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Jul 2010

Before bankruptcy: outlaw debt collectors

Posted by / in Before Bankruptcy / 4 comments

People who need  to file bankruptcy are often abused by debt collectors.

CNN Money reported Saturday that complaints against debt collectors to the Federal Trade Commission are up 50% from 2007 to 2009–and up another 15% this year.

“Harassing phone calls, abusive language and physical violence are becoming a bigger part of business as debt collectors struggle to round up money from people who don’t have it,” CNN reported.

People who need  to file bankruptcy sometimes feel too guilty to complain about these illegal threats.  My firm sues five or six debt collectors a month.  Two of three for harassment before bankruptcies are filed.  And another two or three for what they did after bankruptcy.   (There are a handful of lawyers nationally who sue debt collectors a dozen times a month, months after month. )

Most of what we sue on are what the collectors call “technical violations.”  Usually continuing to call after being told to call the bankruptcy lawyer.  Also, sending letters threatening to sue, when they don’t really intend to sue.   (We sometimes see otherwise law-abiding companies make seriously illegal threats when they are talking in Spanish to Spanish-speaking consumers.)

When the consumer is obviously reading from instructions given by his bankruptcy lawyer, most callers know to be careful.

Recently a handful of my bankruptcy clients have gotten threats of immediate arrest.  These are for payday loans that have been sold to outlaw debt collectors.  These outlaws clearly know they are illegal and don’t care.

We sued one of those outfits last falls and got a $10,000 judgment for our client–but there’s no chance to collect it.  (Although they had several US addresses, this outfit may not be in America at all.)

Suing to stop violations only helps when you are suing (mostly) honest people.   Really abusive collectors are just criminals.    Outlaw debt collectors use the telephone to threaten criminal arrest to extort payment.  They violate the Federal extortion statute, 41 USC 875(d).  They can (and should) be imprisoned for two years.

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Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.

  • eric g.

    January 24, 2011, pm31 11:47 PM

    i have filed bankruptcy in and all dept was discharged in 2008, i got a 1099-c form in the mail today 2011 from a bank .the letter informed me that i have to claim the charged off amount as earned income. is this just a collection atempt

    • Robert Weed

      January 25, 2011, am31 7:05 AM

      Yep. Legally, they should NOT do that. I talk about those 1099’s in my Feb 3, 2010 blog. Be sure to enclose something to the IRS saying it was discharged in your bankruptcy and you don’t owe tax on it. Usually that works the first time.

  • Robert Weed

    August 8, 2011, am31 10:09 AM

    The Attorney General of South Dakota is warning people out outlaw debt collectors on these payday loans. http://www.collectionsrecon.com/collection_news/aggressive-debt-collection-scam/.

    Hope he is successful in actually finding them. But like I say, they are probably beyond the reach of American law.

  • Nick

    September 27, 2022, am30 5:42 AM

    I am so grateful for your blog article.Really looking forward to read more. Fantastic.

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