Posts Tagged ‘free sample letters’

Living Paycheck to Paycheck, Debt Collector Wants Too Much to Settle

Monday, February 18th, 2013

Question: Like so many others in this economy, I can barely pay my current bills, so I had to stop paying the minimum on some of my credit cards. The phone calls and final notices for payment from the banks stopped about a year ago, but I just received a letter with a settlement offer from a debt collection company, which also says that I can dispute the debt within 30 days of receipt. What do you suggest? At the end of the month, there is still nothing left over, after regular expenses, living as cheap as we can. I cannot pay the settlement, but I am afraid their next move will be to sue me in court, like your website says. My wages are higher than the bankruptcy means test amount, so I need help.

My response:
As you know, you are not alone. Now, 41% of Americans live each week paycheck to paycheck, according to a recent survey by Allstate, covered in the LA Times Business/Money Section. After several months of no credit card payments, the bank charged off your account as a bad debt. A charge off is an accounting term to show that the debt is probably not collectable, so bank auditors will no longer allow this to be considered an asset of the institution.

At that point, the credit card bank reviewed its uncollectable accounts and sold many of them to a debt collection agency, known in the industry as a “debt buyer.” Either this debt collection agency or another debt collector is now contacting you to settle this debt, which now belongs to them. If you do not settle soon, they may refer the debt to a collection lawyer licensed in California, who will probably file a lawsuit in the Superior Court that covers where you live, if settlement arrangements are not made in writing. I explain the reasons in an article on my website, Understanding Why You Were Sued.

It can be less costly for the consumer to settle when no lawsuit has been filed and the lawyer has not been retained, because the debt buyer has not paid for those costs and fees. However, depending on the debt buyer’s policies, it still may be unaffordable or you may feel that they want too much to settle the debt, which did not cost them much to buy. Bear in mind, however, that if they sue you in court and win a money judgment, the amount will probably be the full balance on one of your last statements, plus accrued interest, court costs, and maybe attorney’s fees. The judgment may then appear on your credit reports and be secured as a lien on any real property (such as your home) by recording an abstract of judgment with the County Clerk or Recorder’s Office. There are numerous other ways that the collection agency’s lawyers can enforce this debt, such as by levying the consumer’s bank account and wage garnishment.

As painful as a settlement would be now, a worse alternative is having to pay this entire account plus interest and attorney’s fees on a money judgment that itself yields 10% interest per year and many costs can be added to the balance. By the same token, I would not accept any settlement offer that the consumer cannot ensure will be paid, exactly as promised. This would only put you in a worse position, as the discount that you negotiated in the settlement will be lost and the payments will merely be applied as credits towards the full balance due.

When agreeing to a debt collection settlement, you as the debtor should know that the collection agency will require you to acknowledge in writing the full balance due. If you miss one or more of the settlement payments, then they will have a much easier time enforcing in court the full unpaid amount of the debt. This would not limited by the settlement amount. This lawsuit would also not be limited by the fact that some debt buyers lack adequate documentation of their debts and it can challenging to obtain the full records for the account.

Your question also asked about a written dispute, because the debt collection letter states that you have the right to get it verified in writing or to dispute it. You may want to access the free consumer letters on my other web site, sample letter #1.1, which contains the language that I recommend for this purpose. Be prepared, however, for a simple letter back from the debt collection agency that says we have verified it. There are court cases that make this an adequate verification of the debt, so they can continue their collection efforts. I am not aware of potential harm from sending the dispute letter, but asking them to verify the debt in writing can make them more “aware” of you.

Robert Stempler
Twitter @RStempler


Credit Reporting of Non Existent Small Claims Court Money Judgment

Tuesday, May 15th, 2012

My credit report shows a money judgment from small claims court, but that debt collection case was dismissed when we settled before the case was called.  I have a document showing dismissed and I am applying for a job that may want to check my credit records.

My response:
You probably had a local company sue you in small claims court to collect its own debt, because debt collectors typically are not permitted to enforce in small claims court debts that were assigned to them.  (Cal. Code of Civil Procedure, Section 116.420, subd. (a).)

Please check the small claims court’s record of that case to verify it was dismissed.  Then send a copy of the case record (showing no money judgment, dismissed) with a cover letter to dispute this on your credit report. My Firm’s web site’s ( sample letter 3.1 would be a good form to follow and already has the addresses for the big three credit reporting agencies. If you only need to dispute with one of them, then remove the other addresses and send it to the one that is reporting this money judgment. Please also be sure that you follow the letter writing tips, such as keep a copy for your records and send by U.S. Certified Mail, return receipt requested. Once disputed, the agencies by law must investigate or remove within 30 days of receipt.

If you find that the court mistakenly entered a money judgment in the collection case in small claims court, then before you can dispute this on your credit reports, you must get the court’s record corrected and the judgment reversed (vacated, set aside).  You may need to file a motion with the court to set aside an invalid default judgment.  See Cal. Code of Civil Procedure, Section 116.740, for the procedures to vacate an improperly entered default judgment.  However, it sounds as though you were properly served and appeared at the hearing, so that you may need to file in Superior Court a separate complaint in equity and have a trial to vacate the improper default judgment, taken without your consent.  This is a complex proceeding and you would be well advised to consult and retain experienced legal counsel to ensure that the case and law are properly presented, or the court may not grant the relief that you need.

Robert Stempler
Twitter @RStempler

Debt Collectors Checking Your Credit Reports Without a Court Judgment

Saturday, April 2nd, 2011

Can a zombie debt buyer or debt collection lawyers pull my credit reports, when they don’t have a credit card judgment on the original debt? Can they pull during the course their debt collection lawsuit against the consumer, before they have obtained a judgment for money?

Yes. Until the case is settled in full or paid in full or discharged in bankruptcy or discharged by operation of law (such as past the statute of limitations or dismissed with prejudice in court), the creditor and its assignees and agents can view the consumer’s credit report for purposes of collecting the debt.

The Fair Credit Reporting Act, 15 U.S.C. Sec. 1681b determines the situations when a company can view a consumer credit report, including debt collection agencies and their attorneys. Even without getting a judgment, they can view the debtor’s credit report because it is “in connection with . . . collection of an account of the consumer.” There are other parts of the statute which also give a creditor or debt collector the ability to review credit reports, if the debt is unpaid and remains a viable debt.

If you believe that someone has obtained your credit report without a legitimate purpose, as specified under the above section, then you should send them my sample letter 3.3 (link to free letters) by U.S. Certified Mail, return receipt requested. Please be sure to keep a copy and send the letter to the address on your credit report for the company listed under inquires, which you believe had no legitimate reason to obtain your report. Please also note that there is a statute of limitations, so stay on top of this or there will be nothing you can do about it in court, if you wait too long or find out about it too late.

Robert Stempler

You Are Ordered to Appear in Court on a Debt

Thursday, November 11th, 2010

Imagine a sheriff’s deputy coming to your home or workplace, asking for you, and handing you a legal document that summons you to appear in a courtroom on a debt collection lawsuit for a hearing or deposition. You show up at the building at the appointed time, enter the courtroom, and are sworn in by the bailiff. Then the judge or someone else asks you questions about a debt you did not pay and why you have not settled it. You provide your credit card number or sign over title to a vehicle, so that they can settle the debt, then you leave.

It’s all true, except that the sheriff’s deputy, the bailiff, the judge, and others involved are all employed by a debt collection agency, not the government. The courtroom was a mock courtroom in office facilities rented by the same debt collection agency. This happened recently to hundreds of consumers in Erie, Pennsylvania, according to charges brought by the Pennsylvania Attorney General.

The news story and video are at this Pittsburgh News site:

Yet another low for debt collectors trying to collect credit card debts in a tight economy. Who could have expected that they could go any lower than the automated phone calls that debt collectors place day and night to consumers, the calls about the debt to family members and friends, and the over-the-top harassing calls from debt collectors based outside of the United States? But, they managed a new low!

This conduct violates several provisions of the Fair Debt Collection Practices Act and may also violate laws against impersonating an officer or a government official. Don’t let this happen to you. Any document or calls to collect an unpaid debt should be carefully vetted using reliable websites or direct contact with a consumer attorney, with expertise in defending debt collection lawsuits and credit card lawsuits. And, don’t waive your rights. Ask for written verification of the debt in writing, as stated in letter 1.1 at .

Robert Stempler