Debt Collection Practices Act. The FDCPA protects consumer from debt collection abuses. If you, or someone you know, is dealing with debt collector harassment, contact us right away. There is no legal justification for this harassment, we will take steps to protect your rights. 


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How to Stop a Debt Collector

How to Stop a Debt Collector 

Do you know someone who is being harassed by a debt collector? Phone calls, threatening letters, and text messages take their toll on the most tolerant of people. So how can you stop a debt collector from contacting you?

Federal law requires you tell a debt collector to stop in writing. You can tell a debt collector to stop or you can tell them that you refuse to pay. After telling them either one, in writing, it can only contact you to tell you it is stopping contact or to tell you they are taking some action that they intended to take (like filing a lawsuit). 

Stop Contacting Me Letter

So what should your letter telling a debt collector to stop contacting you letter look like? It should have:

Name

Address

Phone number (every number they are calling)

Account number (as it appears in the letters they sent)

Once you give them everting they need to figure out who you are and which account you are talking about. You need to tell them stop. Here is an example of what you can say

Dear Debt Collector:

I am writing you request that you stop contacting me. 

The Fair Debt Collection Practices Act requires you to cease all communications with me after being notified in writing that I wish to cease further communication with you. See 15 U.S.C. 1692c(c). 

I hereby demand that you stop call communications with me by mail, phone, or any other method or means. This demand applies to the above account, and any other accounts you may have or may have in the future. Never contact me again.

Please be advised that I keep accurate records of my correspondence with your company.

Sincerely,

Concerned Consumer

Add in a Dispute

If you want to dispute the debt in the same letter add this language:

Record that I dispute having an obligation for this debt. If you forward or return this debt to another company, please indicate to them that it is disputed. If you report it to a credit bureau (or have already done so), also report that the debt is disputed. This dispute is made under all applicable federal law and state laws.

How to Send Your Letter

Sounds easy to send a letter, but this is the most effective way. It will prove your letter was signed, sealed, and delivered. 

Now that you have an effective stop communications (and dispute if you want it) letter drafted, you need to send it. The best way to send a letter to a debt collector is certified mail return receipt (CMRRR). When you go to mail it, get the CMRRR number and write it on the letter. Then make a copy of the letter, and mail it to the debt collector. You should leave the post office or mail shop with a copy of the letter with the CMRRR number. If you use a U.S. Post Office you may need to make an extra trip to get the copy made. If the collector contacts you again this copy will be the best evidence that you sent the letter and they received it. 

If you want to talk about your debt collector, or sue your debt collector, then give me a call to see how I can help you out.


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Attorney Immunity and the FDCPA

I was recently asked by a judge whether a group of attorneys I sued had attorney immunity for their violations of the FDCPA. It struck me that even among lawyers and judges, people are not aware of the status of attorneys engaged in debt collection.

Attorney Immunity

Attorney are generally immune from suit for their actions in litigation. Attorneys can raise defend their actions brought by nonclients for actions taken in representing a client in litigation. It is well known that an attorney, acting in the interests of their client, is generally immune from any acts that occur in the context of litigation. However, that is not true for attorneys who engage in consumer debt collection.

US Supreme Court, FDCPA, Attorney Immunity

The first FDCPA case to make it to the US Supreme Court considered this situation. In Heintz v Jenkins, a case from the 7th Circuit, a law firm sued over an unpaid debt. Heintz, the bank's lawyer, during litigation, sent a letter incorrectly stating the amount she owed. Jenkins sued the lawyer for his misrepresentations. The Supreme Court held that an attorney who regularly attempts to obtain payment of consumer debts through legal proceedings is a lawyer who regularly attempts to collect debts. And, that a lawyer who regularly attempts to collect debts is a debt collector.  

5th Circuit, Consumer Debt Collection, and Attorneys 

Closer to home, Joseph Onwuteaka, a Houston attorney, started filing suits in a JP court in Harris County. Not just for people who lived in that precinct, but for Texans all over the state. From 2008 to 2012 he filed 1,997 cases in Harris County. Consumers from El Paso to Texarkana and Amarillo to McAllen were being sued in Houston. The FDCPA requires suit be filed where the consumer resides or where the agreement creating the debt was executed. The Court had no problem finding that as an attorney debt collector he was subject to the FDCPA. It imposed the maximum penalty against him.

Texas Appellate Courts, Consumer Debt Collection Lawyers

The Fourth Court of Appeals, in San Antonio, did not find an exception for an attorney who sent a collection letter for more than the debt. Citing the Heintz case, the Fourth Court held that a law firm who send out demands for more than is owed is liable under the FDCPA. The Court explained that a debt collector, whether or not an attorney, must state the amount of the debt correctly. An overstatement is obviously incorrect. But an understatement, is equally bad. If you pay the amount in the demand, and it does not satisfy the debt, then you are not in a better position for having made the payment. In fact you could be in a worse position. If you though you had paid a debt off entirely and it comes back to haunt you, are you better off or worse off? It is important that a demand be accurate.

Opinions from the US Supreme Court to Fourth Court of Appeals are uniform in holding that an attorney sets aside their immunity when they put on the garb of a consumer debt collector.

If you or someone you know has a letter, suit, or call from a debt collector, attorney or otherwise, give us a call.

 

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FDCPA Violations by Medical Debt Collectors

Medical debt is just debt.

Medical debt is one of the most common forms of debt people have. Its not special, you cannot be denied emergency medical care if you have past due medical debt. Don't let debt collectors persuade you to pay a medical debt over rent, or a mortgage payment. Don't ever borrow money to pay a medical debt. Medical debts usually have a lower interest rate than credit card debts, so they can go unpaid for longer periods of time without building up as much interest. You should not ignore these debts, but do not put them ahead of more important bills or debts that have a higher interest rate.

Some dentists and doctors try to sell credit cards or other forms of debt to finance medical procedures. These debts often have bad terms or high rates and are not a good financial decision, as they turn medical debt into unsecured debt, much like a credit card.

Medical Debt Collectors 

Medical debt collectors are usually not the same seasoned professionals who collect credit card debt. Often they make representations that are not true or are inaccurate. Most credit reporting agencies will not report medical debt that is not more that six months past due. Again, paying a medical debt over a car note is not a good decision, not matter what a medical debt collector threatens.

If you know you will be unable to pay a medical debt on time and in full, try to negotiate with the hospital before it goes into collections. Hospitals, doctors, and other medical providers are more likely to be willing to work with you than a debt collector and if a hospital does not have to pay a fee to a debt collector then they can save money. 

Mistakes on Medical Bills 

Carefully review your medical bills for mistakes. If a procedure is entered into the system incorrectly then the charge may be wrong. Here is a tool to look up the medicare reimbursement rate. Some hospitals bill and several times this rate to individuals, but accept the medicare rate from insurers. Finding a large discrepancy here can give you room to negotiate your balance. 

Also, try resubmitting charges to your insurance company, on a second look they may change their mind. Ask your doctor to help with this. They want to get paid and most are willing to have their office provide extra documentation to get procedures approved. 

Dealing with Medical Debt Collectors

Medical debt collectors are just debt collectors, they have to follow the same rules and regulations. They cannot harass, deceive, or mistreat you. They have to be honest with you. If you tell them to stop contacting you in writing, they have to stop contacting you. If you tell them in writing that you refuse to pay, then they have to stop contacting you. They can't give you the wrong amount of the debt, or make threats about actions they do not intend to take. In other words, all the consumer protections that exist for consumer debt collectors exist for medical debt collectors. Its just another form of consumer debt.

Most medical provides won't sue you. They are less likely to than a credit card company, especially when the amount of the debt is relatively small. If you are sued, then the defense is you were charged more than the medicare reimbursement rate and the bills are unreasonable. 
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Telephone Consumer Protection Act (TCPA) overview

Its not hard to tell Telephone Consumer Protection Act is designed to do. It makes autodialed calls to cell phones illegal.

Why is the TCPA important? Unwanted calls to cell phones are a huge disturbance. 

In Cal Newport's book "Deep Work"  his research shows that it takes about 20 minutes for the mind to return to what it was working on after being interrupted. If you are getting 5 calls in a day then your suffering 100 minutes (1 hour 40 minutes) of lost productivity, lost concentration, and unwanted distraction. 

The TCPA sounds simple. 

Like a lot of laws, in the hands of lawyers and courts, it has become complicated.

Thousands of pages of legal writing, court orders, agency filings, and thousands of hours have been spent on the TCPA since it was made law in 1991.

The FCC was given the authority to interpret the TCPA and it has made a number of rulings and interpretations that affect the definition of an autodialer, what it means to consent to autodialed calls, how consent can be revoked, and all number of sub-issues.

Its not just phones that are dialed with an autodialer that are prohibited. Text messages and junk faxes are covered too. 

What is an autodialer?

An autodialer is a broad term, the technical term for the device that is prohibited by the TCPA is an Automatic Telephone Dialing System or ATDS. An ATDS has the capacity to randomly or sequentially dial telephone numbers. Any computer can sequentially and randomly produce a set of numbers. Every computer set up to as a dialer has the capacity to randomly or sequentially dial numbers. Some experts have claimed that a modern smart phone could qualify as an ATDS. If someone is able to dial a number without hearing a dial-tone then they are probably using some sort of an autodialer. 

Here is the obligatory Simpsons autodialer scene:


Consent to autodialed calls

Consent is another big topic under the TCPA. In short, unless you gave written permission to get calls, then the calls are illegal.

How do you make them stop? Tell the caller: "You have reached my cell phone, please stop calling." This should work on legitimate callers. 

Getting calls from scammers? They are harder to stop. Maybe impossible. I never answer the unending "neighbor number" calls. If a calling party has the same area code and prefix (210) 226-xxxx then this is definitely a scammer. 

TCPA penalties

Whats the downside to callers? The penalty under the TCPA. $500 per call. If you can prove that they made the calls willfully or knowingly then the penalty can be tripled. Huge awards have been made under the TCPA. 

If you are getting unwanted calls from someone you have not agreed to let call. Or if you have told them to stop calling and keep doing it, then give us a call. 

Bill 



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