It Pays To Be Aware Of Who You Are Paying
Alright, so you owe some money, but who is attempting to get you to pay up? There are two kinds of people who may call you looking to collect money that you owe to a creditor. The creditor themselves (the business that you owe the money to directly – think Visa), or a third party collection agency that Visa may hire to collect their debts for them. The Fair Debt Collection Practice Act (FDCPA) was created in the 1970s and provides a wealth of protections for debtors. These are strict regulations and rules that a debt collector must follow, and if any of these rules are broken, there is a great possibility that take the agency that violated the FDCPA to court. But what about that deadbeat friend of yours who owes you five bucks? Are you required to grant them thirty days to refute your claim? Clearly, as both you and your friend’s wallet know, you don’t.
My point is that the FDCPA is a very special set of guidelines meant specifically for a very special set of people: third party debt collectors. Browse through Morency v. Evanston Northwestern Healthcare Corp. This was a district court case in Illinois from 1999. In this court case, a hospital issued and sent out pre-collection notices in an attempt to collect debt. For third party debt collectors, this is a definite no-no according to the FDCPA. What could have happened? Well, anyone that got the letter might have been off the hook for their debt. But after looking at the situation, the court held that the hospital was a creditor, because the money was going directly to it, and not a third party collection agency, so the FDCPA did not apply.
This case has not been the first of its kind, and courts will take many questions into consideration to determine if the creditor should also be deemed debt collector. In a lot of these cases they ask the following questions: Does it say on the letters that get mailed out if the debtor doesn’t pay up the debt will be sent out to collection? Did the creditor hire a collection agency only to send letters, not on commission? Is the collection agency itself just a mailing service?
Here’s another example: if a debtor neglects to respond to a letter sent out by a bill collection company, and said collection agency has no further contact with this individual, it probably won’t be held to third party bill collection company standards. If a collection agency doesn’t receive the files or information on the debtors, then it probably won’t be considered a debt collection agency either.
And thus completes our lesson on the difference between third party debt collection agencies and creditors attempting to collect, and why it pays to know who you are paying. And remember: good luck trying to get that five dollars back from your friend!
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Thinking Of Declaring Bankruptcy? A List Of Some Things You Should Never Do: Part Two
In the last article in this two part series I gave you a short synopsis of what bankruptcy was, what each chapters meant, and a list of things to avoid doing once you have made the decision to declare bankruptcy. Continuing on, if you are filing for bankruptcy, do not liquidate your retirement account. First, it is unnecessary to do this because retirement accounts are typically exempt property under the law, no matter what chapter you file. Plus, if you withdraw this money early, this means liability for penalties and taxes which may not be discharged in your bankruptcy.
This next “don’t” won’t make you feel so great, but it is smart to bear it in mind. When you are paying back money that you owe, don’t favor your family members and friends. This is because even though they might be your blood, as far as the law is concerned, relatives have the exact same legal status as all of the other creditors that you owe. It is understandable that you may want to pay back the people you love nearly and dearly the most, but bankruptcy courts are not exactly known for eliciting warm, fuzzy, sympathetic feelings.
Before you declare bankruptcy, don’t transfer your property out of your name. If a logical price was not received for your property, this action can be undone, and it can certainly be canceled out if it were made with the intent to hinder, defraud, or delay a creditor. Relatives and friends can fall into this category as well.
Do not utilize your equity line of credit to pay off your creditors. This is because under most state and federal laws, you have the ability to claim exemption for your home equity. So if you do not use your equity line, you can go through bankruptcy and still be able to hold onto your equity. Think about it this way: if you used your equity line to pay back debt or to take out another mortgage, what you would be doing in a nutshell would be converting debt that would have been discharged in bankruptcy into debt that you will still have to pay in order to keep your home.
To finish the article I will give you one DO: make sure you have a good lawyer, and always tell her the full truth and let her know all of your worries and concerns. Courts take themselves very seriously and have the capacity to file criminal charges if you intentionally commit fraud. And even if they did not go that far, they always have the ability to discharge any debt that they want, or even to simply dismiss the entire case.
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Bankruptcy: What Is It And What Do The Chapters Mean?
Bankruptcy in the United States is a constitutionally (Article 1 Section 8, Clause 4 to be exact) approved way for individuals and business entities to settle good sized amounts of debt. In charge of making the bankruptcy laws is Congress, and the most recent change was an amendment to existing laws through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. For other laws that are relevant to bankruptcy, refer to the United States Code.
Bankruptcy cases are filed in United States Bankruptcy Court, so federal law will govern the procedure in bankruptcy cases. But state laws are also applied when property rights are being determined. One example is that rules that protect property from creditors (the people who you owe money to) will come from state law.
Bankruptcy comes in a number of forms, or Chapters. Title 11 of the United States code contains nine chapters. Six of these will require you to file a petition. The remaining three have rules to govern these petitions.
Chapter Seven is the most well known form of bankruptcy. This involves a trustee who is appointed to obtain the property of the debtor that is not protected by law. Then, they sell it and distribute the proceeds to the creditors. Every state lets debtors keep essential property, so most Chapter 7 cases will let the debtor keep all of their property.
A Chapter Nine bankruptcy is only available to municipalities. It’s a form of reorganization, not liquidation. One notorious example of this was when Orange County, California filed. Bankruptcy under Chapter 11, Chapter 12, or Chapter 13 is more complicated. It involves letting the debtor keep some, or all of their property, and reorganization. They will use future earnings to pay off creditors. People generally file Chapter 7 or Chapter 13. Sometimes an individual will file for Chapter 11, but this is rare. Chapter 12 is similar to Chapter 13, but is only available to “family farmers” and “family fisherman” in some situations. Generally, chapter 12 has is more generous for debtors than a similar Chapter 13 case.
In 2005, Chapter 15 was tacked on to the list. It deals with foreign companies with U.S. Debts.
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