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What is a debt collector?

Many clients who file bankruptcy with our office have received notices in the mail or calls by phone that their debts have been purchased by a debt collector. A few of the most common agencies are:

  • Midland Funding
  • Asset Recovery Systems (ARS)
  • United Collection Bureau (UCB)
  • Cavalry Portfolio Services

Many clients have many questions about these companies: Why are the contacting me? Are they even allowed to contact me? Should I pay them? Can I pay them in installments? As defined by the Consumer Financial Protection Bureau, a government agency, “a debt collector is a person or a company that regularly collects debts owed to others, usually when those debts are past-due.”

When you open a line of credit, whether it is a credit card or a store card (charge account), you are obligated to pay the creditor for the monies used to make past purchases. You are also obligated to pay back loans. If you do not make regular payments, the creditor, which may be the bank that issued your card or loan, may assess late fees and interest on your balance. After missed payments, the creditor can “sell” the debt to a debt collector. The creditor may sell the debt for pennies on the dollar. That is, if you owe $200 on a credit card and you have not made payments, the card-issuing bank may sell the debt to a debt collector for $10. The debt collector can still try to collect the full amount of debt from you. However, they may also attempt to settle the debt for a smaller amount.

The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates debt collection agencies. In general, for example, they cannot contact you after 9pm and can never use harassing language. Nevertheless, any contact from a debt collector can be alarming. If you do not pay them, then they may hire a law firm to file a Summons and Formal Complaint with the civil court closest to you. This can lead to a judgement that can lead to garnishment of your wages. If your wages are garnished, then the creditor will receive a portion of your paycheck. This is a process that takes time, but there are various remedies to prevent this, including bankruptcy.

If you are facing large amounts of debt that you cannot repay, then bankruptcy might be a good option for you. Chapter 7 bankruptcy discharges most consumer debts. You are required to pay back student loans, child or spousal support, parking violations, damages related to accidents if you were at fault due to alcohol or drug use, and tax debts. If your income qualifies you for a Chapter 7 bankruptcy, then debt collectors must stop contacting you once your bankruptcy petition is filed. If you owe money to debt collectors, banks that issued credit or store cards or loans, or medical facilities, then a Chapter 7 bankruptcy can generally wipe out these debts. While many of our clients have received an offer to lower one or two of their debts from a debt collection agency, they often have other debts as well that they simply cannot afford to pay back as well. That is the purpose of bankruptcy; the Bankruptcy Code exists to help consumers get a fresh financial start.

If you are interested in learning more about bankruptcy, then contact the law office of Jayson Lutzky. He is a highly experienced Bronx, New York personal bankruptcy attorney. He offers free in-office initial consultations. Mr. Lutzky will review your financial situation with you and explain the bankruptcy process to you and help determine if it is in your best interest to file for bankruptcy protection. Call 718-329-9500 to set up an appointment before dealing with debt collectors. Convenient Saturday consultations are available.

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