Expert: Regan Shinski - 7/12/2010

Question
QUESTION: I have a unsecured credit card debt that has been charged off about a year and a half ago or so , and has changed hands (collection agencies) more than once . A collection agency represented by a law firm trying to collect on an unsecured deebt that has already been charged off by the original creditor . I don't believe they can do this . I am disabled now and cannot work and am on disability fixed income , I cannot pay . What can I do ?

ANSWER: Hi Garry:

I'm not sure exactly what you are saying they can't do.  Accounts often change hands multiple times and are sold to different creditors and collectors.  Many are - or use - attorneys to collect it.  It is legal and common unless they are incorrectly reporting it to the credit bureaus.  There errors usually involve dates.  For example:  Original creditor owns debt from 2004-2008 and there are several late payments and a chargeoff.  Then it is sold to collection agency in 2009.  They work it for a year and sell it to another collection agency in 2010.  All three accounts can report but there is only one owner of the debt at any given time so the dates should not overlap.

However, it can get even more complicated with some exceptions if the collection agencies are only collecting the debt and do not own it.

I'm not trying to get overly complicated or confusing, just saying that this is traditionally a very weak argument in terms of their violating the law.

Your first priority is to protect your income and assets.  If you are on disability income, you need to make sure this income goes into a bank account that ONLY deposits this income.  Open a new account if you need to.  I mean ONLY - repeat ONLY - disability income can go into this account.  If you find a dollar bill on the street do NOT deposit it into this account.  Tell the bank it is a disability income account and make them put a note on the account.

The reason you do this is that this type of income is protected from wage garnishment and collection but the bank has to be able to easily see that there is no mixing of funds.  This way if you get a judgment against you down the line, your living expenses are protected.

Beyond protecting your income, you can try and complete credit repair, try and settle the account (for less or for terms) or file bankruptcy.  Each of these options are lengthy and really depend on your situation but you can look into any of those options as a pre-emptive strike.

Good luck.

Regan

---------- FOLLOW-UP ----------

QUESTION: I'm sorry I wasn't clear on my question . Who can get a judgement on my account ? My understanding is that only the original creditor can file for judgement until it gets charged off . If after debt is charged off , and gone thru collection agencies , can the colletion agency/their law firm get a judgement . I was served a Summons telling me this , there is no court date or time to appear (they do tell me which court). I don't/can't work because of disability . I do get an occasional residual check of about 20-40 dollars every 2 or 3 months but that will be stopping soon . Thanks , I hope this is more clear and you can help me . Basically , my question is who can file a judgement on me ?

Answer
Hi Garry:

A chargeoff is strictly an accounting maneuver.  It really has no meaning on the liability of the debt, if the debt is owed, or who can sue for it.  It sounds really good for the debtor - like the "charged it off" and will not pursue anymore, but that is not accurate.

Who can sue you is the legal OWNER of the debt or their attorney acting in their name.  Debts are bought and sold just like a car or house.  However, OWNS the debt can sue for it.  What you are describing is very common and most often legal but you should verify.  you could send a letter to the collection agency asking for VALIDATION under the FDCPA.  Specifically ask them to prove the own the debt.  (BTW: if they are calling you a lot, you can also put a note in that letter that you want all future communication to be in writing.  This legally should stop them from calling you.)  Send it certified mail.  You can also send a letter to the original creditor asking them who owns the debt.

These companies are legally obligated to provide proof of ownership of the debt.  Otherwise, what is to prevent ME from sending a letter to YOU saying you owe me this money!

Good luck, I hope this helps.  Be sure to protect your fixed income as I mentioned above.  Once a judgement is in place they can freeze or attack your bank account without warning if you don't protect it.

Regan