When a client retains us, they are permitted to send their collection calls to us. We will tell collectors that we have been retained for bankruptcy purposes, we will take their information, and in most cases, we will even send them a letter telling them of our representation, and telling them not to call our clients any more. But today, we received an interesting phone call wherein the collector admitted that it had no clue about the law.

This collector was “in house” – meaning it was a call from the creditor directly. In this case, a major retailer. The collector asked us why we were representing our client. We told them. The collector then asked, “well, we were wondering why if they are filing bankruptcy, why have we not received a payment in the past six months.” Huh?

Then, they continued. “Well, they have to go through the six month mandatory credit counseling before they file bankruptcy, and we should have gotten a payment during that time. Our supervisors told us that credit counseling is a prerequisite to filing bankruptcy.”

There are a number of articles on this site about the credit counseling requirement. The collector (and the supervisor) is wrong. Flat out, sorry-there-are-lovely-parting-gifts-for-you- back-stage, wrong.

But something occurred to us.

Is this lie something that collectors are telling distressed debtors in an effort to get paid? Based on the sheer surprise of the collector when we told her what the pre-filing requirements really were – we tend to think “yes.”

Posted by Bill McLeod at 2:58 PM | Permalink | Comments (2) | TrackBacks (0)

I’ve often commented on the sad tactics debt collectors use to shake down distressed debtors. Fortunately, there’s no prize for the sleaziest tactics. If there were, Alpine Credit Inc. out of Lakewood, Colorado would win a blue ribbon.

A client of my colleague and fellow NACBA member Will Evans received a letter from Alpine that conveyed this delightful message:

“The bench warrant from your arrest will remain in effect until your judgment is satisfied. We are confident, at some point in time you will be pulled over for a traffic violation, will need to renew your drivers license, or will be arrested at your home. You must post a cash bond before you will be released from jail. Your failure to face the seriousness of this matter will only result in further expenses.”

Interestingly, Alpine Credit apparently touts itself as being “professional”, “ethical” and “legal.” For real.

Will tells me that his client was “…in extreme distress because she was afraid to take her kids to school for fear of being pulled over and arrested in front of them.”

At the risk of sounding unprofessional, what kind of desperate little scum-bag bill collector needs to descend to such levels? I can't imagine it's ethical, and I know it's not legal.

Most people would – if they could - pay their bills. The last thing struggling folks need is a letter like this…and the fear and sleepless nights it spawns. A violation of the Fair Debt Collection Practices Act? You bet. But perhaps more importantly: it's just plain wrong.

Posted by Bill McLeod at 10:03 PM | Permalink | Comments (0) | TrackBacks (0)

The American Bankers Association is telling the Arizona Republic that the new bankruptcy laws (which will have it's first anniversary on Tuesday, October 17) is working as it was intended. Fortunately, there is more than one source for news. Delaware Online reports that after one year, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is not quite doing what bankers had hoped or paid for.

Certainly, bankruptcy attorneys - including yours truly - would agree that there has been a substantial drop in case filings. A Toledo Blade report attributes the drop in filings to higher legal fees and a “difficult” income test. Most bankruptcy attorneys have had to increase their fees since October 17, 2005 due to the increased work on a typical bankruptcy. In many cases, the work has doubled than it was under the old law. However, I am not convinced that the means test is “difficult.” While it’s an extra form, and more paperwork, I cannot say however, it is “difficult.”

What remains difficult is the struggle people face in dealing with debt that's grown out of control. That difficulty is only intensified when debt collectors get ugly. From the Pittsburgh Post-Gazette, this year the Pennsylvania Consumer Protection Bureau has received the highest number of complaints against abusive debt collectors than any other industry, such as telephone companies:

Take the case in which a collection agency telephoned a woman's 5-year-old daughter, ordering her to tell her deadbeat mommy that she'd better pay her credit card bills.

I have to wonder: did the bill collector also tell the 5-year-old that mommy could not file bankruptcy anymore because it was too expensive and there was a difficult income test? I hope not. Debt collectors are not supposed to lie.

Posted by Bill McLeod at 2:52 PM | Permalink | Comments (1) | TrackBacks (0)

The Boston Sunday Globe's Magazine asks this question:

As property values soared, we got hooked on the idea of using our house as a bank, pulling out blocks of equity to pay for renovations, vacations, and more. Now, will the softer real estate market cost some of us our homes, our shirts, even our retirement?

For many Massachusetts homeowners, the short answer is yes.

Posted by Bill McLeod at 2:42 PM | Permalink | Comments (0) | TrackBacks (0)

Congress has approved changes to the Fair Debt Collection Practices Act. In her blog, Harvard Law School Professor Elizabeth Warren explains why she's not happy about it.

Posted by Bill McLeod at 9:17 AM | Permalink | Comments (0) | TrackBacks (0)