Archive for October, 2010

Bankruptcy to resolve debt collection lawsuits: timing is key to make it worthwhile

Monday, October 25th, 2010

Question: I am 9 months pregnant, not working, and I want to file bankruptcy to get rid of a $4100 debt collection lawsuit that I lost.  Please help.

My response:
A Chapter 7 Bankruptcy would discharge this debt collection lawsuit and judgment against you and any other personal debts you owe.  However, because you are unemployed, you may be judgment proof for the present time, which means that the debt collector will be unable to collect any money from you, if you have nothing on deposit in a bank or investment account, and no real estate.

If you have several debts that you need to discharge, perhaps Bankruptcy would make sense.  But, for one $4100 debt?  And you anticipate large medical expenses?  You should explore your other options first.  The video on my web site home page discusses your options.

Please also remember that once you file a Chapter 7 Bankruptcy, you cannot file another Chapter 7 for eight years. Much can happen in that time. Even if you have great medical insurance, it might not cover everything related to your maternity, medical care for your infant, and other expenses of raising a young family.  Perhaps you will have substantial hospital or doctor bills that you cannot pay during the next few years. If you file bankruptcy right now, then you must wait eight years to discharge all bills that arise after your filing.  That means the creditors and debt collectors will have eight years to call you about new debts and attempt to enforce them against your wages and bank accounts. Many cautious attorneys suggest bankruptcy only as a last resort, because it can only be done once every eight years.

Robert Stempler

Today Show on Debt Collection Harassment Gave Bad Legal Advice

Thursday, October 21st, 2010

On October 19, 2010, NBC’s “Today Show” ( aired an investigation on extreme debt collection calls and debt collection lawsuit abuses.  The threats and insults left by debt collectors on recorded voice messages was shocking, to say the least. The shocking calls should be heard by every American who is old enough to apply for a credit card or personal loan.  Please follow the link:

At the end of the report, the NBC senior investigative correspondent, Lisa Myers, offered her thoughts on how to deal with a debt collector.  Ms. Myers stated: (1) “If you get contacted by a debt collector, the worst thing you can do is ignore it.” (2) “If you do owe it [the debt], make some arrangements to start paying at least a little something.”

The first comment about not ignoring the call may or may not be a good tip, and Ms. Myers was short on specifics.  What if the debt collector has no regard for the collection laws?  Will responding to the debt collector really help or will it encourage more calls and more aggression?  Ms. Myers suggests that consumers contact the collector for documentation of the debt, but she does not suggest how to make such contact.

To call a debt collector may put the consumer on a fast track for the extreme insults and threats aired in the Today Show report.  Also, phone requests leave no paper trail.  The debt collector may violate the Fair Debt Collection Practices Act, if they ignore a timely written request for verification, but continue collection attempts.  Thus, verification requests should be by written letter, sent certified mail, within 30 days of receiving an initial letter from a debt collector.  A sample letter with more tips is at, letter number 1.1.

The second comment to arrange to pay “at least a little” on the debt could be a disaster, if the debt collection agency later files a credit card lawsuit against the consumer.  Under California law, these small payments may be used by the debt collector’s collection attorney to show that the lawsuit is timely, within the statute of limitations period.  Without these small payments, many debts become unenforceable in court.  Even small payments could extend the enforcement period for several extra years, under California law.

As to both comments, Ms. Myers would have been wise to suggest that consumers promptly consult with a consumer attorney experienced in debt collection harassment or debt collection lawsuits, for a credit card lawsuit or debt collection default judgment.  Ms. Myers also might have suggested that consumers file complaints about harassing debt collectors with the Federal Trade Commission, which tracks consumer complaints and reports to Congress, or complain to their state attorney general or department of consumer affairs.

The report remarked that “the deck is stacked heavily against consumers.” An experienced consumer attorney can help stop the collection calls and prevent a lawsuit from garnishing wages or freezing your bank account.

Deadline to Respond to a Credit Card Lawsuit, Do Not Confuse with Hearing Dates

Tuesday, October 12th, 2010

According to the county court papers, it said our court date was not till May 17th of next year.  Because we did not respond, can  they get judgment before that date? Does that mean they can start attaching her accounts before that date?

My response:
Yes, the debt collection lawyers can get a default judgment before that date. Hearing dates (such as for Order to Show Cause, Case Management or Status Conferences) that are noted on the papers served with the summons and credit card complaint or that are listed on the court’s web site for the particular civil case in which you are a party, are meaningless, unless you file with the clerk of the court papers that constitute a valid, response to the lawsuit.  Each defendant must also pay the clerk a fee with their first appearance in the credit card case, unless waived by the court’s business/financial aid office.

In California Superior Court (both Limited Civil and Unlimited Civil), the summons states:
NOTICE! You have been sued.  The court may decide against you without your being heard unless you respond within 30 days. . . . You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you. . . .”

If you were not personally served on the debt collection lawsuit, sometimes this deadline is extended by 10 calendar days, for service known as substitute service. The debt collection attorney could also extend the deadline, but you should confirm an extensions in a fax letter to or from the collection attorney.   There are other circumstances where a judgment can be set aside if you can show that you were not served or the form of service was improper, but that really does require an experienced debt collection defense attorney, if you want to succeed.

If you want to see sample the legal papers that have been used by debt collection lawyers in a credit card lawsuit, please follow this link to my website for collection lawsuit sample briefs.

Robert Stempler
Twitter @RStempler

Collection Calls by Second Mortgage Lender After Foreclosure by First Mortgage

Monday, October 11th, 2010

My home was foreclosed two years ago and the second mortgage lender calls every day.  What should we do?  We don’t want to become two-time losers in declaring bankruptcy a second time.

My response:
Bankruptcy is often the last option a consumer should try, after all other options have been unsuccessful or will clearly not work under the circumstances.  I discuss the options to people with a debt collection lawsuit on the first video at:

If no payments have been made in over two years, there is a chance that the mortgage lender or loan servicer may determine that you are truly unable to pay.  Thus, they might not bother suing you in a debt collection lawsuit or retain a debt collection lawyer based in California. Once the statute of limitations expires on those mortgage debts (four years from the date of your last payment under California law), you don’t owe it and they may not get a judgment against you on the debt. See my blog entitled, “Bankruptcy Alternative: The Don’t Pay a Dime Strategy.”

I have had one call from a consumer who was being told the debt collector of their second mortgage for $50,000 was willing to settle for $5,000. Once the second or third mortgage is unsecured by foreclosure of the first mortgage, the consumer is likely to be a good candidate for bankruptcy or have a sound defense to the lawsuit, which makes the lender willing to accept a fraction of the total balance owed in many cases.

Also, be sure to keep track of the calls and what is said.  If the calls or their frequency are harassing or abusive, that may violate the Fair Debt Collection Practices Act. The Act provides an award for your damages and attorney’s fees.

No one in these challenging economic times is a loser, if they learn their rights and know what options are available and the pros and cons of each.

Payday Lenders and their Debt Collectors Take Aim at Military Families

Sunday, October 10th, 2010

In September, 2010, the Attorney General of the State of New York announced that the investigation into the Buffalo, New York, debt collection industry has netted some pretty slimy catch: debt collectors aiming at our military families, who were unable to pay the incredibly high fees and interest rates on payday loans. The owner of one of the companies, Stephanie Lowinger, allegedly instructed his employees to threaten to contact and sometimes actually contact the commanding officers of the service members. See:

Threatening to notify one’s employer or commanding officer in the case of a member of our military violates the Fair Debt Collection Practices Act, 15 U.S.C. Sec. 1692 et seq., which severely limits communications by debt collectors to third parties. My firm has prepared a number of complaints filed in Federal District Court for service members here in California, involving similar threats and calls by debt collectors.

Also, I have represented consumers who have experienced debt collectors calling and revealing personal information to neighbors, siblings, parents, employers, coworkers, and children.

If the calls are intentionally placed to third persons who are not liable on the debt, then the only sure way to terminate such illegal collection acts is with a lawyer filing a collection under the Fair Debt Collection Practices Act (FDCPA), which provides for actual damages and attorney’s fees. If it is not clear that these debt collectors intended to reveal personal information to a third person, the consumer should put the debt collector on notice of their correct address and phone number and request that all communications be directed to this correct address and phone number. Such requests are best done in writing by certified mail, with a copy of the letter and postal receipt kept at least one year, which is the statute of limitations for FDCPA claims. Please see the sample letters 1.1 and 1.2 at

I have also had the honor of representing consumers who were sued on payday loans, in debt collection lawsuits. In my experience, the debt collection lawyers don’t sue for the full interest rates specified in the loan, they primarily want to get most of the principal paid back. Besides, the full interest rate would make most people blush, given how high they are and the people who agreed to them so vulnerable, financially.