Archive for February, 2011

Settling a Debt: Documentation Made Easy

Sunday, February 27th, 2011

I was able to negotiate a good settlement with a debt collection agency. It is about half of what I had originally owed to the original credit card bank for this account. I want to be sure that I handle this properly, so that my payments are properly credited and the settlement documented. Can you offer any tips to protect myself?

My response:

I have prepared for such problems two new legal guides on  In particular, please read my Debt Settlement Guide #2, which gets into specifics on the documentation that you should have of a settlement agreement for a debt, before you pay anything to settle a credit card debt.  Also, Guide #3 freely offers specific language (several “Debt Settlement Terms in a Box”) so anyone can have free sample settlement terms to settle a debt with any debt collection agency or creditor.

You no longer need to rely on the debt collector to handle the paperwork or a debt settlement company. Of course, I offer give it to you for FREE. Please read the legal guides carefully and contact me for further help or if you are sued on the debt.

Robert Stempler

Advice for Retired Couple with Paid Home and $100,000 Debts

Saturday, February 26th, 2011

Several Questions:
I am retired and my wife works part time, due to her physical limitations.  Our home mortgage is completely paid off and we have a rental house with a mortgage, but positive equity, so we would not qualify for a Chapter 7 Bankruptcy. Considering this, how likely is it that we will be sued and can they collect?

We have about $100,000 total in credit card debts and I have been able to negotiate a lower interest rate with almost all of them.  There was only one credit card company (HSBC) that would not negotiate, but I have avoided all contact with them so far in the hope that they will leave us alone.  If sued, should we keep our checking account balance to a low “operating” level to pay bills? Should we take money out of a 401k employer retirement plan?

My response:
Thank you, sir, for your thoughtful questions and background details.  Avoiding contact with a company, such as HSBC, does not mean that they will leave you alone and not pursue you in court for the unpaid balance.

In my experience representing consumers, the five companies most likely to directly file a credit card lawsuit within a year or two of not receiving payments are:
HSBC / Beneficial
American Express
Citibank (which also operates the Sears credit card program)
JPMorgan Chase Bank
Capital One Bank.

Of these five, Chase sells many of its accounts to debt collection agencies (known as “debt buyers”), rather than sue in its own name.  Chase also has its own department of lawyers in Los Angeles and in Northern California, which they use for filing many credit card lawsuits in California to enforce their credit card account agreements against California residents.

With the real property recorded in your name, the companies that I mentioned are likely to sue you. Whichever lenders or debt collectors that sue you, they will probably not accept low settlement offers, because they can secure the judgment on your real property, if they prevail in the credit card lawsuit.

The debt collection lawyers cannot touch your retirement or Social Security benefits, unless you leave it to accumulate in a bank account, above certain levels.  If you take money out of an employer’s 401k, that money could then be attached in a bank or investment account.  Thus, take money out only as needed to settle a debt or for other critical needs.  Please do not take out your full retirement balance and leave it in an account like a sitting duck.

I don’t know how much your wife makes in her part-time position, but she could be sued on this debt, too. If the creditor wins a judgment, the debt collection lawyers would attempt to garnish her wages.  The amount below the federal minimum wage for a 30-hour work week, after taxes, is exempt from garnishment.  Above is not exempt and can be garnished, though you can seek a claim of exemption from the court. Please see my article at this link:  Making Garnishment Bearable.

Typically, debt settlement companies advocate a program where you pay them a monthly payment, while you stop paying your accounts.  After a while, these debt settlement companies will try to negotiate a settlement with your creditors or debt collectors, hoping that they can settle the debt for a fraction of the balance owed.  I would not suggest you try this strategy, because you have so much exposure with your home and other real estate.  Also, avoid debt settlement companies, as the U.S. GAO did a report to Congress that these companies make people worse off than if they were before.  See my article on Avvo at this link: Debt Settlement Ripoff

As far as your checking account, I would not leave any account open if you lose and a judgment is entered, because the debt collection lawyer will levy any open account on the hope that you may have made a big deposit recently. Your own bank will charge you a processing fee for handling the levy, which can be very expensive.  Any outstanding checks you wrote on the account will bounce, once the sheriff shows up at your bank with the levying papers.

Robert Stempler

Can My Letter to the Debt Collection Attorney Slow Down or Prevent a Lawsuit?

Saturday, February 5th, 2011

I received a letter from a debt collection law firm here in California on a credit card debt  that I was unable to pay.  Right now, I don’t have the money to settle it and I am pretty sure they will sue me if I don’t do something.  I don’t want to file bankruptcy for a couple of debts. Is there anything I can do to delay (or prevent) the lawsuit, such as by sending them a “cease and desist letter” or asking them to verify the debt?  I’ve also seen letters on the internet that ask for a list of things, which may take them some time to answer.

It would be a pretty neat trick to imagine what you–the consumer–could do, other than settling, to delay a credit card lawsuit, when it is in the hands of a California debt collection attorney.  Unless you have a substantial dispute, such as identity theft or not your account, I don’t see your writing a letter will delay the lawyer’s filing the debt collection lawsuit against you.

In fact, I suspect it could have the opposite effect. Your letter may get answered in a few days with a standard form letter by the lawyer, then your file is at the top of the pile of debtors they will sue this week. The long letters with lots of demands and questions on them are not worth anything, as the law does not require them to answer most (if any) those annoying questions. Unless you’re the victim of identity theft or they sent the letter to the wrong person, writing a verification or cease letter does virtually nothing to slow down their filing suit against you, if your number is up.

No one really knows and each law firm may have different procedures on when they file suit. Some may have a first come first serve basis. Others may select the cases to sue based on how close the statute of limitations is to expiring. Still others may select them by size of the debt and by whether they believe you are more likely to have a decent paying job or a home with equity that they can attach.

Debt collection is all about numbers, which is why it probably does not matter whether you write a letter or not.  If your number is next, they will respond to the letter then file the credit card lawsuit and serve you with it.  Please be sure you know what to do next, by reading my blog posting:

If I can offer you a free case evaluation, please go to the main web site to click the red button for a free eCase Review.

Robert Stempler

Wrong Person Served: A Case of Mistaken Identity

Thursday, February 3rd, 2011

Someone handed me a summons and complaint for a credit card lawsuit with my name on it.  I did not have any credit card with this lender. What should I do?  How do I know if I am the victim of identity theft?  If this is someone else’s debt, can I ignore the lawsuit?  I don’t want to pay the court’s filing fees or hire an attorney, if possible.

My Response:
Credit card lawsuits are serious business and without a proper response filed in court, the debt collection attorney will request that a default judgment be entered against the defendants who are served but fail to respond.  If the summons and complaint are in your name, then the judgment will also be in your name.  Thus, the debt collection lawyer may apply the judgment as a lien on your real property, a levy on your bank and investment accounts, a garnishment against your wages, and other enforcement attempts.

The fact that this is not your debt is something that you can present to the court only if you or your debt collection defense attorney file a response in court before the deadline expires. See my blog posting on this deadline: Otherwise, a default judgment may then be entered, which terminates the defendant’s right to oppose the judgment, without considerable extra paperwork and expense.  You may end up having your personal funds used to satisfy a default judgment for the full balance claimed in the credit card lawsuit.

It feels pretty bad paying someone else’s credit card debt.  Top off that feeling with having someone else’s bad debts also ruin your good credit by appearing as an derogatory public record on your credit report and jeopardize your employment, if the nature of your work requires that you have no bad debts.

Please see my blog posting on how to respond to a credit card lawsuit:

If this turns out to be an identity theft account or you would like to see if that is the case, as opposed to mistaken identity with someone else having a similar name, please see my identity theft legal guide on

Never ignore a credit card lawsuit without consulting experienced defense counsel.  If you are able to get the case dismissed, you may be able to recover your court costs and attorney’s fees.

Robert Stempler