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Thursday, October 7th, 2010

Should Medical Debts Show Up on a Credit Report?

In recent weeks, the U.S. House of Representatives passed a piece of legislation that would require credit reporting bureaus to remove medical debts from consumers' credit reports if those debts were paid or settled more than 45 days before the release of the report.

If the Senate passes a similar bill, this could mean good news for millions of Americans who have seen their credit rating suffer because of medical bills they were unable to pay.

Medical Bills & Bankruptcy

Sources note that, in recent years, medical debt has ranked as the most common contributing factor to personal bankruptcy filings in the U.S. And, according to insiders, that's partly because of the following reasons.

  • Unclear medical billing techniques: As you've probably noticed, most medical care facilities don't send you out the door with a bill for their services – instead, the bill comes weeks or sometimes months later, and you have to sift through it to figure out what you were charged for.
  • Limited or absent medical insurance: As recent debates over healthcare reform reminded us, millions of Americans don't have adequate medical insurance, meaning that even relatively minor procedures can have severe financial consequences for the uninsured.
  • Persistently high unemployment: Because health coverage in this country is generally linked to employment, the currently high unemployment rate means that more Americans than ever are uninsured or underinsured. Expensive medical bills, coupled with limited income, often mean serious financial distress.

Medical Bills & Credit Reporting

So what would be the benefit of removing paid or settled medical debts from credit reports?

  • Improved credit: With fewer negative actions on a credit report, more Americans would qualify for more attractive loan terms (like lower interest rates). This, in turn, would set the stage for people acquiring less debt overall and perhaps mean fewer people would need to seek bankruptcy protection.
  • Improved incentives to pay: Knowing that paying or settling medical debts could have a seriously positive impact on their credit scores could push more consumers to negotiate payments on medical bills. The long-term benefits associated with an improved credit score might provide the motivation to work through confusing language and overwhelming bill totals.

Medical Bankruptcy

The Senate's action on this bill could play an important role on the finances and credit health of millions of Americans. According to one study, as many as 40 percent of Americans have medical collections on their credit reports – and such information is harming their overall credit health.

If you're worried about medical debts or think you may need bankruptcy protection to address your financial concerns, take action now by connecting with a bankruptcy lawyer for a free consultation.

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Posted in The Law and Your Money, Your Credit Score | No Comments »

Wednesday, September 15th, 2010

What You Need to Know about Debt Collectors

WalletPop.com recently published an interview with a journalist who decided to spend some time working at a debt collection agency to research whether or not the company complied with federal guidelines for debt collectors (as outlined in the Fair Debt Collection Practices Act).

His findings (which are detailed in the book Fight Back against Unfair Debt Collection Practices), are summarized below.

What to Expect from Debt Collectors

While federal law specifically states that debt collectors must follow various guidelines that basically add up to treating debtors with respect, various reports have suggested that many collectors regularly break these guidelines—and most consumers don’t realize they have rights in the matter.

Here are some classic maneuvers to watch out for and speak up about if you encounter:

  • Trainees don’t count. It seems that some collection agencies excuse illegal behavior from employees by identifying them as “trainees,” meaning that they haven’t been fully instructed on how to behave according to the laws. To counteract this potential argument, make sure you document any threatening or rude calls from debt collectors: get their name, employee number, the date and the time of the call.
  • Tapes and lawyers come in handy. Apparently, debt collectors will play by the rules if you notify them that you are recording the conversation or that your lawyer is handling your debt collection calls. Be warned, though, that professional collectors have worked with a lot of debtors and you’ll actually need to have a lawyer retained if you claim you do.
  • Don’t give permission. In order to contact you outside the hours of 8:00 am and 9:00 pm, debt collectors need your express permission; however, it seems that some debt collectors will essentially lie about getting such permission by fudging their notes about a call. This reinforces the importance of taking notes about such phone calls yourself to use in cases of harassment.
  • Collectors probably know your credit history. One reportedly common tactic is for a collector to refer to other debts you may be current on when trying to collect a debt on which you’ve fallen behind. This means that you should be checking your credit report regularly to make sure you know at least as much as they do.
  • Get settlements in writing. If you and a collector agree to settle a debt for a partial, lump-sum payment, be sure to get the agreement in writing before making any payments. The agreement should have the original amount of the debt, the agreed settlement amount and the terms of the repayment. If you’re communicating with a collector over the phone, insist on an emailed PDF or a faxed copy of the agreement before making any payment.

Protect Your Rights from Debt Collectors

If you think your rights have been violated, you may want to contact a bankruptcy lawyer in your area to see what your options are for moving forward.

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Posted in Bankruptcy News and Events | No Comments »

Friday, August 27th, 2010

Debt after Death: What Happens when a Debtor Dies (or the World Ends)

Update 05/20/2011

Debt has a habit of sticking around after death - but what about when the world ends? With more than $16,000,000,000,000 (that's trillion) in consumer debt in the U.S. - plus another $14T in public debt - there's a lot of zombie debt that will be crawling the land even after we're all gone.

Christian broadcaster Harold Camping is certain that the world will end Saturday, May 21, 2011 (that's tomorrow), based on "infallible, absolute proof" that the Judgment Day, and his followers around the country are quitting their day jobs and preparing for the Rapture.

Now, to be fair, Camping believes that the world will end only for "true Christians," who will be whisked away to Heaven while the rest of us of forced to endure the apocalypse, which could take several months - and explain why all those good people's credit card bills are no longer being paid when the debt collectors start calling (and you know those people aren't going anywhere).

So run up those credit cards and spend like there's no tomorrow! And when we're all still here Sunday and the bills start coming in, see if Camping will foot the bill.

Original post 08/27/2010
And now, the bankruptcy blog is going to touch on what happens to your debt after you die.

What happens to your debt after you die is not a topic that’s likely to come up on its own at the dinner table, but it’s a good idea to talk about this matter anyway. It’s important for you and your loved ones to know when you’re responsible for each other’s debts post-mortem—and when you’re not.

A recent post from WalletPop offers an outline of what to expect after the death of a family member who owed money. Here’s a summary.

  • Can debt be inherited? In most cases, debt does not automatically pass from one family member to the next, according to sources. That means that, if you receive a letter from a creditor demanding payment on a loved one’s debt after his demise, it’s a good idea to do some research before paying.
  • Debt in community property states: One of the exceptions to the above rule has to do with state law. If you live in a community property state (find out here), you can inherit debt from a dead spouse (but not from a sibling or parent).
  • The link between debt & inheritance: Another exception involves the relationship between a person’s debts and her legacy. If, for example, a parent dies and leaves you money or a house in addition to consumer debt, you’re legally obligated to pay the debt before collecting the inheritance.
  • What about debt from a co-signed loan? If you co-signed a loan for a family member or friend and that person passes away, you are responsible for paying the remainder of the loan.

How to Know if You’re Responsible for a Debt

One unfortunate truth about debt and death is that some creditors might try to collect on a debt whether or not it’s legal for them to do so. Worse, some scam artists may specifically target survivors in an attempt to trick them into paying money they don’t really owe.

If you’re mourning a loved one, the last thing you likely want to deal with is finances, but following these guidelines might help protect you from fraudsters:

  • Avoid sending a creditor any money at all until you’re sure that you are actually responsible for repaying a debt.
  • To determine your obligations, ask the creditor to send you written documentation of the debt’s original purpose, the terms of the debt and the exact amount currently owed.
  • If possible, consult a bankruptcy lawyer to help you work through the complexities of covering debt’s after a loved one’s demise.

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Posted in Finance 101: Secure Your Future | No Comments »

Monday, August 23rd, 2010

Dealing with Debt Collectors: What Not to Do

As the Great Recession continues to take its toll on the economy and employment landscape, millions of Americans in debt are turning to bankruptcy . Others are trying to negotiate with their debt collectors. But that’s rarely an easy task, especially during high-stress interactions like contact from a debt collector.

It’s important to remember that, even though you owe someone money, you still have rights: you can and should expect to be treated respectfully by collectors and, no matter how much pressure one puts on you, there are a few things that analysts suggest you should avoid.

Here’s a look at some of those no-nos.

  • Sending a post-dated check: While it may be tempting to get a debt collector off your back by sending a post-dated check to cover what you owe, sources indicate that it’s generally not a good idea. Why? Some collectors, it seems, have been known to deposit such checks early, and most banks permit them to do so. This could leave you with bounced check fees and other unpleasant matters to deal with if you don’t have sufficient funds in your account.
  • Divulging your bank account number: No matter how much money you owe, debt collectors are not legally entitled to your bank account number or other sensitive financial data. Even if you decide to make regular payments from a certain account, opt for a money order or a cashier’s check from a bank other than your own. If you’ve already given out an account number, keep a careful eye on the activity in that account and be prepared to challenge any withdrawals you haven’t approved.
  • Indicating that you’ll be applying for a loan: Sometimes, before applying for a loan, consumers attempt to clean up their credit reports by paying old debts and trying to get rid of other negative information. But letting a collector know what your goals are can work against you—instead, if you choose to contact a creditor, ask him to verify a debt in writing. Then, ask for written proof that he will remove the negative information from your credit report after you’ve paid; once you receive that proof, you can repay the debt.

The difficult economy has meant that more Americans than ever are struggling with day-to-day expenses, and the FTC noted that complaints about debt collectors rose by 12 percent in 2009 and outnumbered all other complaint types.

For a more detailed look at what you can expect, check out this page on your consumer rights with debt collectors. Further, know that debt collectors cannot legally contact you:

  • To collect debts whose statute of limitations has passed;
  • To collect debts that have been discharged in bankruptcy; or
  • To collect debts while bankruptcy’s automatic stay is in place.

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Posted in Your Credit Score | No Comments »

Thursday, March 18th, 2010

Debt Collectors Behaving Badly (And How to Make Them Stop)

Debt collectors in certain areas of the country have begun contacting debtors in more and more harassing ways, according to a recent article from WNEP in Pennsylvania.

This situation is troublesome not only because it can cause fear and embarrassment for debt collectors’ victims, but also because such techniques are illegal.

The Slimy Tactics Reported by Victims

While repeated phone calls from a bill collector may be irritating, some of the actions that are being attributed to collectors are downright appalling:

  • Threats of jail time: Some debtors have reportedly been threatened with arrest—even with arrest at their place of employment.
  • Insults: Sources indicate that some collectors have taken to belittling debtors about their level of education and their work ethic.
  • Cruel suggestions: Apparently, some debt collectors have gone so far as to suggest debtors commit suicide as a way to remedy their inability to repay their debts.
  • Neighbor contacts: It seems some collectors have even ducked as low as contacting a person’s neighbors about debts owed.

Clearly, something is wrong here. Debt collectors are not legally allowed to get away with such actions, but unfortunately many consumers aren’t aware that they have rights protected by federal law.

Your Rights and Options

So what exactly are creditors forbidden from doing? Here’s a summary of what actions are prohibited by the Fair Debt Collection Practices Act:

  • Harassing a debtor, her family or her friends
  • Failing to follow up a phone call with written details about a debt within five days
  • Contacting anyone besides the debtor or his lawyer about a debt
  • Physically or verbally threatening a debtor
  • Suggesting or implying that a debtor can be arrested when she legally cannot
  • Lying about the amount of the debt owed
  • Contacting the debtor directly when he has known legal representation
  • Ignoring a debtor’s written denial of a debt

The collectors mentioned in the story above were breaking the law—but unless the debtors are aware of the laws protecting them, they’re not likely to take any action.

Halt Creditors with the Automatic Stay

If you’re facing aggressive behavior from a creditor, it may be time to consider working with a legal professional. One option for stopping creditor contacts is filing for bankruptcy, which will trigger an automatic stay that blocks all contact from creditors.

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Posted in Economic News: How Are We Doing? | No Comments »

Monday, February 8th, 2010

Debtor Collects from Creditor Harassment

Anyone who has ever been hounded by a debt collector has probably fantasized about giving the collector a taste of his or her own medicine. That fantasy may be much easier to realize than most people imagine, as the story of a Dallas debtor shows.

Background: Your Rights as a Consumer

Laws are in place at both the federal and the state level to protect all Americans from overly aggressive debt collection practices. In fact, between the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Telephone Consumer Protection Act, a lot of behaviors typical of debt collectors are prohibited.

In addition to other things, debt collectors cannot:

  • Lie about their ability to take legal action to collect on a debt
  • Call you repeatedly with intent to annoy or harass
  • Call you outside of 8 am and 9 pm local time
  • Contact you directly when you have indicated that you have legal representation
  • Contact you by any embarrassing media (like postcards)

Unfortunately, many consumers are not aware of their rights and so do not take legal action against collectors who break these laws.

A Man with a Plan

According to the Dallas Observer, a man named Craig Cunningham has taken it upon himself to stand up for his consumer rights.

The Observer reports that Cunningham made some poor investment choices when credit was easy and ended up with more than $100,000 worth of debt. But, when collectors began contacting him and asking him to pay up, he decided to fight back.

Essentially, here’s how Cunningham has managed to make the most out of a bad situation:

  • He hired a lawyer to represent him and help him understand the intricacies of the consumer protection laws that were relevant to his case.
  • He began recording calls from his creditors and saving all forms of contact he received.
  • With the help of his attorney, he filed lawsuits whenever a debt collector violated a national or state consumer protection law.
  • He began receiving court settlements from successful cases.

Most collection agencies, it seems, prefer out-of-court settlements (which often involve a statutory fine) to taking a case to trial, since settlements save them money. The Observer notes that Cunningham has thus far earned $20,000 from suits against law-breaking collectors.

If you think your rights have been violated by a debt collector, consider contacting an attorney to determine whether you could take steps to receive compensation for the violations.

For those who don't have the resources to fight each creditor, there's another option to end harassment: filing bankruptcy. Bankruptcy can give you legal protection from creditors and wipe out your obligation to repay debts.

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Posted in Finance 101: Secure Your Future | 1 Comment »

Friday, January 29th, 2010

FTC Hails Victory Over Abusive Debt Collection Practices

The Federal Trade Commission announced this month that it has settled charges with three debt collectors accused of various types of abusive debt collection. For those of us who are dealing with collectors and facing a bankruptcy filing, this could mean some good changes are coming around.

The settlement, which reportedly includes the largest civil penalty ever levied on a debt collection agency, comes in conjunction with future restrictions for the defendants.

Fair Debt Collection Practices Violated

According to the case, the defendants violated terms of the Fair Debt Collection Practices Act, which outlines acceptable behavior for agencies responsible for collecting on debts. These guidelines prohibit a variety of actions, including:

  • Contacting a debtor before 8:00 am or after 9:00 pm local time
  • Contacting a debtor after receiving a written request not to do so
  • Contacting a debtor at her place of work after being told not to
  • Calling the debtor with the intent to annoy, harass or abuse
  • Contacting the debtor directly when he is known to have an attorney
  • Misrepresenting a debt or using deceit to collect money
  • Threatening arrest or legal action when neither is an option
  • Seeking more than a person legally owes
  • Publishing a person’s name on a “bad debt” list
  • Reporting information incorrectly to a credit reporting bureau
  • Contacting a third party about a consumer’s debt
  • Contacting a debtor by embarrassing media (like a post card)

In this case, the men were charged with threatening arrest and legal action when none was warranted as well as using harassment and abusive contact to collect debts. The men in question were senior managers at debt collection agencies and as such either participated in the illegal actions or were responsible for such actions among their employees.

The Settlements

One of the three defendants, Keith Dickstein, owner of Academy Collection Service, Inc., apparently paid a $2.25 million settlement in 2008. The two defendants who settled early this year, Edward S. Bastian and Edward Hurt, were saddled with fines of $375,000 and $300,000 respectively for abusive collection practices.

The fines were suspended after each man paid $7,500, based on their ability to pay; payment of the remainder will depend upon their future compliance with debt collection laws.

Your Consumer Rights

Federal law outlines many protections for consumers. Make sure you have an idea of what consumer rights you have so you can take legal action, if necessary, should they be violated. By filing bankruptcy, you can stop all form of creditor harassment, thanks to the power of the automatic stay. If creditors are harassing you over debts you can't afford to pay, you may want to explore your options with a bankruptcy lawyer.

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Posted in Finance 101: Secure Your Future | No Comments »

Thursday, April 9th, 2009

After Filing Bankruptcy: Attempting to Collect Discharged Debts Is Illegal!

When you receive your bankruptcy discharge, you are legally excused from responsibility for any debts that have been discharged.

Unfortunately, some unscrupulous creditors count on people filing bankruptcy not knowing how far their protection extends and attempt to collect on debts after the court has excused them.

Don’t Pay What You Don’t Owe

The fresh start granted to you by the court protects you from the following.

  • Mail contact from creditors: Letters indicating that payment is due are prohibited; if you receive any, show them to your attorney.
  • Phone calls from creditors: Again, you have no obligation to pay discharged debts. Contact from creditors asking you to do so is forbidden. Record the time and date of any such calls.
  • Lawsuits from creditors: Because you no longer owe money on discharged debts, creditors have no legal recourse to collect them.
  • Failure to update your credit report: Creditors that threaten to continue reporting a discharged debt as unpaid to scare you into paying it are breaking the law. Be sure to check your credit report for accuracy and note any wrong information you see.

Why Creditors Attempt Collection

Put simply, creditors stand to make money by attempting to collect on debts you don’t owe.

If you pay them, they get cash they otherwise wouldn’t have.

In some cases, the people or groups attempting to collect aren’t even your original creditors! Here’s why:

  • Say you owed one credit card company $1,000, but the debt was discharged in bankruptcy. You now owe the company $0, which is how much they can legally collect from you.
  • A third party collector may offer to buy your debt from the credit card company for, say, $10 for the privilege of “owning” the discharged debt. The credit card company may agree, since $10 is more than $0, so they technically make a profit.
  • The collector can then hound you about paying the debt, even though you no longer have any legal obligation to do so. If you end up paying, they make $990. If not, they only lose $10.
  • Because enough bankruptcy filers are unaware that they don’t have to pay these debts (or feel somehow guilty about not having paid them), many pay. This makes the illegal debt collection profitable even when some people refuse to pay.

Contact a Bankruptcy Lawyer

If any of your creditors tries to collect on this “zombie debt,” you have the right to contact a bankruptcy lawyer.

You have rights and can take action to protect them – that’s what the fresh start is all about!

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Posted in Post-Bankruptcy Debtor Education | 1 Comment »

Friday, January 16th, 2009

Creditors Scramble to Get What They Can From Debtors

Faced with the deep recession and more consumers filing bankruptcy, banks and lenders are feeling the squeeze.

Not only are many consumers backed into corners with unmanageable debt and few options, debt collectors are realizing that their options are limited too.

Many people are simply unable to repay their debts--and as the old saying goes, you can't get blood from a stone.

According to a recent article in The New York Times, lenders and debt collectors are now scrambling to get what they can from borrowers, even if it means forgiving a portion of the debts.

Some creditors are now accepting greatly reduced payments, allowing debtors to clear the debt.

This new wave of debt forgiveness has nothing to do with charity and is not an act of kindness.

Creditors are reacting to the devastating economy and working with debtors may keep them from losing everything.

Creditors Know of Chapter 7 Bankruptcy

Make no mistake; lenders are fully aware that if a debtor files Chapter 7 bankruptcy, many debts could be completely discharged.

As the recession deepens and more Americans are losing their jobs in mass layoffs, banks and credit card companies are preparing for more defaults in 2009. As a result, these creditors are competing for payment.

While some companies are scaling back consumer credit lines and hiking up fees, others are giving customers more leeway.

The New York Times reports that Bank of America said in 2008 it waived late fees, lowered interest charges and, in some cases, reduced loan balances for more than 700,000 credit card holders.

American Express and Chase Card Services are reportedly working with customers too, and the Times reported that every major credit card lender is giving debt collectors more options to help distressed debtors.

Debt collectors are also feeling the squeeze, as they are generally paid based on the amount of money they are able to recover. The number of borrowers who are receiving payment extensions has reportedly doubled in recent months and deals to forgive 20 to 70 percent of credit card debts are becoming common.

Just a few years ago, banks and credit card companies were far less likely to work with debtors. However, as the number of people filing bankruptcy grows so does the amount of bad debt that credit card companies are forced to write off. This has forced many creditors to change their debt collection strategies.

Creditors realize that consumers now have fewer options to pay off debts.

Debtors who may have used equity in their homes to pay off debts in the past no longer have home equity.

As costs of food and fuel have soared and many consumers have lost their jobs, savings have been depleted and filing bankruptcy becomes the only option.

So, if you have outstanding debt, consider giving your lender a call a having a chat. Perhaps you could pay off that account for less than you think.

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Posted in Your Credit Score | No Comments »