Dealing with a debt collector who lies The Bankruptcy Adviser by Justin Harelik • Bankrate.com

Dear Bankruptcy Adviser,
I have a credit card debt that is about five years old and I have some questions. This company called my wife today and told her that we needed to pay this now or make arrangements or they were going to repo our car. Is that legal? I have tried to call the lawyer back that called and I get no answer. Instead, after the machine asks me to leave a message it says their mail box is full. Thank you, if you can help.
-- Robert

Dear Robert,
A credit card company or a collection agency cannot simply repossess your automobile because you fail to pay your credit card debt. This is a lie and a violation of the Fair Debt Collection Practices Act. I wish you had it recorded because then you would have a claim against the collection agency.

This is a very common lie told to people that are in financial distress. The collection agency knows that you are not recording the conversation and knows that you will probably never come after them for lying. Therefore, they feel safe in breaking the law.

At this point, if your debt is five years old then the statute of limitations may have passed. Further, it does not appear that they have a judgment against you. If they did, it is possible for a judge to force you to turn over your automobile or other valuable assets to satisfy the judgment. This judicial remedy varies from state to state. Without a judgment, however, the creditor has no legal recourse and you will probably never have to pay a penny.

You could pay if you wanted to, or, if you were convinced by someone like, say, a collector. This is why the collector is reduced to lying to you. To them, it seems like the option most likely to produce results.

Here are a couple other common lies you might hear:

• "We've investigated your situation, and you don't qualify for bankruptcy."

This is highly unlikely to be true. The fact is that the bankruptcy laws are still available to the vast majority of people. Close to 98 percent of bankruptcy seekers still qualify for bankruptcy protection. Remember, the collection agency has no idea what your income and expenses are, nor does it know about all your assets. In short, it has no idea if you qualify or not.

• "You cannot file bankruptcy on our type of debt anymore."

Most debts are still related to credit card debt or other unsecured debt, nearly all of which is still dischargeable in bankruptcy. The collector hopes that you do not check out your options. If you feel cornered, you might just pay the debt.

Robert, don't be intimidated by a collector. Instead, be proactive. Record your phone calls with the collector (your state's laws may require you to notify the collector that you are recording the call). If the statute of limitations has run out, then write a letter stating that the collector may not call you by phone and can only communicate with you via mail. Fax and mail the letter via certified mail with return receipt requested. Once you receive the returned receipt showing that the collector received the letter, each time the collector calls you need to state the following: "Thank you for calling. I am now hiring an attorney to sue your company for violating my rights under the Fair Debt Collection Act." Then, try to obtain the phone records that show that the collection agency called subsequent to receiving the letter.

Once all that's done, Robert, it may be time to review your finances, check your credit and make sure that your financial house is otherwise in order. A situation like this, while it may only be an irritation, is a good opportunity to solve future problems before they happen.

Justin Harelik is a practicing attorney in Los Angeles. To ask a question of the Bankruptcy Adviser go to the "Ask the Experts" page, and select "bankruptcy" as the topic.