Bankruptcy effective against plague of collection lawsuits

Thugs_Blinding_and_Mutilating_TravellerThe Boston Globe and Washington Post reported on May 29, 2013 that debtors across the United States were facing a new wave of collection lawsuits, many of them based on questionable facts.

According to the Globe article, a number of collection cases have been built on shoddy records. “Authorities in California, for instance, say JPMorgan flooded the courts with lawsuits against credit card holders based on flimsy evidence that they were in default, according to a lawsuit filed earlier this month by the state’s attorney general. The complaint says the bank signed off on hundreds of legal documents ‘‘without any knowledge of the facts alleged in the document and without regard to the truth and accuracy of those facts.’’”

American Express is in the regulator’s cross-hairs, too, as they have agreed to pay $112.5 million to resolve allegations of abusive collection practices, late-fee charges, and deceptive marketing. Customers, in some cases, were misled to believe that if they partially paid off their debts, the remaining balance would be forgiven.

And worst of all are the debt-buyers, bottom feeders in the collection game who purchase accounts for pennies on the dollar, then try to squeeze you in to accepting settlement terms. Debt buyers often purchase just a spreadsheet with names of delinquent borrowers from banks after accounts become more than 180 days past due. Judges, have grown alarmed by the number of cases involving debt buyers that lacked proof of outstanding debt or contained generic testimony.

Can any or all of these abuses be remedied by filing a consumer bankruptcy case? In most situations, the answer is a definitive “yes,” because the automatic stay that goes into effect when a bankruptcy is filed provides IMMEDIATE relief — no more trips to court, no more settlement deals, no more phone calls, letters, or summons delivered by the sheriff.

 

By Doug Beaton

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