Tuesday, February 12, 2013

Defeating Debt-Buyer Scams and Lawsuits


Are you already concerned about bills piling up, threats of foreclosure, and collection phone calls?  In certain cases in which you’re receiving calls about money you owe, you may be dealing with debt-buyers, many of whom have no legitimate claims for debt.  What’s worse, debt-buyer scams can lead consumers who already have scarce financial resources to avoid paying legitimate debts, hurting themselves and their lenders in the process. You want to be sure that your hard-earned money is going toward legitimate debts.  So how can you tell if you’re dealing with a debt-buyer scam?  A recent article in Clearinghouse Review suggests that there are ways to identify these scams and to protect yourself against them.

What Are Debt-Buyer Lawsuits?

Sometimes referred to as ‘junk debt,’ debt-buyer lawsuits concern consumer debt that is purchased very cheaply, “for pennies on the dollar,” and often with no underlying documentation related to your original contracts or payment histories.  The companies that buy these debts and institute these lawsuits are often called ‘junk-debt investors.’  After purchasing old debts, these investors will start a lawsuit against the debtors who are listed on the accounts they’ve just purchased, whether or not they have a valid legal claim to that money.

It’s important to keep in mind that there is a difference between traditional debt collection and a debt-buyer lawsuit.  In traditional debt collection, the original creditor is trying to collect money that is actually owed.  In these cases, the debt collector has a direct connection to the company or agency from which you borrowed the money being collected.  Differently, debt-buyer lawsuits have no direct connection to the original creditor.

So, is junk debt money you actually owe?  For many people, this kind of debt may be real in some ways—from an old credit card or another older account that you’ve abandoned.  But in many cases, it may not be debt that you actually owe.  In many cases, the statute of limitations may have already passed.  There is a specific period of time in which a creditor can bring a lawsuit against the debtor, and this is called a ‘statute of limitations.’  Additionally, some of the debt for which these debt-buyers are suing could be debts that have already been discharged in bankruptcy.  Often, when debt-buyers are involved, people who owe money to creditors can be sued twice for the same debt!

Who is Targeted?

According to a recent Legal Aid Society publication on debt deception, debt-buyers such as the ones mentioned here tend to have the most substantial impact on the “lowest-income communities” and “communities of color.”  In short, these debt-buyers seek out persons who may not have access to knowledge about their legal rights in these situations.  Often, the debtors who have been targeted do not show up to court after the debt-buyers have initiated a lawsuit, and this can lead to a default judgment.  This means that the court entered a judgment against the debtor simply because she or he did not appear in court.

What Does the Law Say about Debt-Buyer Lawsuits?

There are many ways to identify these junk-debt investors, and there are important legal terms to keep in mind.  In addition to the “statute of limitations” point discussed above, there is other language to consider.  For example, in order to be liable for a debt, the caller attempting to collect that debt must be able to “prove a valid chain of assignment.”  This means that the debt collector has to show proof of a chain from the original lender to the junk-debt investor.  Often, these scammers can’t do this.  Also, these junk-debt investors can’t prove an “account stated.”  In debtor-creditor situations, the consumer must agree to pay a specific amount to his or her creditor, and in cases of debt-buying, that junk-debt investor must establish a new agreement with the consumer in order to have a valid collection agreement.   While these terms can seem confusing or overwhelming, the most important thing to keep in mind is that you can seek legal help if you’re the victim of a debt-buyer lawsuit.  If you believe you have been targeted by a debt-buyer lawsuit, contact an experienced attorney today who can help.

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