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Collections Law/Made court-ordered payments to collection agency; they transferred the debt to another collection agency with no notification to me

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QUESTION: Hello Mr. Hertz,

I fell behind in court ordered payments to a collection agency.

I called this collection agency to see if I could pay all I owe them now at this point in time to bring the account current, only to find that since the last time I had paid this collection agency, they had transferred my account to another collection agency! I have not received any notification that this transfer had taken place. I have not received any late notices on payments, nothing regarding this matter from this current collection agency holding this debt. This has been since 10 months ago.

What do I do now? What can I do at this point in time?

Thank you for your time and attention to my message.

Sincerely,
Ann

ANSWER: I can think of only three possible things to do: (1) see if you can get the phone number, name and address of the new collection agency and try to contact them; (2) put the money necessary to bring the account current aside and keep saving until you are contacted; or (3) see if you can find out from the court if the court order has been transferred in some fashion (seems unlikely, but it would depend on the state).

The real problem is that interest is accruing that is unpaid.  But you are entitled to send a check to whatever entity holds title to the judgment at the last known address if you wish.  

You could also check with the court.  You may be entitled to pay the money into court since you cannot find the judgment holder.

There is also the possibility that they have lost track of you or lost the judgment in their file.  In which case they may never come after you.

You are the one who has to make the call on that.  

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

QUESTION: Hi Mr. Hertz,

Thank you for your advice. These following few paragraphs are in response to the enumerated courses of action you had just sent me in response to my original question to you:

Possible action #1: I have the new collection agency's number, name, but no address. I am terrified to contact them only because I was late in my payments. I do not want them turning around to tell me I was late in paying and have them initiate legal action against me.

And a related question: Can legal action be brought against either or both of these agencies since they had left me out of the loop with their actions on my account?

Possible action #2: I do have the money put aside to bring the account current. I am intending on saving until they do contact me, if they will.

Possible action #3: I have some questions here: Why would the court order be transferred? How would this affect me? (By the way, the area code of the new agency is in Ohio.)

More background information on this issue:

I am in CA in Alameda County. This judgement was obtained at the Alameda County Superior Court.

The lawyer who represented me hammered out a fixed settlement amount with no interest accruing on this amount. According to the settlement papers, I would just make a fixed payment of x dollars a month until that fixed settlement amount was reached, and that would satisfy paying this debt off.

Mr. Hertz, given all of this, I also have this one burning question:

Could I file for Chapter 13 in regard to all of this?

If I could file for Chapter 13, this would provide me a world of peace in regard to this matter.

Mr. Hertz, thank you for your time and attention to my concerns.

Sincerely,

Ann

ANSWER: You can certainly file a Chapter 13 if you want to, but it sounds as though your deal through the original judgment is better.  I would call and find out if they have a judgment against you.  Just inquire innocently.  See if they have any information at all.  Don't give your address or telephone number.  Just call until you are satisfied that they know you owe the money (they may not!)  You can probably get them to put you back on track, under all the circumstances.

A Chapter 13 costs, so unless you have other serious debts, bankruptcy may not be a good way to go.  You'd have to give me more of your background and balance sheet for me to advise you further.

They can transfer the judgment without your agreement.  But it may have fallen between two stools, as it were.  Who knows?

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

QUESTION: Hi Mr Hertz,

Thank you again for your prompt response.

Here is some more information on this matter to help you advise me further if Chapter 13 may be a way I can go:

This was my original judgement: $24,000 at $500/mo. I have paid $11,500, leaving $12,500 as the remaining balance.

I have student loans at 13,036.93.

I have a payment plan on back property tax. I am on a five-year payment plan. Come 4/10/2015, it will be my 4th year on this plan and I will owe my 4th payment on this day. I owe 8,217.57. I am billed once a year.

I do not have a car note.

I own my house outright.

I do not owe any federal or state taxes.

I have no credit card debt.

I have roommates that have been providing me with $1500 to $2286 for rent a month, depending on their length of stay, and if there are two or three roommates living here. I am not reporting this income.

I am a substitute teacher. Sometimes the work I get is very frequent, or infrequent each year. This work has been inconsistent. The most I have been paid has been $2500 a month through teaching.

My monthly expenses are:

Homeowners Ins.: $70.00
Auto Ins: $25.00
Electricity: $20.99
H2O: $29.78
Food: $50.00
Garbage: $12.27
Property Tax for one year (not on that plan I mentioned above): $312.50

So, my monthly expenses are about $520.54.

Mr. Hertz, I do have this question: If I approach a lawyer who specializes in Chapter 13 to try to obtain a Chapter 13 judgement, could this lawyer or any lawyer refuse to deal with me because of my prior settlement judgement and involvement with another lawyer over this matter? (My original lawyer who negotiated my settlement; her specialty is family law.)

If this fell through the cracks where I never hear of this and it was lost forever...all I can say is wow...someone may be looking after me.

But, I would still be scared of looking in my mailbox, at least.

Mr. Hertz, thank you again so much for your help.

Sincerely,

Ann

Answer
Ann --

I don't think Chapter 13 would do much for you because you own your house outright.  You didn't say what state you are in or what value your house has, but I suspect that your homestead rights will cover less than half the value of the house unless you live in Texas, Florida, or some other place with very high homestead rights.

A Chapter 13 lawyer would have no problem representing you.  The prior settlement judgment doesn't detract in any way from your rights.

You cannot discharge student loans in bankruptcy (except in extreme circumstances) and you have no other debts except the judgment, so far as I can see.  So your best bet is either to call the collection agency and try to sniff something out (that is, information about whether they have heard of you) or just sit there and keep saving money towards the debt, hoping that they never come after you.

Even judgments expire.  In California (where I am from) they are good for 10 years.  Here's a list of other places.  http://www.cardreport.com/laws/judgement-sol.html.

I strongly suspect that if they did make a demand on you, they would probably be quite happy if you caught up on the payment plan and might let it go at that.  You didn't tell me the terms of the judgment and what the creditor might do if you defaulted.  Normally, what they could do is record the judgment as a lien against the house.  Yes, they could then try to foreclose, but you could then file a Chapter 13.  Or you could try to get a small loan to pay them off.  In Chapter 13 you would probably have to pay interest on what goes through the plan and there is also the attorney fees.  Your deal with the creditor is much better overall except for the uncertainty.

If I were the creditor, I would probably be quite willing to get caught up.  They might ask for the right to record the lien against the house.  That's OK so long as you are given lots of leeway to get a takeout loan or do something else if you fall on hard times and cannot pay them regularly.  If they ask for a lien, consult the attorney then so that protections are built in for you.

If you need more information, please let me know.  

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Michael T. Hertz

Expertise

I can answer most questions concerning bankruptcy, whether business or personal, including questions by debtors, creditors, persons interested in purchasing assets from bankruptcy estates, and the like. Also have expertise in tort law, French and Canadian law.

Experience

Practiced bankruptcy for 27 years in California and taught bankruptcy for three years in Maine. This included Chapters 7, 9, 11, 12 and 13 cases, representing debtors, creditors (secured and unsecured), bankruptcy trustees, creditors committees, and persons interested in purchasing assets from bankruptcies. Debtors included persons with virtually no money up to large corporations.

Organizations
Inactive member of the Bar of the State of California. Nonpracticing member of the Bar of Massachusetts. Formerly member of the Maine Bar and conseil juridique in France. Certified by National Committee on Accreditation in Canada.

Publications
Georgetown Law Review; California Bankruptcy Journal; Maine Law Review; Dalhousie Law Journal; University of Toronto Law Journal.

Education/Credentials
Harvard Law School (J.D. 1970; cum laude) and Pomona College (B.A., 1967; cum laude)

Awards and Honors
Selected as a "Superlawyer" in 2005 and 2006 for Northern California.

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