Get Rid of Collection Agencies

For many homeowners in a financial hardship, when it rains, it pours. They fall behind not only on the mortgage, but also on many of their other debt payments, including credit cards and unsecured loans, among others. Obviously, saving the home should be the first priority, if it is a possibility, but by the time the hardship is over and they have worked through a plan to stop foreclosure, the homeowners may find out that their other debts have been charged off and sent to collection agencies. These companies will often begin to make threatening phone calls and intimidate the debtors with lawsuits, poor credit, or worse. And homeowners would like to get their credit back on track, but they may just not have the financial ability just after the foreclosure. In this case, they may be able to begin working on these other debts and eliminate them completely.

Fortunately for homeowners, most creditors, even large credit card companies and banks, fail to keep good records of the debts they own. They may not have original contracts, complete payment history, or any substantial information on the homeowners, and when they sell the debts to a collection agency, this new company may have even less information and be even worse at keeping it in good order. Of course, this does not discourage the debt collector from attempting to get as much money from the homeowners as possible, and proceed with a lawsuit anyway, but homeowners are protected by various laws to make sure that the collection agency has a valid right to pursue the debt. The most important of these laws is the Fair Debt Collection Practices Act, commonly abbreviated to FDCPA.

The FDCPA was designed to regulate these collection agencies when they attempt to pursue debtors, and defines what a debt collector is, and what their responsibilities are under the law. Many debt collectors may be law offices, but they are considered to fall under the regulations of the FDCPA. The act also outlines the rights of debtors to request validation of the debt, and what information needs to be provided to qualify as validation. If the collection agency can not verify the debt, they can not continue to try to collect it. However, the homeowners would need to request validation before they are sued by the collection agency, in most cases.

Debt validation is one of the most effective tools that homeowners may use after facing foreclosure, in order to begin repairing their credit. When their credit records are full of charged-off credit cards now being pursued by collection agencies, the technique can help them eliminate some of this debt and get it removed from their credit history. If the collection agency has not followed the law (and many of them violate it numerous ways! ), they can not try to sue the homeowners or go after their assets.

One of the more egregious ways that debt collectors fail to follow the rules is by failing to be licensed under state laws. Unless they are specifically licensed to operate as a collection agency in a particular state, they can not pursue a debt. Not every state has debt collector license laws, but many do, and debtors should check to make sure a company is following both federal and state laws. These laws are designed to protect debtors from aggressive or illegal tactics used by collection agencies, and to ensure proper procedures are followed.

If a homeowner finds that he has already been sued by the collection agency, and a default judgment has been granted, this does not mean the debt collector followed the laws. Most courts will simply assume they did comply with the law, if the debtors did not show up to defend their position, as many do not. The collection agency wins by default, and the debt is presumed to be valid. Then, they can begin the process of attempting to garnish wages, put a lien on a property, or other tactics allowed by law. The debtors at this point would have to go to court and try to have the default judgment vacated. Especially if they can show good reason why they did not respond to the complaint in the first place, and the debt collector has violated laws, the judgment may be dismissed entirely and the debt would have to be removed from the homeowners' credit report.

Even then, the debtors' work may not be done. If the collection agency is in violation of laws, the homeowners may wish to consider suing their creditors in small claims court. Each violation of the FDCPA (and this is only one law among others) may result in $1,000 being awarded to the debtor. This money, representing penalties to the debt collector for not following the law, could be used by the homeowners to pay off other debt or establish an emergency fund in case of another financial hardship.

Obviously, none of these techniques (validating a debt, vacating a judgment, or suing creditors) is a simple matter, and specifics vary from state to state and by county. But very few debtors are aware of the resources available to them that are specifically designed to provide them with aid and protection under the law. There is a vast amount of case law, opinion letters, and general advice online, and homeowners interested in getting out from under their collection agencies and repairing their credit are encouraged to begin researching on their own. The payoffs for a few hours or days worth of work can save them thousands of dollars in interest charges by repairing their credit, and allow them to qualify for a new home loan sooner after the foreclosure than if they simply allowed the debts to remain unchallenged.