Expert: Regan Shinski - 1/20/2010

Question
I have begun receiving daily collection calls a collection company for a debt that they say my dissolved corporation incurred in 2007.
First of all, I dispute that the debt is owed, I NEVER agreed to the services or to pay what they are saying I owe. A single corporation ($500/ month billed) was split into two and the service company automatically began billing twice the amount without creating or getting a new agreement approved. This new billing amount was presented as a surprise after 4 months when debt had reached $2000 without me knowing.
I assume I have begun getting collection calls because the statute of limitations was about to be reached. The corporation was dissolved by the state of Texas some time after the alleged debt occurred. Now a collection company is coming after me personally, threatening to sue, calling me daily, and saying they will put this on my credit report.
I sent them a letter quoting the Fair Credit Reporting Act and asking them to stop, they claim this does not apply to businesses, but they are not calling and harassing a business, they are calling an individual who no longer owns the corporation. They are also threatening my personal credit report.
I don't know how to protect myself and my credit rating from this debt I do not owe. I no longer live in Texas. How do I dispute this debt? How do I stop the harassment? How do I prevent this from appearing on my credit report? Can they sue me if I no longer live in the state and the corporation no longer exists? Should I sue them or the original creditor? Please help!

Answer
Hello Cory:

It's a complicated situation.  There are two issues to discuss; liability and process.

You seem to think you are not liable for the debt so I'm not going to spend too much time on it and assume for the rest of this answer you are NOT liable for it and that you can win by proving it in court.  Just make sure you never had a personal guarantee and that your company was properly structured and maintained to keep the corporate veil of protection intact.

Your second problem is how to proceed.  Sadly, you really cannot sue until you have damages and, at this point, what are your legal damages?  It's backwards, but the usual process is that you get sued or have a negative action take place against your credit.  At that point, you could sue the original creditor for damages and a correction of what took place.  I know it's stupid but there are two parts to every lawsuit:  liability and damages and right no you have no legal damages.

Alternatively, you could pay or settle the debt - keeping it off your credit, then sue the original creditor basically for a refund.  Obviously, that is really putting your money at risk but it should protect your credit.  If you choose that route, be careful of the settlement.  try and get something in there that says you disagree with the debt but are paying to protect your credit.  Make SURE it is not a final settlement relinquishing your rights to sue after payment.

If this is a credit card account, you could dispute the charges through Visa, Mastercard, or American Express' dispute procedures.

To answer your additional specific questions, they can sue you regardless of the state you live in but, in general, they have to sue you in a court in your home state.  You should seek dismissal or relocation of the venue if they sue you in Texas and you no longer live there.  As discussed above, they can sue you if there is a personal guarantee or if the corporate veil is broken through poor paperwork or how the legal entity was set up within Texas law.

Good luck, I hope this information helps.

Regan