Demand debt verification before bankruptcy

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Dear Bankruptcy Adviser,
My wife recently revealed to me that she is being harassed by a debt collections agency and is in default on two additional credit cards. My name is not on these accounts. She had them before we married. The total damage is well over $30,000. The collection agency is talking like they want to settle, but they refuse to send anything in writing. However, they are demanding bank account information to set up automatic payments. With regard to the other two accounts, one has agreed to a secured payment term. The other wants $1,000 to bring the account current before they talk about payment options.

My question regarding bankruptcy is this: Can my wife file a Chapter 13 for her credit card debt and not risk our home? The house is in both of our names.
— Mr. J

Dear Mr. J,
There are two parts to your question. One deals with potentially illegal conduct by these collection agencies. The other issue is the impact of a potential bankruptcy.

With regard to filing bankruptcy, I would give a “cautious yes” to your question regarding the Chapter 13. That is, you can file a Chapter 13 and not risk your home. Under Chapter 13, you repay some or all of your debt over three to five years, under a plan administered by the court. I say “cautious yes” because I don’t know enough about your personal situation to answer definitively.

The value of the home and what is owed on it will determine whether all or some of the debt would have to be repaid in the Chapter 13. Each state has bankruptcy laws that protect home equity differently.

You might want to consult with at least two local bankruptcy attorneys prior to filing Chapter 13 bankruptcy. At the very least, you will know whether bankruptcy is the right move. You and your wife might also find out if a Chapter 7 bankruptcy is an option, which could wipe out your wife’s debt and let you keep your home.

In the meantime, you and your wife need to be a little more aggressive with these collectors. These companies only want to get paid, but the tactics used are less than moral, may be unethical and could be outright illegal.

First, I agree that you should never pay one penny to them without getting everything in writing.

To start, call the companies and ask for a fax number or address. Send a written request demanding the collection agency validate the debt and, at the same time, dispute the debt. This means you want the collection agency to prove that you owe the money, that it has the legal right to collect and which company originally held the account.

Tom Martin, a lawyer with Price Law Group and a specialist in the Fair Debt Collection Practices Act, or FDCPA, says: “Requesting validation and disputing the debt is a powerful way to combat unscrupulous debt collectors. The law requires the collector to respond to a consumer’s validation request, and they cannot continue with their collection efforts unless and until they have done so. If they continue to collect without validating the debt, they have violated the FDCPA, and the consumer may be entitled to monetary damages as a consequence.”

What does that mean to you? “If a debt collector receives a dispute from a consumer, and the debt collector has been reporting the consumer’s account to the credit bureaus, the collector must start reporting the account as ‘disputed,'” Martin says. “And if they fail to do so, the consumer may also be entitled to monetary damages.”

The collection agency must provide proof of liability and cannot simply demand payment without evidence. Otherwise, you are simply giving money to a company that might not even own the debt anymore.

Finally, you must keep accurate proof of any payments that you have made on the debt. If you were to get sued and needed to prove that you paid something, the burden will be on you to prove it.

The best way to handle this situation is with my favorite motto: “No one can make you feel inferior without your consent.” You must stand firm and demand evidence.

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