THOUGHTS ON DEBT, DEBT COLLECTION ABUSE, AND BANKRUPTCY

By David B. Ross, Esq.*

Hard Times

Feeling the pinch of this economic downturn? You are not alone! Our law firm added debt relief services as a result of close friends and clients who were struggling with debt and debt collection. After talking with our friends and our clients, I realized there are lot if misconceptions about debt and options for debt relief including what creditors or debt collectors can and cannot do. More importantly, I realized that many good people end up alone and frustrated – afraid to talk and afraid to get help. That is the wrong approach and not only can it devastate credit scores for a much longer period of time but also the stress and uncertainty can lead to depression and anxiety. I wanted to the get the message out that you are not alone and that there are tools that can help in almost every case.

Hurting Nationally

According to the most recent data available from the United State Government, bankruptcy filings are on the rise. For the last reported period ending in 2010, there were 1,531,997 bankruptcies filed. That is a 27% increase over 2009 reported statistics. The national trend appears to be true locally as well.

Hurting Locally

While no local statistics were available for comparison, anecdotal evidence from our clients suggests that bankruptcy filings are on the rise locally as well. We have seen a lot of hard working folks who have been laid off who are simply no longer able to make payments on their credit cards, their mortgage, or their medical bills. It appears that there are lots of folks still reeling from Adelphia collapsing who have been limping along, who have not been able to find employment at the pay levels at which they were previously employed, and whose property value has decreased such that refinancing is no longer a viable option to provide additional income until the economy picks up. Likewise, lots of folks who started their own businesses have been unable to make a go of it. We have seen truck drivers who have had to contend with the dual blows of a bad economy and higher fuel prices. The result is that with decreased or negative cash flow coming into the business, folks are no longer able to repair and keep their trucks on the road, and the business goes with it. Unfortunately, the fuel bills, repair bills and other bills don’t stop when the trucks are pulled off the road.

Will the calls ever stop?

A common scenario that we see in our office is that once people fall behind, creditors and debt collectors begin to call and send letters and some of them are not very nice. While some contact between a creditor/collector and an individual is appropriate, many times the contact becomes abusive and designed to frighten and coerce individuals into paying debts they may or may not owe. As a recent example, the Pennsylvania Attorney General filed suit against a credit collection company in Erie, PA because it was allegedly using fake court notices delivered by fake deputies to trick people into showing up at a fake court appearances for the purpose of frightening people into paying money.

It is not only the content of the communication but the number of contacts that can be abusive. Some companies call repeatedly throughout the day and call friends, family and work. Other companies pressure people into giving them their account information for a “one time” payment by check and then continue to take funds out without authority to do so, which can result in overdraft and other fees to consumers.

Many of the practices outlined above violate the Fair Debt Collection Practices Act (FDCPA) and State laws. Congress and the Pennsylvania Legislature realized that debt collection tactics had become oppressive and put limits on what a creditor/debt collector could do. For instance, they are prohibited from calling except between 8:00 AM and 9:00 PM. They cannot call repeatedly. They cannot make false and misleading statements. They cannot collect an amount or fees not authorized by the original agreement. The cannot call and disparage you. They cannot call other people and disclose that you owe a debt in order to publically humiliate you.

The FDCPA also provides avenues to make the debt collector stop calling you. If you retain an attorney and inform them (preferably in writing) of the name of your attorney, they must cease contact with you. If you inform them in writing of your desire that that they stop contacting you, then they must stop calling and writing to you (with certain limited exceptions). This does not mean that the debt goes away, but it puts an end to harassing contact. The creditor still has the right to file suit and prove up their damages in court if they can. If they refuse to stop contacting you, this is an additional violation of the FDCPA.
Penalties for violation of the FDCPA.

If a debt collector violates the FDCPA, they are liable for the greater of $1,000.00 or actual damages. Better still, the debt collector has to pay your attorneys fees, so law offices like our office will handle your claim for you with no fee to you. The goal of this legislation is to stop oppressive collection activity while providing for legitimate contact between debt collectors and our citizens. Enforcement through private legal actions ensures that creditors are not abusive to our citizens.

Keep your head up

Bankruptcy takes a bad rap, but it shouldn’t. The idea of a fresh start has ancient roots. For example, you will find in the Bible debt forgiveness every seven years in what was known as the Year of Jubilee. Try as we might, we have not been able to find a better solution to insolvency. Our English cousins tried debtors prisons. Thankfully, we rejected that idea. Throwing people in prison did nothing to address the debt. It did not help society, and did not help the debtor to be a producing member of society.
Bankruptcy is good for debtors. It gives them a fresh start. It helps them to become producing members of society. Today, the modern prison is the debt collection box where creditors impose interest rates so high on people that they can never pay off debt once they fall behind, and these rates apply regardless of the reason that people fall behind. That means that the hard working Joe is treated the same as (what I believe is the extreme minority of people) the person who is simply irresponsible. That means that there is no way out regardless of how hard an individual works. Under a Chapter 7 bankruptcy, qualified individuals can get rid of unsecured debt and keep what they own. For individuals who make too much money, own too much stuff, or are behind on their mortgage payment, a successful Chapter 13 Bankruptcy Plan allows them to pay back some or all of their creditors over time and keep their house.

Bankruptcy is fair to creditors. Most creditors today who extend credit are very sophisticated companies who assess credit risk and charge interest rates based upon risk. The inability to repay the debt is a risk that is factored into the cost of credit and many times the debts they seek to collect are mostly the result of interest, late fees, over limit fees and the like rather than credit actually extended to consumers. Bankruptcy protects creditors by making sure there are not any hidden assets, limiting the amount of years between filings, forcing the sale of certain assets if individuals have too many assets, and when individuals have sufficient income – creating a repayment plan that pays creditors back over time (Chapter 13 Bankruptcy).
In summary, these are difficult times. Bankruptcy filings are on the rise, and they serve a good purpose in our society in clearing out debt that hard working folks cannot pay regardless of their desire to do so. Dealing with delinquent debt is difficult enough without people harassing you, but you don’t have to let them kick you in the teeth. You can force debt collectors to stop harassing you. The best approach is to be proactive. Come to terms with the problem and take active steps to tackle it. Bankruptcy may be an option, but you should explore all of your options and find the one that best suits your needs.

If you would like further information on bankruptcy, debt relief, the FDCPA, or stopping harassing debt collection practices, feel free to contact our firm at (814) 274-8612. There is no fee for the initial consultation.

* David B. Ross is a partner at the law firm of Ross & Ross, LLC

From offices in Coudersport, Potter County, Pennsylvania, Ross and Ross, LLC serves the personal injury, bankruptcy, social security disability, divorce and family law needs of Western, Northwestern, Central and North Central Pennsylvania including the communities of Coudersport, Galeton, Shinglehouse, West Branch, Smethport, Port Allegany, Bradford, Roulette and Wellsboro, as well as Potter County, McKean County, Tioga County, Bradford County and other areas of Western PA and Central PA.

* Federal law requires the following disclosure: We are a debt relief agency helping people file for relief through bankruptcy under the bankruptcy code.

** There are other types of bankruptcies. Chapter 11 is for businesses and chapter 12 applies to farms.
***Legal Disclaimer: The contents of this site are for informational purposes only and do not constitute legal advice. No lawyer-client relationship exists until one of our attorneys meets with you and agrees to accept you as a client.

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