Consumer Bankruptcy, Debt Collection

Should I Hire a Debt Relief Agency to Avoid Bankruptcy?

Consumers often resort to seeking the assistance of a debt relief company in an effort to avoid filing bankruptcy. However, hiring a third-party debt relief company is not always a wise decision for the consumer if bankruptcy is inevitable.

Some consumers decide to retain the services of a debt settlement company to negotiate payments on their outstanding debts. However, often the better option ends up being either having the consumer directly settle his or her debts without hiring another company or having the consumer move forward with filing for bankruptcy.

Debt settlement companies say they can work directly with the consumer’s creditors to settle their outstanding unsecured debts. In order to accomplish this, most debt settlement companies tell their clients to stop making payments on their debts, thereby pushing the debts into collections. The debt settlement company will then tell the consumer to pay them a monthly fee, which will be set aside into a savings account for future settlement of the person’s debts.

Unfortunately, there are many things a debt settlement company fails to tell the consumer when they are hired to negotiate the consumer’s debts. Ultimately, debt settlement is a business, and the company is looking out for their bottom line, not the consumer’s best interest, which is why so many debt relief scams exist.

First, while the debt settlement company is working on the consumer’s behalf, the total amount of debt will continue to grow thanks to interest accruing and fees being assessed when the consumer stops making payments. The consumer will also find his or her credit score taking a significant hit during this time since defaulting on a financial obligation is reflected poorly on someone’s credit report. Additionally, the creditor is under no obligation to work with the debt settlement company. They may be successful in settling a debt, the creditor is not obligated to take a settlement offer just because one is made. The creditor is always within their rights to pursue the full amount owed.

The consumer’s credit score will definitely be impacted by debt settlement. Essentially, entering debt settlement is an admission of the consumer not paying his or her debts as originally agreed. Additionally, the debt settlement will stay on the consumer’s credit report for seven years.

Ironically, debt settlement can also leave the consumer in an even worse situation than when he or she started, especially if the efforts to negotiate the debts are unsuccessful. For many consumers, going through debt settlement is essentially delaying the inevitable filing for bankruptcy. It is usually best for the consumer to first sit down with a bankruptcy attorney and analyze his or her situation to see which route is the best one to take.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Debt Collection

How to Dispute a Debt with a Debt Collector

Debt collectors can be relentless. They will attempt to contact a consumer through any means necessary to collect on a debt. Financial hardships can be stressful enough but dealing with the additional stress of collection calls can be a large burden in a person’s life.

Surprisingly, this burden is even dealt with by people who don’t owe any debt at all. In fact, according to Forbes, around 52% of debt collection complaints received by the Consumer Financial Protection Bureau in the last year were made by consumers that claimed they were being contacted regarding debts they did not have.

Debt Collection, Debt Relief

CFPB Announces Two Final Debt Collection Rules to Go into Effect November 30

The Consumer Financial Protection Bureau (CFPB) announced two final debt collection rules which are scheduled to take effect on November 30, 2021. These two rules clarify and add further detail to provisions of the Fair Debt Collection Practices Act (FDCPA), the law that offers protections to consumers from abusive or unfair collection practices from third-party debt collectors.

These rules were originally going to be made effective in the spring, but the CFPB delayed the effective date by 60 days to allow all affected parties time to comply due to the COVID-19 pandemic. However, after making the announcement regarding a 60-day delay, the CFPB determined that the extension was not needed and published the official notice in the Federal Register officially withdrawing the extension.

Credit Card Debt, Debt Collection, Debt Relief

How Much Debt is Too Much? Here are the Warning Signs.

For many people the word ‘debt’ is a four letter word. A word that resonates a certain fear and anxiety, oftentimes associated with credit card bills and collection calls. However, taking on certain kinds of debt can serve as a means to an end. For example, borrowing money to go to college and earn a degree, starting a business, or purchasing a home or car.

Determining how much debt is too much debt can be tricky. If you have a good job, are in good health, and keep track of your finances, and interest rates, debt can be managed effectively. If used wisely, and for things that grow in value, like a home or education, it can be useful.

Debt Collection

How Federal Laws Protect You When Dealing with Debt Collectors

Dealing with debt collectors can be stressful. Their job is to get the consumer to pay on a debt at any means necessary, which can often mean through coercion, harassment, and fear. Many debt collectors have been known to use aggressive or illegal tactics to collect on a debt, leaving many consumers to feel like they have no choice but to make payment to get them to go away. However, federal law offers certain protections when it comes to debt collectors. It is important that consumers understand what these protections are so that they are aware of what rights they do have when dealing with debt collectors.

According to the Consumer Financial Protection Bureau (CFPB), nearly one in every four people have a debt in collections. Illegal debt collection practice is a common complaint made to the CFPB.  

Debt Collection, Debt Relief

Understanding Zombie Debt and the Statute of Limitations

Consumer debts have what is called a statute of limitations. This is the amount of time the creditor can use the court to force a consumer to pay a debt. After the statute of limitations has expired on a debt, it is no longer legally enforceable. Occasionally, however, a consumer may be contacted regarding an old debt by a collector who hopes the consumer will ‘restart the statute of limitations.’

Zombie debt is debt that the consumer thinks is “dead,” meaning it is past the statute of limitations that the debt collector is now trying to bring back to life. While the debt collector cannot take the consumer to court to collect on the debt, there are no laws saying they cannot continue to contact the consumer to collect what is owed. Many times, debt collection agencies will purchase expired debt to turn a profit. Since the cost to buy expired debt is exceptionally low, even if they collect on a handful of accounts, they are still earning a profit.

Debt Collection

Can Debt Collectors Contact You on Social Media?

Debt collectors will attempt to contact a consumer through any means necessary to collect on a debt. As more consumers communicate with each other via social media, debt collectors are utilizing these platforms as another means to contact consumers.

A federal agency issued a new rule that would allow debt collectors to contact people by email, text message, and social media platforms, including Twitter, Facebook, and Instagram.

The new rule limits how many times the collection agency can contact the consumer via telephone. Collectors will be limited to seven debt-collection phone calls weekly, but they are allowed to send an unlimited number of text messages, email messages, and social media private posts.

Debt Collection, Debt Relief

Predatory Debt Collectors Barred from PPP Loans Under New Bill

New legislation introduced this week will effectively bar all predatory debt collectors from receiving money from funds received under the federal government’s Paycheck Protection Program (PPP).  

The measure has been introduced by Representatives Suzanne Bonamici (D-Ore.) and Marie Newman (D-Ill.). In announcing the proposed legislation, the lawmakers pointed to an analysis conducted by the Washington Post in January 2021. The Post reported several incidents where debt collection companies had harassed consumers for payment on debts after they had received their own financial assistance from federal PPP loans. It was their hope that this legislation will curb these practices and will effectively block predatory debt collection firms from receiving PPP money themselves.  

COVID-19, Debt Collection

Debt Collection Lawsuits Pause While One Debt Collector Continues to Pursue Collections

At the start of the COVID-19 pandemic, most debt collectors hit the pause button on collection lawsuits due to widespread national lockdowns. However, one of the largest debt collectors, Sherman Financial Group, continued to pursue its collection efforts. 

According to a study conducted by the Wall Street Journal, Sherman Financial Group had the largest increase of any debt collection firm between March 15, 2020 and December 31, 2020. The study analyzed filings from five state-court districts from the start of the pandemic to the end of 2020. The number of filings went up by 52 percent from the previous year. In comparison, debt collection filings went down by 24 percent with respect to the industry overall.