Unmanageable credit card debt, looming student loans and unpaid medical expenses are common nationwide. In the current economy, millions of Americans are struggling with debt. Debt collection agencies throughout the country are now facing state and federal scrutiny for violation of debt collection practices law. New legislation and pending lawsuits are part of the efforts to curb illegal creditor actions.
After a debtor files bankruptcy, creditors must cease any collection effort and halt legal action. Despite clear laws that aim to prevent creditor action, debtors continue to deal with aggressive agents, lawyers and collection companies that will profit from purchased debts. Outdated laws and failed oversight has made debt collection a $12-billion-a-year business.
It is estimated 30 million Americans are harassed and pursued by debt collectors, a number that is up 50% since 2003. While debt collection is nothing new, the high rates of unemployment combined with the collapse of the housing market and underwater mortgages, more debtors are unable to pay their creditors.
While bankruptcy is one solution, it may not be enough to stop unscrupulous creditors. Debtors are forced to deal with menacing phone calls and unfounded arrest threats. In some cases, creditors have pursued neighbors and family members.
Consumer advocates have filed lawsuits against large debt collection companies that allege faulty affidavits. Lawsuits have also been filed for misrepresentation and harassment by debt collectors. A new federal bill would require debt collectors to document that they are pursuing the right person for the right amount of money. This is in response to the number of creditors who don’t have any proof of debts.
If you are behind in payments, you still have rights. If you are being threatened by creditors or facing legal action, bankruptcy is one step towards financial independence. In certain cases, you can file a legal claim against creditors who do not cease collection after bankruptcy.
Source: Los Angeles Times, “Aggressive debt collection tactics are drawing federal scrutiny,” Jim Puzzanghera, Aug. 20, 2012