Thursday, September 11, 2014

Q&A: I Changed My Name, Will Debt Collectors Find Me?

Dear Mr. Edwards,

Nearly three years ago I had a visit to the emergency room. I was sick for almost a month before letting my soon-to-be husband convince me to be seen, or rather force me. I had no insurance and was very hesitant to go. He paid the required $250 at the hospital with his credit card, and they told him that that was all that was owed for the entire visit and that we would not be billed for anything. What liars. 

Eventually I received a letter of collection for $500. I still have not paid it, as I've been either out of work or working part time, and now I am unemployed with a baby at home. At the time of my ER visit, I had a different last name and different address. I have since married, moved twice, and changed my phone number. My question is, will they still be able to find me in the next few years before the statute of limitations in my state goes into effect? 

What's more, will they have access to my husband's bank account and property and the ability to garnish his wages or place liens on his possessions? I am just so scared to track down my bill because I am afraid the amount has tripled by now, and there is absolutely no way we can pay it. But I am also worried that they can ruin my husband who has worked so hard for what he has, though it isn't much. Should I wait it out or take a risk and track down the debt? Please advise.

Thank you again for all your help.
God bless you.



I can understand your trepidation to go hunting down this debt. Hopefully I can ease your mind a little bit about some of your concerns. I'm going to separate my answer into sections. This makes it easier for you and future readers with similar problems to navigate between topics. 

Can the collection agency find you with a new name and address?

Technically yes, the collection agency can find you. The most likely method they'd use would be to locate you via your credit report. Your credit report should contain both your maiden name and your married name. It also contains your Social Security number which you probably provided at the hospital when you checked in. Just for future reference, I see no reason to provide an ER with your Social Security number if you're uninsured. They have to treat you regardless of whether or not you "remember" your SSN. 

When the hospital turned your debt over to the collection agency, it also turned over any information it  had on you: your full name, your address, etc. The collection agency plugged this information into its credit reporting software and boom! The software matches your information to the appropriate credit record. 

Changing your name, address and phone number may make you harder to locate for an individual, but for a collection agency with access to your credit reports, locating you wouldn't be rocket science. As soon as you update your name and address with your credit card company (or any other lender with whom you have an account that appears on your credit report), the credit card company updates its system to reflect your new information. That new informations subsequently gets reported to the credit bureaus and added to your credit report--which the collector, as a legitimate creditor, can pull and review at any time.

Can the collection agency enforce your judgment against your husband?

With the exception of government creditors, no creditor has the right to attach liens to property, seize property, garnish wages or levy bank accounts without first suing the debtor and obtaining a civil judgment. In most cases, creditors can't enforce your judgment against your spouse. Unless your husband was sued, he doesn't get garnished/liened/levied. 

The exception to this rule occurs in community property states. Community property states hold both spouses equally liable for debt. Now listen up, this part is important: Even if you and your husband live in a community property state, he is only liable for debts you incurred while already married. Your hospital bill was incurred prior to your marriage. 

So breathe easy. No collection agency can garnish him, seize property from him or freeze his bank accounts. Be careful though. A collection agency with a judgment against you can do those things to you, and if you share joint ownership of bank accounts and property, your husband's assets may still be at risk. State laws vary concerning what joint assets judgment creditors can and cannot seize. Wish I could be of more help there, but I don't know which state you live in. 

Check both you and your husband's credit reports 

Regardless of what you decide to do from this point on, you need to pull your credit report from all three credit bureaus. You can do this for free once a year without having to give a credit card number if you pull your reports through

Another issue you need to face head on is the prospect that your husband may have sustained some credit damage from this fiasco. Legally, he was only your boyfriend at the time you visited the ER and he was not (and still isn't) on the hook for that debt. He is, however, the one that paid the $250. Given the backwards and just plain ineffective way that many hospitals handle billing practices, its a good idea for him to pull his credit reports when you pull yours--just as a precaution. Credit reporting and collection mistakes are quite common.

What to do if you already have a judgment

It's very possible that the collection agency has already sued you and obtained a judgment against you. Any outstanding judgments should show up in the "Public Records" section of your credit report. Since you don't have a job, you aren't in danger of wage garnishment, but judgments are generally enforceable for ten years (some states differ, but not by much). If you get a job before the judgment expires and the judgment creditor still has its eye on you, you could face garnishment. And, like I mentioned previously, joint assets may be at stake. 

Depending on whether or not your state has a time limit for contesting judgments, you may be able to file a motion requesting a hearing to expunge an existing judgment. You have grounds to request such a hearing for a variety of reasons (once again, all this varies by state) but regardless of your state you should be able to contest the judgment if you were not properly served with a summons (which you clearly weren't). 

Waiting out the statute of limitations for debt collection 

You mentioned that you are flying under the radar waiting for the statute of limitations to expire, but we need to make sure that you're waiting out the right statute of limitations. 

Your original state's SOL freezes as soon as you leave the state and the SOL generally begins anew when you move to a new state (There are some exceptions, but this is the way it usually works). Now, if the creditor isn't aware of the fact that you moved away from your original state, the SOL clock continues to run until it expires. Its safer, however, to go by the SOL in the state where you live. 

Keep in mind that the SOL only protects you if you use it. A collection agency can still file suit after the SOL expires. If you don't respond to the summons and use the expired SOL as an affirmative defense, you could end up with a judgment on your record for a debt that was supposed to be time-barred. 

The likelihood of a lawsuit

Want more good news? You aren't a very good candidate for a lawsuit and the collection agency, if its found you, probably already knows that. You don't have a job and your husband is immune to legal action. The only real concern would be any major assets in your name, such as a home or car, that a collection agency could attach a lien to. 

Don't quote me on this because collection agencies are often unpredictable, but I strongly doubt they'd bother to sue you over a $500 debt (and no, it probably hasn't grown to immense proportions like you fear. We'll get to that in a minute.). That's a downright piddly amount compared to what some people owe and likely isn't even worth their time. 

Interest Charges on Collection Accounts

It makes sense to worry about interest on most collection accounts, but not on hospital bills. The Fair Debt Collection Practices Act states the following: 
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
Put simply, a collection agency cannot charge you interest on a debt unless a signed agreement between you and the original creditor gave the original creditor the right to charge interest. This refers primarily to credit card companies. Once a collection agency has the debt, it can continue charging interest and the debt skyrockets. 

The same isn't true of hospitals. They aren't creditors per se, they are businesses to whom you owe a single debt for a single service. They can charge whatever they want for their services (and often do) and so they have no need to charge interest to make a profit. If the hospital didn't charge interest, the collection agency can't either.

Additional Collection Agencies and Junk Debt Buyers

It would be nice if after a certain length of time a debt--and any liability attached to it--just vanished into thin air. Unfortunately, that doesn't happen. If the collection agency cannot convince you to pay, it will simply pass the debt on to another collection agency and the cycle continues. 

Keep in mind that after the statute of limitations in your new state expires, you'll have an airtight defense against any lawsuits you know about, but junk debt buyers are notorious for intentionally serving summons papers to the wrong address in an effort to procure a judgment in their favor by default--especially if the SOL has already expired. Be wary.

Also, the credit reporting period expires 7.5 years from the date of your hospital visit. When that happens, federal regulations prohibit collectors from reinserting the information. That doesn't mean, however, that junk debt buyers won't try to change the debts and add the collection back on your credit file long after the credit reporting period expires. I strongly recommend that you print out your current credit reports and keep your original hospital bills in the event you ever need to dispute the account if it shows up as zombie debt years down the road. 

If you have any other questions, don't hesitate to let me know. Just post them in the comments section of this post and I'll find them. 

Best of Luck,

Wednesday, September 10, 2014

Does Getting Your Car Impounded Hurt Your Credit Scores?

If you want to see unbridled fury, you need look no further than the guy who's just watched as a tow
truck loaded up his car and headed to the impound lot. If you aren't familiar with impound lots, they're nothing more than prison for cars. And this is not a figurative statement. I've seen impound lots that had the whole metal-bars-and-barbed-wire thing going on. I guess they're concerned that someone, furious as having his car impounded, might just try to break in and take it back. If that's your plan, I'm sorry to burst your bubble of bright, shining hope here but stealing your car back?  Not gonna happen. It's car prison, remember? You'll have to pay bail.

Why Cars Get Impounded

The average American hears "impounded car" and automatically thinks of drug dealers and the cars  they use to smuggle and market their wares. Using this logic, as long as you aren't the Godfather, a drug mule or anything in between, you should be safe from having your car impounded. Right?


"Oh, that could never happen to me!" you say, but reality just isn't that kind. Below are just a few reasons your car could get towed to the impound lot. Remember, this is just a generalized list. Impound laws and procedures vary by state.

  • Road Rage (if you act on it in a dangerous or threatenng manner.)
  • Driving without a license
  • Driving 45 mph over the speed limit
  • Having expired tags and registration
  • Your car is evidence in a crime or contains evidence of a crime
  • You abandon your vehicle

Can't Pay Impound Fees? Tough Luck

The impound lot may be prison for cars, but the daily impound fees are closer to that of a swanky hotel. Basically, it could cost you several hundred dollars to get your car out of impound. This is true even if your car was impounded from the side of the road after you ran out of gas and made a 10 minute ride up to the gas station with a friend to get some (happened to me).

Impound fees increase every day that you don't redeem the vehicle. When you simply can't afford to pay your impound fees, one of two things will happen.

1. Your lienholder will pay off your impound fees and repossess the car itself. This only occurs if you still owe money on the car and have stopped making car payments since the vehicle was impounded. The lienholder then sells the car at auction.

2. The impound lot sells the car at auction.

Collections After an Impound

The fees your car incurs while impounded are your legal responsibility--even if the circumstances surrounding the vehicle's seizure were blatantly unfair. After a period of time which varies by state, the impound lot sells the car and applies that balance to your outstanding impound fees and, of course, any liens your car carries. If your car sells for enough money to cover these debts, its time to drop to your knees and thank your lucky stars that someone up there likes you. You no longer have a car, true, but you don't have a missing car and a huge debt load hovering over your head.

If the impound fees exceed the amount your car sold for at auction, you could find yourself in some serious credit trouble. The impound lot will likely turn your debt over to a collection agency. The collection agency will then add it to your credit report. And that's whe the real horror show begins.

How an Impound Affects Your Credit Scores

Although everyone's mileage will vary, you can expect to lose 100 points or more after a collection account for impound debt gets slapped on your credit report. The FICO scoring formula is kept very hush hush, so you won't know exactly how much an impound will hurt your credit score until it shows up on your credit report.

Impound fees can hurt your credit scores.

As much as it pains you to hand over your hard-earned cash to the very people who you may feel stole your car, paying off the collection account now can help you in two very crucial ways:

1. You won't get sued. 

Getting sued sucks. The consequences of a lawsuit suck even more. The collection agency wlll likely add its own legal fees to your unpaid impound fees--spiking your debt to unreasonable proportions. They'll then collect it a number of ways:
  • Garnishing your wages
  • Levying your bank accounts
  • Attaching liens to other property you own
  • Seizing certain assets (Have another car? Not for long)
And in case I forgot to mention it, court judgments in the collector's favor will also show up on your credit report. A judgment hacks away at your credit rating like a bad executioner. Court judgments aren't bound by the standard seven-year reporting period. A judgment over unpaid impound fees will remain on your credit report for the length of time the creditor has to legally enforce it: ten years in most states.

2. The collection for your unpaid impound fees will begin to age.

The Fair Isaac Corporation (the company responsible for the FICO credit scores that lenders use) knows that the most recently reported information on your credit report is the most accurate indicator of the credit risk you pose to lenders. This is good news for those with bad debts that haven't been updated in years, because the older the account, the less it hurts your credit scores.

Paying your delinquent impound fees may make steam shoot from your ears, but it helps ensure that the collection account connected to the debt doesn't get regularly updated by the collection agency. Federal law requires that the collector update the debt as "paid" with the credit bureaus, but afterward it will just sit there until the credit reporting period (seven years) expires.

Note: Paying a collection does not result in the collection agency removing it from your credit report any sooner. It also doesn't improve your credit scores. Paid collections for impound debt--or any other type of debt for that matter--are just as detrimental to your credit rating as unpaid collections.

If you don't pay up, the collection agency may just decide to "refresh" your impound debt on a regular basis--ensuring that it does the most damage possible to your credit scores before you either pay it or the credit reporting period expires.

How An Impounded Car Affects Your Credit

An impound itself doesn't have a direct effect on your credit scores. It's the consequences of not paying off the impound that's a problem. Worse still, impound fees increase by the day. So if you don't have the money to bail your car out of impound by the end of the first week, the fees might climb beyond your ability to pay.

Generally, the better your credit scores are when a derogatory item hits your report, the more damage that entry will do. For a person with credit scores above 750, a collection account and civil judgment are the credit equivalent of a nuclear bomb. Be smart when it comes to your impounded car--even if that means swallowing your pride and paying a debt you believe you don't rightfully owe. If you don't, you could lose the car and your decent credit rating. That's not a fair trade for your pride.

Related Posts:

Can a Collection Agency Put a Lien on Your House or Car?

Can a Collection Agency Take My House?

Make Yourself Judgment Proof

Monday, September 8, 2014

Q&A: Collection Agency Keeps Updating Credit Report--Does This Hurt My Score Each Time?


I have a creditor that keeps reporting a major derogatory to my credit report every week. Sometimes twice a week. Will this bring my score down every time they report it? Its a $180.00 balance.



First, let me say that I'm surprised a collection agency is updating that frequently. I have some good news and some bad news. 

The good news is that you don't lose credit points every time the collection agency updates your credit report when updates occur that frequently. If the collection agency were updating your account every six months or even every year, your credit scores would probably drop somewhat each time, but very frequent updates, while detrimental to your credit scores, don't have the same immediately noticeable negative impact that more infrequent updates do. In the long run, however, the credit impact of both will likely be similar. Let me explain: 

One of the aspects of the mathematical formula that the Fair Isaac Corporation uses to calculate your credit score is the age of each account on your credit report. The exact formula is a trade secret, so there's really no way to estimate how much of an impact a collection agency's regular credit report updates will have. We do know, however, that the age of the accounts on your credit report accounts for roughly 10% of your credit score. 

If a collection agency merely adds its tradeline to your credit report and never bothers to update it (this is quite common) it has an immediate negative effect on your scores, but that effect lessens over time. Because the tradeline isn't updated, the scoring formula doesn't view it as being "fresh." Older entries that aren't updated affect your credit scores less and less as time goes by. 

When a collection agency regularly updates its tradeline, however, it ensures that the scoring formula continues to view the collection as a recent item. This, in turn, prevents your credit scores from gradually outpacing the collection account as it ages. An updated collection account carries the same negative weight the day its removed from your credit report as it did the day it was first inserted. 

Here's the good news. The fact that the collection agency keeps updating your credit report has no bearing whatsoever on the date the credit bureaus will remove the negative tradeline. The collection account should come off 7 years from the date the original debt fell 180-days delinquent (this is usually, but not always, the original creditor's charge-off date). If the debt is relatively recent, there's a good chance that these frequent credit report updates will slow down and eventually stop sometime in the future. 

Best of Luck,

Sunday, September 7, 2014

Q&A: How to Fix Credit Before Refinancing Second Mortgage

I have been reading and trying to learn for 2 years now. I am wondering if you can give some insight. 
I had to do something and the only thing I could do was default on all credit cards. 
Every card we had was defaulted while we did that, I have paid my mortgage,2nd mortgage and car payment with no late pays. 

My second is an interest only loan that is due in 2018. I have to refinance or will lose our you think in this case trying a pfd or settlement would be my smartest option so o can try to rebuild before the 2018 date? My sol is 6 years..



First of all I want to applaud you for your efforts. You wouldn't believe the number of questions I get in the comments section of a post when the answers to the question are in the post. Now, on to refinancing that second mortgage of yours.

I don't know when you defaulted on your credit cards, but those defaults alone may not derail your efforts to get your second mortgage refinanced when 2018 rolls around. Defaulted credit cards and the collection accounts that result from them can only remain on your credit report for seven years and 180 days from the day you defaulted (Remember: the credit reporting period is the amount of time an entry can remain on your credit report. The statute of limitations is the amount of time a creditor has to sue you). I don't know when you stopped making payments, but its possible that all or most of the negative information will be gone by the time you refinance. 

Attempting to settle your debts isn't likely to do you any good. Sure, the collection agency (I'm assuming those debts are in collections by now) may agree to a settlement, but nothing you pay them now is going to improve your credit scores. The only thing that paying a collection agency will do is restart the statute of limitations for a lawsuit. You don't want that. You want to sit back and fly under the radar while your state's six-year SOL times out. 

A far better idea than paying the collection agencies to settle is to put that money away, wait for the statute of limitations to expire and pay a good attorney to help you isolate violations and get these negative accounts removed from your credit report. Nothing scares collection agencies quite as much as formal statements from an attorney--especially when the debt is time-barred and the collection agency no longer has any legal leverage. 

You can always attempt a pay-for-delete, but unless you have the full amount of the debt on hand it has the potential to backfire on you. Paying only part of the debt restarts the clock on the SOL and agreeing to pay in installments (they'll demand direct bank drafts) gives the collection agency access to your bank accounts. Believe me, you do not want that. Worse still is the fact that debt collectors have no qualms about suddenly "forgetting" that they agreed to delete their tradeline in exchange for payment. If you do have the cash on hand to successfully negotiate a pay-for-delete and the collector agrees, it is absolutely vital that you get the agreement in writing, on the collection agency's letterhead and signed by an actual person before making any payments. 

Even if you can't get all of the negative information removed by the time you have to refinance your second mortgage, any collections that remain will be old. The FICO scoring formula attaches greater importance to your most recent accounts. This means that old negatives don't hurt your credit scores nearly as much as newer negatives. 

Your goal here is to make sure you spent the time from now until you refinance your second mortgage doing everything within your power to accrue only positive credit information. Always pay your current creditors on time, keep low balances on any remaining credit cards or store cards, etc. If it were me, I'd purchase my credit scores once every six months just to see where they're headed. Do NOT buy your scores from the credit bureaus. They sell Vantagescores which don't mean anything. You want your FICO scores. You can purchase those directly from Fair Isaac at 

Getting your hands on another credit card may be difficult right now, but would be extremely helpful in the long run. The FICO scoring formula takes the types of credit you carry into consideration. Balancing out credit cards (revolving debt) with loans (installment debt) is crucial to earn the highest number of points. If you're married and the defaulted credit cards were in your name only (leaving your spouse's credit unmarred) I'd recommend asking her/him to apply for a new credit card and add you on as an authorized user. The account would then appear on your credit report and help you rebuild your credit scores before you attempt to refinance that second mortgage of yours.

In the long run, the main thing your lender is going to be worried about is whether or not your unpaid creditors have the right to sue you and attach a lien to the property you're refinancing. The expiration of the statute of limitations for these defaulted credit cards will work in your favor when refinancing your second mortgage.

Best of Luck,