KNOW ALL YOUR OPTIONS BEFORE MAKING A DECISION
A key issue in any collection action will be the consequences for the consumer of a judgment for the collector. What assets and wages can the collector seize, how much of my paycheck can they have, and can they attack my home are all very important questions when deciding what direction to go in when faced with a collection action. Therefore, you will want to be aware of all your options at the beginning of the process so that you make the best financial decision moving forward. The lawyers at BWA Law Group will look at your specific issue and provide you with the best options, so that you can make the best financial decision for you and your family.
Defending the Case – Top 5 reasons to defend a consumer collection action.
Many people, including some judges, assume that when a collector sues on a debt the consumer almost always owes the money. Whatever the accuracy of this view in times past, changed practices in the marketplace have dramatically altered the facts. Today, consumers have complete defenses in a significant number of collection cases. The top five reasons to defend:
1) Consumer has a dispositive defense.
2) Counterclaims can result in the recovery of damages and attorney’s fees
3) Prevailing in the collection action can improve a consumer’s credit rating
4) Protection of the consumers’ assets and income
5) Alleviation of emotional distress
However, many collection actions are solid without much opportunity to defend. In those cases settlement may be the best course of action.
Settling the Case
A key factor in any collection action will be an appraisal of the litigation tactics that are typical of both the collector and the collector’s attorney. Do the collector and collection attorney typically pursue cases aggressively? Is the collector’s attorney even familiar with what is necessary to prevail in a contested action? Is the collector the original creditor or a third party that purchased the debt? All very important questions and one’s in which the Attorneys at BWA Law Group can assist.
Last thing to evaluate is collectability. An important part of advising a potential client on what they should do when facing a collections action is to understand the client’s assets and income that are at risk if the collector prevails in the court action. A debtor who possesses only exempt assets is referred to as “judgment proof.” While a judgment may be taken against such a person, the creditor cannot compel collection of the judgment from the debtor’s income or assets. Therefore, properly claiming your exemption and doing nothing further may make the most financial sense.
The Bankruptcy Alternative
A chapter 7 bankruptcy filing wipes out unsecured debt and eliminates the need to defend the collection action. Because nonexempt assets will be lost in a chapter 7 bankruptcy, and because of the cost involved, bankruptcy may not make sense to discharge one small debt. It is a powerful remedy when a consumer has a significant amount of unsecured debt and minimal nonexempt assets. When a consumer has significant nonexempt assets, filing under chapter 13 may be a better alternative, as it typically will significantly reduce the portion of an unsecured debt that must be repaid and allow that amount to be paid out over a period of years.
Navigating Collection Agencies
A collection agency is a company hired by lenders to recover funds that are past due or accounts that are in default. The lending company itself can also have a division that acts as its collection agency.
Many of us at one time or another have had an unpaid or overlooked bill turned over to a collection agency. It’s important to understand that when dealing with debt collectors, you have plenty of rights, thanks to the Fair Debt Collection Practices Act.
The Fair Debt Collection Practices Act provides many laws that protect you against creditors. For example, a debt collector cannot contact you in connection with the collection of a debt at any unusual time or place. In fact, a debt collector cannot call you before 8 a.m. or after 9 p.m., nor can a debt collector call your place of employment if your employer prohibits such communications.
In addition, if the debt collector knows you are represented by an attorney at BWA Law Group with respect to such debt, the debt collector cannot contact you directly.
Of course that doesn’t mean you’re off the hook. The Fair Debt Collection Practices Act gives the collection agencies rights as well. For example, a collection agency can renew collection activities if it provides you with proof of the debt, such as a copy of the bill you owe. And in general, most creditors are willing to sue you over an outstanding debt.
If you are contacted by a collection agency:
- Do not engage in a conversation with the debt collector. Simply instruct the debt collector that you want the information in writing. Within five days of contacting you, a debt collector must send you a written notice telling you the amount of money they believe you owe, the name of the creditor, and what action to take if you believe you don’t owe the money.
- If you think you don’t owe the money, always dispute the debt in writing. If you send the collection agency a letter within 30 days of receiving written notice of a debt stating you do not owe money, a debt collector cannot further call you.
- Make sure you keep a copy of the all correspondence. A paper trail could be important if it turns out the debt collector breaks the law. Also, you should send any correspondence via certified mail; otherwise the collection agency can deny receiving it.
- If a debt collector claims to be an attorney, credit bureau representatives, or even a law enforcement official, don’t believe them. Again, simply instruct the debt collector to send you the information in writing.
For more information on your rights as they pertain to collection agencies, be sure to review The Fair Debt Collection Practices Act. If you find yourself in a situation where a collection agency is threatening legal action, it’s best to contact BWA Law Group.