Q&A: NCO Re-aged Collection Debt on Credit Report/International Identity Theft

Lee,

I found your info by googling NCO Collection Agency.

I am a United States citizen living in Canada.  I moved here in Dec. 2002 and would visit home every few months as my parents were both ill and were both deceased in just over three years.  There is a collection account on my credit report that I didn't recognize at first.  I injured myself in the 3rd week of January 2006.  My father died on Jan. 28, 2006 and it honestly slipped my mind.  Quite frankly, it took me until this past April to even remember I had been hurt.  Now, there's this entry that shows NCO "opened" it on Aug. 16, 2007 and a "report" date of May 17, 2009.  To date, I have not been contacted by them. 

I was reading your comment to Lisa dated June 19, 2014 on collectionagencydebt.blogspot where you stated, "If the original default date was more than seven years and 180 days ago this shouldn't be on your credit report at all and you should be able to get it removed as obsolete." and wondered if this also applied in my case. 

Further complicating matters, someone in my hometown has apparently obtained cell phones under my name and social security number and (according to the credit reporting agencies) a mortgage.  It is one of the security questions and when I reply I have "no mortgage", I get an "incorrect answer" and a phone number to call.  My friend is the retired Chief of Police in my hometown and informed me that until I move back home, there is nothing that can be done from here.

Any advice you have to give is appreciated and I thank you for your time.

Sincerely,

Nancy

Nancy,

The seven-year credit reporting period is the same for everyone. so what I told Lisa would also apply to you. Debt collectors generally have to remove their negative tradelines when the original creditor removes its charge-off. Unfortunately, you owe a medical debt, and medical debts don't come with an original creditor. Particularly insidious collection agencies use this to their advantage. The original creditor's report is the yardstick that both you and the credit bureaus can use to determine if a collection is obsolete. Medical debts don't appear on your credit report if they're paid on time, so there is no original account for the debt on your credit report. Without an original creditor account on file, the burden of proof is on you to demonstrate that the collection agency is in error. 

Here's a fun fact for you. The Federal Trade Commission already hit NCO with the largest business fine in history for altering collection accounts dates to ensure they remain on debtors' credit reports far beyond the seven-year limit. The clock on the credit reporting period should start ticking when you stop paying the original creditor--not when the collection agency receives the debt. 

If you dispute this directly with the credit bureaus, NCO will probably verify it as accurate. What you want is some proof that the original debt was incurred in 2006, not 2007. An old medical bill for your injury that notes a late payment and how late the payment is (i.e. 30 days late, 60 days late, etc.) should work just fine. You can also check with your insurance company or the original medical provider for the date of service. The hospital records may not go that far back, but your insurance company might. It can't hurt to try.

Black out any information you don't want to share with NCO on your documents of proof (the details of your injury, for example, are none of their business) and make a photocopy of each item you're using as documentation. Highlight the date. Also print and photocopy the credit report pages from each of your credit reports that reflect the error.

Write NCO a letter stating that the account they are reporting to the credit bureaus is obsolete. Note exactly when you incurred the debt and refer to your medical paperwork as evidence. Point out that you never made any payments on this debt, thus the date of delinquency occurred in 2006, not 2007 and the debt should no longer appear on your credit report. Tell them that re-aging a debt is against the law, and that you have the right to sue (and will exercise this right) if they don't immediately delete this tradeline from your credit report. 

If they don't delete, make photocopies of the same information you sent to NCO and send the proof, along with a letter explaining that this debt is obsolete and must be removed, to each of the credit bureaus whose files reflect the collection. If you want to make absolutely certain that your dispute falls into human hands and doesn't get shuttled into the computer system (the computer system neither acknowledges or analyzes your evidence) write out the letter by hand. Make sure to send both the NCO dispute and all credit bureau disputes via certified mail, return receipt requested. 

I have to wonder though....why does this matter? You're living in Canada. I used to live in Canada. American credit doesn't mean squat over there. Although they have the same credit bureaus, their credit system is based on Social Insurance numbers, not Social Security numbers. You can't pull an American credit report using Canadian credit bureaus. Their system simply isn't set up that way. 

On to the case of identity theft. Identity theft is serious business. Most debts don't follow you to Canada, but if the identity thief racks up enough of it, sooner or later a creditor is going to find you and outsource that debt to a Canadian collection agency which will hunt you down on your home turf in Canada. Don't let this happen. 

You need to file a police report. I think what your policeman friend meant wasn't that you had no course of action to defend yourself but rather you can't fill out an identity theft report with the U.S. police. Go down to your local police station, explain that your identity was stolen and ask to fill out a police report. You can use a Canadian police report the same way you would use an American police report. Use your Canadian police report to file an identity theft complaint with the credit bureaus. 

Make sure to point out that the report was filed in Canada because that it where you're currently living. You don't want the credit bureaus to think that you're a Canadian citizen and dealing with Canadian identity theft concerns yet somehow reported the theft to the wrong bureaus. If that doesn't work (I can't see any reason why it wouldn't unless you keep running into idiots who don't know what they're doing. Believe it or not, the credit bureaus employ scores of these people) Wait until your next trip to the U.S. and fill out a police report about the identity theft there. According to the FTC, you can file a police report either with the police station where you live or the police station where the identity theft occurred. 

You'll also want to place a fraud alert on your American credit reports pronto. The following resource from the Federal Trade Commission should provide you with a detailed guide on exactly what to do when you find out your identity has been stolen: Federal Trade Commission: Identity Theft. 

I'm going to list some numbers for you to call if you run into problems along the way. 

• Federal Trade Commission headquarters: (202) 326-2222
• Experian:  1 (888) 397-3742
• TransUnion Identity Theft Department: (800) 680-7289
• Equifax fraud alert: 1-888-766-0008

If you are financially able, consider contacting a consumer law attorney within the U.S. You can do what's necessary to take care of these issues on your own, but its time consuming and extremely stressful. A good consumer law attorney has extensive experience doing this very thing. In addition, collection agencies and credit bureaus alike take lawsuit threats from an attorney much more seriously than lawsuit threats from the debtor. You also have to consider that this person committed a major fraud by purchasing a house in your name. You would retain the right to file a civil suit against the individual and force them to pay for your attorney. 

I cannot stress this enough: Do NOT ignore this. DO NOT. If this person has gotten a mortgage in your name, she knows that you are living out of the country and plans to simply live as you indefinitely. Someone has to bring her to justice. A fraud this significant can carry jail time and, lets face it, this lady belongs behind bars so that she can't turn around and do this very thing to someone else. 

Best of Luck,
Lee

Illegal Lies Debt Collectors Tell

If you haven't been living in a mountain cave in Zambia for the past two decades, I don't need to tell you that debt collectors lie. You already know that. What you may not realize, however, is that some of these lies are illegal and, as such, violate federal consumer protection laws. This gives you the right to legal recourse should you choose to pursue it.

Illegal Lie #1. If you don't pay this debt, you'll go to jail

Unpaid debt won't land you in jail.

Once upon a time the state of Georgia was a debtor's prison. Australia started out this way too. In this day and age, however, no one is going to handcuff you and haul you away when you stop paying your credit card bills.

The Fair Debt Collection Practices Act is a lovely little document that gives you, the consumer, a summary of your rights and the collection agency's rights. One act that the FDCPA prevents is false representation.

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section...

The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action...

The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.

There you have it. Your nightmares about being tried, sent to the pen and dropping the soap are over. Not only can a collection agency not imprison you, debt collectors can't even threaten imprisonment while attempting to wrangle a payment out of you. They can't even tell you that you committed a crime. While not paying your debts isn't particularly responsible, it isn't illegal.

Illegal Lie #2. I'll tell your friends, family and/or employer about your debt. 

Anyone who ever attended middle school knows what a powerful motivator humiliation is, and unpaid debt

Collectors can't tell your boss about the debt.

is embarrassing. Even if your collection accounts are the result of circumstances that were completely out of your control, you'd rather go naked in public (okay, well, maybe not that far) than have your boss know that you shirked a hospital bill last year. Collection agencies are well aware of this and have been known to use it to their advantage. If you're out-of-your-mind afraid that your deep, dark debt secret will finally see the light of day, you're more likely to pony up whatever amount the debt collector asks for.

Fortunately for you, the FDCPA is very clear about this. Not only does this threat fall under the "false representation clause" above, debt collectors aren't even allowed to contact your loved ones unless its in an effort to locate you. And they certainly aren't allowed to tell anyone about the debt.

Believe me, no matter how personal it may seem between you and the collector who's been calling you night and day for months, you're just another number on a list of numbers he has to call every day. He's probably not stupid enough to put his job on the line. Probably.

Illegal Lie #3. I'll sue you and foreclose on your home, garnish your wages, levy your bank accounts, seize your 401k and repossess your car. So pay up. 

Fear, like humiliation, makes us do things we wouldn't normally do. Threatening to take your wages, savings and property is at attack on your very stability. The logic here is simple: If you don't pay, there are some horrific consequences coming your way--or, maybe not.

Only a judge can give collectors the right to seize assets.

It's true that a debt collector has the right to sue you for the debt. State laws vary but most will allow collection agencies who win a lawsuit to attach liens to your property and seize your liquid assets--but only some of them. Here's a list of just a few of the assets you may have that are exempt from debt collection (unless you owe a defaulted federal student loan, but if that's the case you're already familiar with the flames of financial hell and the fact that nothing is exempt doesn't faze you anymore) and that collectors cannot threaten to take:

• Social Security
• Your 401k
• Most retirement benefits
• Unemployment benefits
• Welfare
• Veteran's benefits
• FEMA funds
• Child support 
• Your IRA

In a twisty bit of legalese, the FDCPA prohibits collection agencies from threatening to take an action they either cannot take or do not intend to take. No seizure of property can take place without a judgment and a judgment requires a lawsuit. Thus, if the statute of limitations has expired on your debt, threatening to sue you and/or seize your assets is a big no-no for collectors.

Filing a Lawsuit Against a Collection Agency for Lying 

People expect to get lied to by collectors. Like daredevil cab drivers and bad sushi, its an all-too-common fact of life for many Americans. Filing a lawsuit is too much work for most to bother with. If a debt collector decides to risk his job by lying to debtors and breaking federal regulations, odds are he'll get away with it.

The FDCPA still gives you the right to sue for infractions, but if the collection agency can prove that the violation was unintentional and that its policies don't allow for such behavior, the court can throw out the lawsuit.

Related Posts:

Debt Collection Lawsuits: Statutes of Limitations by State

The Debt Collection Lawsuit Threat

What Are Your Odds of Being Sued By a Collection Agency?

Can Debt Collectors Call Your Boss?

No one wants to look bad in front of the boss--and there are few things as embarrassing as having your boss discover that, not only do you have bad debts, but that debt collectors are so focused on recovering them that they're willing to call you at work. Sure, a debt collector can't just call up your boss and say, "I'm Dave from XYZ Collection Agency and your employee, Gina, owes us $3,000. Just thought you'd like to know." But the fact that a debt collector can't openly disclose your debt to your boss doesn't mean that your employer won't find out indirectly.

From a legal standpoint yes, a debt collector can call your boss, but only in its search for you. The collector may identify himself on the phone, but he cannot volunteer information about the company he works for--unless your boss asks for it. If your boss wants to know just who it is on the phone looking for you, the collector will disclose the name of his/her employer. Now that may be all fine and good if the collection agency's name is something elusive, like XYZ Corporation, but if its XYZ Collections or XYZ Acquisitions, it doesn't take a rocket scientist to make the leap from "A collection agency wants information about my employee" to "My employee must owe the collection agency a debt."

Collectors may call your boss.

Although your boss might be a big enough idiot not to put two and two together, its highly unlikely.

If the collection agency knows where you live and work, it no longer has a legal reason to call your boss directly, but the company will still try to call you. If a debt collector finds your work number, you can rest assured that you'll receive a barrage of collection calls throughout the day--especially if those calls frustrate you. The reasoning is simple: Once you're frustrated enough you'll agree to make a payment on the debt just to make the calls stop. This is particularly beneficial for the collector if the statute of limitations on your debt has expired. By making a payment, you once again make yourself vulnerable for a lawsuit.

Your boss will likely take notice if you start receiving a much higher-than-normal volume of personal calls at work and look into the matter. You don't want that to happen. The name of the game is keeping the boss in the dark when it comes to your personal business--and collection calls are very, very personal business.

How to Stop Collection Calls at Work

The FDCPA prohibits debt collectors from calling you at any time or place they know to be inconvenient for you. It also makes a special allowance for collection calls at work.

a debt collector may not communicate with a consumer in connection with the collection of any debt --..
at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.

This means that all you have to do to stop collectors from calling you at work is to tell them that you are not allowed to take personal calls at work and that calling you at work is an inconvenience. Most collection agencies train their collectors to adhere to the FDCPA in order to avoid FDCPA-violation lawsuits.

Unfortunately, sometimes verbal communication doesn't go over very well with debt collectors. Unscrupulous third-party debt buyers may ignore your requests not to call you at work. This may be due to ignorance of the law, but whatever the reason, you can cover yourself and ensure a paper trail exists by notifying the collection agency in writing that you cannot receive collection calls at work. Send the notice Certified Mail, Return Receipt Requested and keep the return card. This provides you with proof that the collection agency received the request if the harassing calls at work continue and you're forced to take legal action.

Debt Collectors Can Inform Your Boss About Your Debt After a Judgment

If a collection agency sues you and you don't show up in court with a defense, the court grants the collection agency a judgment against you by default. State laws vary, but a court judgment generally gives the collector the right to seize your assets. One common method creditors use to collect judgments is wage garnishment.

If a collection agency decides to garnish your wages, it no longer has to hide your debt's existence from your boss. The collector will serve your employer with a writ of garnishment or writ of execution, depending on your state. Your employer must then direct a portion of your paycheck to the judgment holder until the debt is either paid off, the judgment expires or you quit your job. As embarrassing as it may be for your boss to know that you are under a garnishment order due to an unpaid debt, your employer cannot fire you based on the garnishment alone. Strangely enough, your employer can fire you if you receive a second garnishment order. The moral of the story? if a collection agency is tailing you, tread carefully and act fast to keep your job stable and your boss oblivious.

Related Posts:

Can Bill Collectors Call Your Family?

What Happens If a Collection Agency Sues You and Wins?

Debt Collection Lawsuit Statute of Limitations By State

Q&A: Will Midland Credit Management Sue?

Hello Lee, 

I am unable to post to your blog for some reason, but I have been reading your blogs and you have some great information. I hope you are able to provide some insight on some of my questions regarding Midland Credit. 

My problem is that I have a super old account from Beneficial Household Finance from 2007. My DOFD was 5/2007 and at that point the debt was approximately $2800.00. In 2009, I understand that HSBC closed Beneficial Household. In May of 2010 Midland purchased the debt (or so that is the date that is stated on my credit reports that they purchased the debt). In December of 2010 they said I made a payment. And I kept racking my brain to try to figure out why I would have made any kind of payment to these scumbags. Perhaps I was just trying to do the right thing. So since I had paid off some accounts through a non-profit organization "Consumer Credit Counselors" I called and checked with them.... Sure enough they made a payment going to Midland for my Beneficial account in December of 2010. So now I have renewed the SOL and it will be on my credit report for 3 more years. Midland is now saying that I owe them $9700.00!!! How can they escalate to such an outrageous amount? And then just this year they started sending those ridiculous offer letters and calling twice a day on my phone, but I never answer them. Now it seems that they have recently stopped or slowed down. Is this a sign that they are getting ready to sue me?

This was an account that was a revolving type of account like a credit line, but it was not a credit card. I am in Nevada so does that mean that the SOL is 4 years (for an open ended account) or 6 years (because it was a contractual account).

So I will get to my questions based on the information above, and if you need more info from me in order to answer them, please let me know:

1) What do you think the likely-hood of Midland getting ready to sue me is?
2) Is it possible that they may give up and sell the debt? If so, what happens next?
3) They have the last recorded payment from CCCS as 12/2010, but how likely is it that they will have documented proof that it is for me and to be applied to this account?
4) Do you think the SOL for an account such as this would be 4 years or 6?
5) Since Beneficial closed in 2009 and Midland purchased the debt in mid-2010 how likely do you think it is that they have documentation of the debt?
6) Should I just continue to play Ostrich on this for now since they have been unsuccessful in contacting me?
7) Should I contact a consumer protection attorney and discuss the possibilities with them before I get served? 
8) Is there any way I can be proactive now (without making payment arrangements on a debt that is 3x the amount that I actually owe)?
9) How can a $2800 debt turn into 3x the amount originally owed?
10) What are my options to fight them and get this off my credit report?

Thanks for your input!


--Monique


Monique,

For starters, thanks for letting me know which state you're in. State laws often apply and you wouldn't believe the number of people who don't include their state in their question.

I get from the tone of your letter than your credit report and scores is the most important thing to you here and on that front I have some good news and some bad news. The good news is that the date Midland first purchased and reported your debt has no effect whatsoever on the debt's reporting period. The credit reporting period for most debts, including this one, is seven years from the date of first delinquency. That means that if you made your last payment to Beneficial Household Finance in May of 2007, the credit bureaus will remove the account records--including all collections associated with that particular debt--in November 2014. That means you've got six months to wait until federal law requires the credit bureaus to remove Beneficial Household's original charge-off and the Midland collection account that resulted from the charge-off. The payment your credit counseling agency made has no effect on this. It comes off in six months, paid or unpaid.

That being said, lets get to your questions. I'm doing them out of order so that I don't have to go back and rehash anything and this can be as simple as possible.

Do you think the SOL for an account such as this would be 4 years or 6?

Credit cards are generally considered open accounts as far as the statute of limitations is concerned. Sometimes debt collectors who want to sue will try to argue that the debt is, in fact, a written account since the SOL for written accounts tends to be longer. Your state's statutes pretty clearly define credit card debt as an open account. That means your statute of limitations on this debt is four years. This gives Midland seven months to sue you or hang up their hat.

You can find Nevada's stance on this here. Read NRS 97A.060 at the very top of the page.

How can a $2800 debt turn into 3x the amount originally owed?

The fine print of your original credit card agreement contained a clause stating that, by agreeing to the card, you were also agreeing to the accrual of interest that would continue even if you defaulted on the account. So even though the account is no longer open, credit card interest has been accumulating ever since 2007. That's why your debt is now so much higher than it was when you originally defaulted.

What do you think the likely-hood of Midland getting ready to sue me is?

That depends on a wide variety of factors. If they're serious about suing you, they'll likely start to investigate you. They need to know if you are employed or receive income they can't garnish (such as Social Security) and they'll want to know if you own property they can place a lien on or if you are just a renter. Any collection agency, to increase its chances of actually getting paid, is going to go after the people who are most likely to have the funds to actually pay the debt. You can't squeeze blood from a turnip, and if you don't have assets Midland can seize, you may not be worth the time and money it takes to drag you to court.

You are, however, dancing around the danger zone. Not only do you have a debt high enough to elicit a lawsuit, you're nearing the end of the statute of limitations in your state. Most collection agencies will throw everything they've got at you and use lawsuits as a last resort, since they're left holding the bag for the legal fees if they can't collect the judgment.

Keep in mind that Midland can sue after the statute of limitations expires. The case would get dismissed on the grounds of an expired SOL, but only if you bring the expired SOL to the court's attention. I don't know Midland's policies well enough to say whether or not they habitually file out-of-statute lawsuits.

Since Beneficial closed in 2009 and Midland purchased the debt in mid-2010 how likely do you think it is that they have documentation of the debt?

A record of the debt exists, otherwise you wouldn't have Midland on your back. But Midland will need more documentation than just its word to prove this case in a lawsuit (if you show up to defend yourself). If they sue you and you don't show up, they win by default without needing any proof. Most debt collection lawsuits end this way. If I were to guess, I'd have to say its highly unlikely that they have the kind of documentation to prove a case against you if you respond to a summons and demonstrate your intention to fight the lawsuit all the way down. Collection agencies buy debts in bulk and thus often have no records to support their claims--just a name and the amount the person supposedly owes.

They have the last recorded payment from CCCS as 12/2010, but how likely is it that they will have documented proof that it is for me and to be applied to this account?

The documented proof that the payment occurred is that the payment occurred. They should have no problem proving that via electronic records. As for whether or not the payment was sent from the credit counseling agency specifically for your account...that's trickier. It's an interesting claim to challenge because, if they can't prove it, that means the SOL has technically already expired. This is just my opinion, but this seems like a very weak defense because its relatively easy for them to request those records from the credit counseling agency that made the payment in the first place.

Should I contact a consumer protection attorney and discuss the possibilities with them before I get served? 

You're clearly worried about this otherwise you wouldn't have contacted me. The fact remains, however, that while you're well within your rights to consult an attorney, he/she isn't going to be able to save you from a danger that simply hasn't presented itself yet. I know its agonizing to wait and see what Midland does, but its a heck of a lot cheaper than hiring an attorney who's going to charge you a couple hundred dollars to tell you exactly what I'm telling you right now for free. Or worse--one who'll be shady enough to refer you to a bankruptcy attorney. If you opt for an attorney, be very, very careful taking that route. There's some thumping good lawyers out there who genuinely care about the little guy, but there's just as many who see you as just one more way to line their wallets. Do your homework on this one.

Should I just continue to play Ostrich on this for now since they have been unsuccessful in contacting me?

They haven't been unsuccessful in contacting you. By your own admission they are calling and sending letters to your home address. If it were me, I'd keep a record of this. Every call you get, write down. Every letter you get, save. This way, if they try to gutter sue you and get a default judgement using a fake or outdated address, you'll have proof to use in court to have the judgment vacated later on. So no, do not become an ostrich. Become a hawk. Watch and wait and pay attention. Because guess what? In your state, failure to properly serve a summons is grounds to vacate a judgement. That doesn't mean you shouldn't do your best to fly under the radar, if you catch my drift. Making contact with them now, right on the cusp of the expiration of the SOL, would probably be unwise...

 Is there any way I can be proactive now (without making payment arrangements on a debt that is 3x the amount that I actually owe)?

Not to my knowledge. The time for proactivity passed quite a while ago. At this point, even paying the original amount isn't going to clean up your credit. It won't even leave you with a "paid in full" mark on your credit report. If you paid the original amount now, the collection agency would likely just sell the remaining unpaid balance to another collection agency and this nightmare would begin anew. Your best way of being proactive is to know your rights and exercise them when and if it becomes necessary to do so.

What are my options to fight them and get this off my credit report?

Well, as we've seen, this thing should come off your credit report on its own fairly soon. If it doesn't, that means its been re-aged by Midland. That's when you can send a nice letter informing them that it is against the Fair Credit Reporting Act for them to continue reporting an account 7 years and 180 days beyond the date of your payment. Failure to adhere to those rules leaves them subject to a consumer lawsuit. Here, I'll even quote you the statute: You can find this under section 605 in the Fair Credit Reporting Act, page 22

Information excluded from consumer reports. Except as authorized under
subsection (b) of this section, no consumer reporting agency may make
any consumer report containing any of the following items of information...

Accounts placed for collection or charged to profit and loss which
antedate the report by more than seven years.

 I always recommend that people reach out to the collection agency for corrections first because, while you have every right to dispute the item as "obsolete" with the credit bureaus, you're once again in a situation where the collector has the ability to verify the lie and suddenly it becomes that much harder to dispute. Once they've "investigated" once, federal law doesn't require the credit bureaus to investigate a second time. If its any comfort, from what I know of Midland, they're pretty good about deleting their tradelines on time.

Now, this brings us back to that gargantuan debt they claim you owe. Midland, in my experience, will occasionally shelve debts rather than selling them to other debt buyers. In other words, once the SOL and reporting period have expired, the debts seem to disappear as well (that's weird for a collection agency, but I have seen Midland do this before, so you have to give them at least some credit for that)  But we have to face the facts, your debt is large and the odds are someone will have an interest in collecting it. If Midland passes the debt on to a junk debt buyer, it's very possible that this new collection agency will magically insert itself into your credit report. Be prepared for this and regularly monitor your credit from now on. You can get a free annual credit report from each credit bureau without a credit card by using the Federal Trade Commission's approved website for pulling free credit reports--AnnualCreditReport.com. Since you can get a report from each agency, I have always found it most prudent to pull one report every four months from a different agency. Unless, that is, you want to spring for a credit monitoring service.

One more thing, the expiration of either the credit reporting period or the statute of limitations is not going to cause Midland (or any other debt collector) for that matter, to simply give up on that debt. Once you're out of the woods on the lawsuit front, you may want to consider sending a cease and desist letter to put a stop to the incessant collection calls and letters once and for all. And for the love of all that is holy to you, keep a paper trail to back yourself up with the expired SOL/credit reporting period. This is incredibly important if a future collector ever decides they want to reinsert this nastiness into your credit record.

Occasionally I'll put links to other related articles that readers might find helpful at the bottom of certain posts, but the ones I'm including today are specifically related to you and your situation. This post has already become the longest Q &A I've ever done, and I don't want it to turn into a novel. Plus, there is a cheesesteak waiting for me in the kitchen and the very smell of it is fogging up my better judgment.

Best of Luck,
Lee

Related Posts:

Send a Cease and Desist Letter to Debt Collectors 

What Are Your Odds of Being Sued By a Collection Agency?

Dealing with Midland Credit Management

Removing Re-Aged Collection Accounts From Your Credit Report

How to Stop Collection Calls at Work

Few things are quite as embarrassing as receiving collection calls at work. Even if the collector doesn't identify himself as such, many employers frown at employees getting personal calls. It's illegal for a collector

Collectors calling you at work? Make it stop.

to discuss your debt with a third party, such as your boss or co-workers, but as we've seen in the past, just because its illegal, that doesn't mean it won't happen. Long story short, bill collectors calling your workplace have the capacity not only to shame you, but to put your job in jeopardy. As angry and frustrated as you may be, you have the ability to stop collection calls at work for good.

Read More: Can Bill Collectors Call Your Family?

Stopping Collection Calls to Your Employer

The Fair Debt Collection Practices Act governs collection tactics. It states that, while debt collectors have the right to call you, they don't have the right to call you at any time or place they they know to be inconvenient for you. If calling you at work is inconvenient, then its time to let them know that.

Your first course of action should be to tell the collector verbally that you cannot take personal calls at work therefore calling you at work is inconvenient. Make sure to use the word "inconvenient." Its a trigger word that some bill collectors are taught to listen for. Some collection agencies will honor your verbal request and only call you after hours. Others will ignore you. Keep in mind that a debt collector who doesn't know the ropes may not understand your rights. Feel free to cite Section 605 of the Fair Debt Collection Practices Act in your conversation. Inform the collector in a civil manner that you are invoking your right to dictate the times and places that you cannot be contacted by a collector.

Read More: Can Your Record Phone Calls From Debt Collectors?

Cease and Desist Letter Stops Collectors Calling You at Work

If a verbal request doesn't work, its time to create a good old paper trail. Write a letter to the collection agency notifying them that the FDCPA protects you from receiving calls at times and places that aren't convenient for you. If you feel its necessary, point out that if the collection agency doesn't heed this request, you have the right to file a lawsuit against the company for damages due to its failure to adhere to federal law and any lost wages you suffer as a result of getting fired due to the number of personal calls you receive from collectors. Send your letter Certified mail, Return Reciept Requested. This forces the collector to sign for it--preventing then from claiming they didn't get your letter and continuing with the collection calls at work.

Read More: The Partial Cease and Desist Letter

Your Legal Rights Regarding Workplace Collection Calls

Odds are that once you've sent the collection agency a formal request to stop calling you at work, they'll comply. After all, this demonstrates that you know your rights. Unfortunately, not all collection agencies are alike and there are always a few bad apples in the bunch. If the collection agency calling you at work is one such bad apple, a verbal and written request may do little to deter them. Should this happen to you, its time to pull out the big guns: legal action.

The FDCPA gives all consumers the right to sue third-party collectors that don't adhere to federal collection guidelines. If you've sent the collection agency a Cease and Desist letter and have been ignored, send

Write a Cease and Desist letter to the collector.

another. By sending a second Cease and Desist, you aren't attempting to make the collection calls at work stop, you're trying to build a strong court case.

You don't need a lawyer to file a lawsuit against a collection agency. You may even wish to notify the collection agency, in writing of your intentions. Few collectors want to face down a debtor in court over an FDCPA violation. The very fact that you're suing will likely make you--and your debt--more trouble than you're worth. Should you decide to sue, keep in mind that the FDCPA limits your damages to no more than $1000 unless the calls have caused you real-life financial  hardship. One example of a real-life financial hardship would be if the collection calls caused you to lose your job. Few cases of workplace harassment by collectors actually comes to this, but its crucial that you are well-informed of your rights and options in order to stop embarrassing collection calls in the workplace.

Original Creditor or Collection Agency Forged Signature on Documents. Now What?

Hi Lee,

Your blog is wonderful, thank you. And, I REALLY need your advice.

I have a $3,100 bill from OC for a business debt that the company claims I signed a PG. I told them I didn't PG and it wasn't my responsibility. In 10/2012, they dinged my credit.

I'm currently refinancing a large jumbo loan and it appears the OC now either sold or hired a CA to collect. The CA has now dinged my credit, and the amounts are slightly different and it appears as 2 separate debts.

I spoke with CA and they provided me with the contract and I believe my signature was forged. 

However, because of the size of the loan and the dramatic payment reduction I will receive monthly, I simply need this taken off my credit immediately, and would be willing to pay for delete if I could get this removed. However, based on this blog I don't suspect this will be a possibility. In addition, if the CA agrees to PFD how can I get the OC to remove the entry?

Is there another option? Time is of the essence, so hiring an attorney and filing suit over $3,100 is not a good option either, IMO.

Please advise, thanks!

---Anonymous

Anonymous,

First of all, thank you for the compliment. If this blog has helped even one person, all the effort has been 100% worth it.

Now, for the meat and potatoes of the problem...even if the collection agency agreed to a pay for delete (and you never know, they might. $3100 is nothing to sneeze at), you couldn't get the original creditor to delete its entry. The pay-for-delete only works for the collection agency. The original creditor doesn't benefit and, as a result, its entry will still remain for the full reporting period. Unless, of course, you become a financial and/or publicity threat to the company. There are three ways I can think of to take care of this problem without following through with a lawsuit. Keep in mind, this is just what I would do if I were in your situation. This does not constitute legal advice.

Potential Solution #1

If you know for a fact that you didn't sign a personal guarantee and your signature was clearly forged, this is fraud. A handwriting expert would quickly be able to tell whether the signature was a forgery or whether you signed it and simply forgot (even when we sign things in a completely different way, there are still personal handwriting markers that remain). You and I both know that you don't have the time to deal with a messy lawsuit right now – but neither the original creditor nor the collection agency know that. And this is to your advantage.

If it were me, I'd hire a handwriting expert to analyze both my signature and the signature on the personal guarantee. If he/she finds that the signatures were made by two different people, ask the handwriting expert to put those findings in writing. If you're having trouble locating a handwriting expert, check with the closest university.

Now its time to take a trip to an attorney's office. Don't worry, you don't have to sue, you just have to put together an airtight and scary-as-hell threat. Explain what's going on to the attorney and ask to hire him/her to notify the collection agency and original creditor of the handwriting expert's findings and demand that they cease collection efforts immediately and remove all negative information connected to the fraudulent personal guarantee from your credit report. Provide the attorney with two copies of the handwriting expert's letter. Along with his own letter, he'll need to send a copy of the handwriting expert's findings. This demonstrates to the original creditor that you have proof against them. If you have proof and they have nothing but "But she/he signed it, your honor. Honest!" then you're more trouble than you're worth. They won't want that to go to trial.

It could be a problem if the OC is unorganized and careless. Then the threat may fall through simply because one hand doesn't know what the other is doing. That's always a possibility. You, however, will come at them with two things that give any company pause – legitimate proof of wrongdoing and an attorney. Nothing says "I mean business" like a lawyer touting proof of fraud.

You may run into an attorney who insists upon actually suing the company and who refuses to send his own demand letter coupled with the handwriting expert's findings because he claims it won't work. If this happens,  watch out! If you have a solid enough case that the attorney wants to take it to trial, then you very clearly have a solid enough case to attempt to resolve the issue outside of court. In this scenario, its very likely that the attorney knows a good case when he sees it and wants to convince you to sue because he'll make more money from a lawsuit than a letter. The good news is that, since attorneys who play in my field make so much less money than, say, a corporate attorney or defense attorney, they often legitimately want to help people. I'm just saying watch out for dishonesty in the legal profession. I guess that's akin to saying "Watch out for sharks in the ocean," huh?

Potential Solution #2

Although you have no desire to deal with a lawsuit right now, that doesn't change the fact that, with a forgery, you have every right in the world to file one. Solution #2 requires that you use your handwriting expert's analysis to file a lawsuit for fraud against the original creditor and/or collection agency. It's important not to focus solely on the original creditor just because they are the ones whose documentation reflected the forgery. If you request validation, the Fair Debt Collection Practices Act dictates that a debt collector cannot pursue further collection activity until it provides that validation. And guess what? It isn't unheard of for debt collectors to forge debtor's signatures on documents. The forgery could have been born anywhere.

Neither the original creditor nor the collection agency wants to go to court. They don't like going to court for frivolous lawsuits and they hate going to court to defend themselves against a claim as serious as fraud--especially when the plaintiff has an expert providing him/her with solid documentation that supports that claim.

It's very likely that both the original creditor and the collection agency would decide that removing that $3100 debt from your credit report is a lot cheaper and less time-consuming than bringing in an attorney and defending themselves against a claim of fraud. I've seen collectors back out of lawsuits that had a lot less merit and delete their credit report entries simply to spare themselves the time and money required to successfully defend against a lawsuit. You don't have to have an attorney to do this, but notification from an attorney packs a much scarier punch that a lawsuit you file on your own.

The only major issue that comes into play here other than time is money. Handwriting analysis isn't cheap and neither are lawyers--even if you only use them for a short period of time. Unfortunately, the cheapest way (filing this lawsuit yourself, going to court, requesting discovery documents, etc.) is the most time-consuming and you'll have to sacrifice money for time in order to get the credit problem taken care of so that you can refinance your home.

Potential Solution \#3

Report all of this to your attorney general and ask for help. Send a copy of the forged signature and your real signature. One well-placed call from the attorney general can usually make the bad guys go away--at least for a while. Also, file an online complaint with the FTC on both the original creditor and the collection agency. While the FTC won't settle your claim for you, they will investigate if they get enough similar complaints.

I understand your urgency to get this taken care of to ensure that you can refinance your home, but even if things go well there is no guarantee that this issue will be cleared up by closing. I would consider putting off refinancing until after you've cleared up this mess. Without the time constraint looming over you, you'll have time to aggressively pursue the lawsuit that you so desperately deserve to file. These people should not be allowed to get away with this.

Best of Luck,

Lee

Collection Agency Will Sell Your Unpaid Balance After Debt Settlement

One of the tricks in every debt collector's arsenal is offering you a debt settlement. They'll start out high and reduce the amount as time goes by and you don't play ball. If the debt is particularly old, the collector may agree to settle for a paltry sum. Either way, you can rest assured that if you have an account in collections you'll get a debt settlement offer sooner or later. If you plan on taking that debt settlement offer, however, you need to be aware of the fact that the collector may just sell your account to another collection agency after you pay the settlement.

Selling Accounts After Debt Settlement

Ok kids, let me tell you how collection agencies make money. On the front end, they buy debts for pennies on the dollar from creditors and collect on the debts for far more than they paid. The way they make money on the back end, however, is far more sinister.

Here's a story that, for some of you, is all too familiar...

Julia's car was repossessed two years ago. She was left owing $3000 to the bank. The account eventually went to collections. Julia agreed to settle with AAA collection agency for $1700. She used her tax refund to pay off the settlement, breathed a sigh of relief and put the incident behind her.

Six months later Julia starts receiving phone calls from a XYZ collection agency. XYZ collection agency claims that Julia owes them $1550 for an unpaid debt. Julia has no clue what debt they are referring to. After endless phone calls and a whole lot of stress, Julia discovers that AAA collection agency accepted her $1700 settlement payment and then sold the remaining balance of $1300 to XYZ collection agency. XYZ collection agency added $250 in fees and began the collection process anew. It's also reporting the debt on her credit report. She doesn't have the money to settle the debt a second time and, even if she did, she is worried that XYZ will also sell the unpaid balance of her settlement to yet another collector.

This hometown horror happens more often than you'd think. There is no law prohibiting a collection agency from negotiating a debt settlement with you, accepting your settlement payment and then selling the unpaid balance to yet another collector. Remember, debt collectors will make money any way they possibly can. This is a lucrative way. The saddest part? They generally make very little on the debts they sell since these debts are only purchased by junk debt buyers. Unfortunately, junk debt buyers are the worst of the worst and will harass you endlessly for a debt that, technically, you don't owe anymore.

Protect Yourself From Having Your Account Sold After Settlement 

If you want to pay a collection agency's settlement offer but don't want to end up on the hook for the remaining balance somewhere down the line, there is a simple way to get around this: get it in writing. I probably use that phrase more than any other. It's crucial in this business.

Tell collectors to put it in writing.

We are accustomed to doing business with companies who play by the rules. If they say they're going to do something, they usually do it. If they don't do it, its due to an oversight and enough irate phone calls from us later, they do it. Collection agencies do not work this way. If you reach an agreement with a debt collector over the phone, demand that the company put the agreement in writing before you pay them a dime.

Now, the collector is trained to request that you make a good faith payment before the company does anything. You are going to politely decline until the collection agency draws up a good faith statement outlining the terms of the agreement. It's perfectly reasonable to tell the collector that he works for a collection agency and you don't trust them. Tell them they can email you a pdf document on company letterhead outlining the settlement terms, you'll even stay on the phone and wait. But whatever you do, don't pay first!

What to Request on Your Debt Settlement Agreement

A document outlining the amount you'll pay and when isn't enough. Your debt settlement statement has to provide you 100% protection from your account being sold to another collector after you've already paid. This, of course, is the very thing the collection agency doesn't want to give you. Why? Because they have every intention of doing just that. Don't be another victim.

Your statement from the collector should include the following:

• The amount of the settlement
• A statement from the collector noting that, once this amount is paid, your debt is satisfied. 
• A statement from the collector agreeing not to sell the remaining balance to another collector 
• The statement should be on company letterhead and signed

Be polite, but make it clear (and you'll probably have to calmly restate this over and over) that until you have that statement in your hand, you cannot make the first payment. You see, once you make that first payment, they can sue you (paying resets the statute of limitations). If I could spend my days hovering over your shoulder and protecting you from collection scams, I would. Unfortunately, I can't, and no one is going to protect your rights but you. So do it. Demanding a statement containing the terms of your debt settlement agreement is the only surefire way to prevent a collection agency from selling your debt to another collector after you've already paid.

Related Posts:

Can You Reset the Statute of Limitations on a Debt?

Send a Cease and Desist Letter to Debt Collectors

The Debt Collection Lawsuit Threat

Can Collection Agency Collect After Original Creditor Issues 1099 Tax Form?

Here's an unsettling little fact you may not be aware of: When a creditor writes off your debt and sells it to a collection agency, that creditor may send you a Form 1099-MISC at the end of the year. The Form 1099-MISC notes the amount of your debt that the creditor "forgave." Of course, we both know that collection agency debt is about the furthest thing from "forgiven" debt that there is, but the original creditor can get a tax break by taking uncollected debt as a tax loss. As with most things that debt collectors and creditors do, their minuscule tax break can come back to bite you in a big way.

Forgiven Debt, Form 1099-MISC and Your Taxes

When you receive a Form 1099-MISC from a creditor, that means the creditor has reported your debt, and you, to the IRS. Thus, in order to stay on the IRS' good side (and believe me, we all want to do that) you must include the debt as income on your tax return and–you guessed it– pay taxes on it.

I know what you're thinking, "Oh good. I'd rather pay a portion of the debt as tax than pay the full amount plus fees to a collection agency." But not so fast, here comes the kicker: A collection agency still has the right to collect the debt after you've received a Form 1099-MISC from the original creditor and paid taxes on the debt.

And now you're thinking I've either developed early-onset Alzheimer's or have been hittin' the bottle again. I know there are a plethora of forums posts and blogs and articles everywhere making these claims. There are an equal number saying it isn't true. After all, it just doesn't make any sense. It is true and I am going to explain to you exactly why this is.

The IRS, Taxes and Forgiven Debt

The people who shout from the rooftops that a collection agency can't legally collect after you've paid taxes on a debt are generally referring to this lovely bit of jargon from the Code of Federal Regulations:

"When collection action on a debt is suspended or terminated, the debt remains delinquent and further collection action may be pursued at a later date in accordance with the standards set forth in this chapter. When an agency discharges a debt in full or in part, further collection action is prohibited. "

Yes, that's federal code. And yes, it contains the claim that once a debtor pays taxes on a forgiven debt, that debt is no longer collectible  But what most people who find this bit of text fail to realize is that it governs the actions of government entities, not consumers and commercial creditors. There is no comparable code offering consumers the same benefit, and if it isn't in the law, it isn't enforceable.

Told you it was real.

Let me give you an example. Once upon a time in Japan a vending machine appeared in a subway tunnel. The vending machine sold, of all things, young women's used undergarments (This is too crazy for me to make up). The city immediately took action to remove the vending machine, but discovered that there were no laws on the books making such a vending machine or what it claimed to sell, illegal. The city eventually found some obscure law regarding second-hand clothing and licenses to eliminate the machine, but until then there was nothing they could do.

The same principle applies here. There is no law protecting consumers from being double-charged. As a matter of fact, there is case law supporting the practice.

Debt Buyers' Association vs. Snow

It's easy to misread the code and assume that, once a 1099-MISC is issued, all collection efforts on the debt must stop. Back in 2006, this very assumption led the Debt Buyers' Association–an agency that represents the  interests of a number of collection agencies–to file a lawsuit.

The lawsuit was simple in scope: The DBA claimed that, because the law required creditors and collectors alike that met certain requirements (I won't go over those requirements here) to send the debtor a Form 1099–MISC, this impinged on the entire collection industry. Basically, collectors faced the inevitability of not being legally permitted to collect on any debts for which a 1099 had been issued.

The court ruled that there was no reason a debt collector could not continue its collection efforts after a 1099 had been issued. And legally there isn't since, as ridiculous and unfair as the whole thing sounds, there is no law prohibiting the practice. The court noted, however, that the debt collector could send the debtor a statement informing him/her that a Form 1099-MISC had been issued because the debt met certain technical requirements, but that collection activity would continue.

How thoughtful of them.

What to Do When You Get a 1099 From a Creditor or Collection Agency

While you can just refuse to pay a collection agency and take your chances with the statute of limitations, you don't have that same freedom with the IRS. If you get a Form 1099 from a collection agency or the account's original creditor, you have to factor it into your income. Period. Whether or not to pay the collection agency what they ask (or pay the debt and subtract the amount the 1099 claim increased your tax liability) is your decision.

Why Laws Regarding Debt Collection and 1099 Tax Forms Aren't Likely to Change

I once naively believed that someday some savvy consumer was going to file a lawsuit over this claiming that, according to legal language, the 1099 could only be issued for "forgiven" debt. Thus, the debt must be forgiven as soon as the debtor pays taxes on it. It didn't take me long to realize that the collection industry has a powerful lobby effectively preventing any case law supporting the consumer's rights. In addition, politicians tend to treat debtors like pariahs, so don't expect any new laws on the books anytime soon that protect consumers from this "double-billing" on the part of creditors and collectors.

Related Posts:

Can a Collection Agency Take My Tax Refund?

What To Do If Bill Collectors Come to Your House

If you owe delinquent debts, odds are that your communication with debt collectors has gone no further than threatening letters and a whole mess of  nasty telephone calls. If you're like some unfortunate Americans, however, a debt collector has shown up at your door. Few debtors expect bill collectors to come to their houses to collect payment. If you find a debt collector at your door, however, there are ways to protect yourself and make sure that the incident never repeats itself.

Don't Disclose Your Identity

Are collectors ringing your doorbell?

It's good 'ole common sense that you should ascertain the identity of any strangers who show up at your door. Although its unlikely that an axe murderer is prowling around in your neighborhood posing as a debt collector, its always a good idea to find out who your visitor is before answering any of his or her questions – that includes whether you are or are not the individual the bill collector is looking for. Debt collectors are prohibited from sharing any personal information about your debt with a third party, so if you suspect that the stranger at your door is from a collection agency and he won't disclose his identity or who he works for – neither should you. Close the door and go on about your day. If he won't leave, call the police. That's what they're for.

Prevent Debt Collection House Calls

The Fair Debt Collection Practices Act notes that collection agency employees cannot contact you using methods that you have made clear are inconvenient to you. While this generally refers to making phone calls to your place of employment, showing up at your door easily falls into this category. If the last thing you want is to find yet another bill collector at your door, write the collection agency in question a cease and desist letter. Note in your letter that under no circumstances are any company representatives to come to your home to conduct collection activity. Send your letter via certified mail return receipt requested. Should another bill collector pay you a physical visit, you can then file a police report as proof of the incident and sue the company for violating federal law. Regardless of the outcome, its almost a given that the collection agent in question will find himself unemployed.

Debt Collectors on Your Property

There is one situation under which a collector has every right to come onto your property and that is to repossess secured debt. While credit card company representatives and unsecured collection agents are highly unlikely to come knocking on your door, a bank won't hesitate to send a crew over to your house to repossess your car if you don't make the payments. In this case, however, the bill collector isn't likely to knock on your door and ask you for the keys unless the car is locked away in a garage. If the debt you owe is unsecured by property, however, you have the law on your side to ensure that collection agencies can't simply show up at your door and, if they do, that history will never repeat itself.

Related Articles:

Send a Cease and Desist Letter to Debt Collectors

Can Bill Collectors Call Your Family?

How Debt Collectors Find You

Collecting Debt From the Dead: Survivors' Rights Against Collectors

When I was in my late teens, my father died. He wasn't feeling well one evening so he went to bed early...and just never woke up. He left behind some debts that ended up in collections and before too long, collectors were calling our house on a semi-regular basis. My mother wasn't emotionally capable of taking these calls, and I was trying to take care of her the best way I knew how: by fielding away my father's creditors. My story to any collection agencies that called was that my mother had packed her bags and left myself and my father three years prior and I had no idea where to find her. Once I even mustered up some fake sobs and asked the collection agent if he found her, would they please call and tell me? 

Long story short, I didn't have to give the collection agencies a lie when they called to collect after my father's death. If I had a time machine, one of the things I would do is go back in time and give my young self instructions on how to handle this. I can't do that, but I can give those instructions to you. 

But first, the basics. 

Debt After Death: The Probate Court

When a person dies, that individual's estate goes into probate. The estate isn't limited to property the deceased owned, but encompasses all of his/her worldly assets (there are some exemptions that are not included in the estate, but they aren't relevant for the purpose of this post). It's the creditors' responsibility to file claims with the probate court against the estate within the time limit set by the state. At the end of the probate period, the court "settles" the estate by paying off creditors that filed legitimate, timely claims and turning the remainder of the deceased's assets over to his heirs. 

Oftentimes, there are creditors that don't get paid. Those creditors, unwilling to do what they're supposed to do and write off the account as a total and complete loss, "accidentally" sell that account to a collection agency. Thus, they get some scratch for the debt while simultaneously passing the buck to someone else. 

The natural course of events transpires and debt collectors begin calling the deceased's house nonstop. The surviving family members inform the bill collectors that the debtor is dead, but the debt collectors don't believe that. The family might even send the collection agency a copy of the death certificate. Sometimes, this is the end of the story, but more often than not the dog and pony show is just beginning. 

You Owe Your Dead Parent/Husband/Wife/Brother/Grandmother's Debt!

First and foremost, debt collection is an industry with a high turnover rate. Agents don't stay at the job very long. It's just too disheartening and most people aren't nasty enough – or desperate enough – to make that a long-term profession. Because of this, bill collectors rarely have the training and experience necessary to know all of the small ins and outs of collection law – especially when it comes to the deceased. 

Make the collection calls stop

To make matters worse, bill collectors work on commission. The more money they collect, the more money they make. This gives collectors who know better a strong incentive to toe the line of the law or even jump over it entirely. Most consumers know their basic rights, but have no idea how to handle debt collection activity after the death of a loved one. 

So the debt collector calls and demands that you pay the debt of your husband/sister/brother/grandparent and you say..what? You've been put on the spot. You know nothing about this debt, but this person says you have no choice but to pay it. If the collector is particularly nasty, he'll threaten to do something like sue you, garnish your wages, take your car and home or ruin your credit rating. If you're like many scared consumers, you're blinded by grief and confusion and you either promise to make a payment or worse – give the debt collector your banking information to allow the company to debit the money directly from your bank account. 

How the Law Protects Survivors

Here's the first thing you need to know. With few exceptions, you do not owe this debt.  Let me say that again for emphasis. YOU DO NOT OWE THIS DEBT. Got it? Good. 

The law is a grey area as to whether or not a bill collector who knows your loved one is dead can still call and ask you for payment. The Fair Debt Collection Practices Act makes it perfectly clear that collectors can only discuss the debt with the debtor, not a third party (in this case, you). But when the debtor is dead, the debt collectors almost always ignore this rule and, to the best of my knowledge, there's no case law on this yet. 

But one thing is painfully clear: a bill collector can never, ever threaten someone with legal action they cannot actually take. The collectors cannot lie to you in an effort to scare you into paying off your dead loved one's debts. They'll do it without blinking an eye, but its illegal. 

(If you're curious about just how low collectors will go to collect the debts of the deceased, this New York Times article, You're Dead? That Won't Stop the Debt Collector is both fascinating and cringe-worthy at the same time.)

What To Do When the Collection Calls Start

When your phone starts ringing off the hook with calls from collectors wanting you to pay off the deceased's accounts, your first course of action should be to inform the collector that the individual has passed away and ask for an address to send the death certificate to. Contrary to what you may believe, most debt collectors aren't evil beings sent from the bowels of Hades to terrorize the living. They'll give you the correct address and hang up the phone. So here we go, step by step:

1. Get a copy of your deceased loved one's death certificate.

2. Write a cease and desist letter to the collection agency noting that the only individual legally responsible for paying the debt in question is dead and that the company is not to contact his/her family members any further. 

3. Mail the death certificate and cease and desist letter to the collection agency via certified mail with a return receipt requested. 

4. Repeat the process for every collection agency that calls until the calls finally stop. 

5. Sue at your discretion. 

Exceptions to the No Liability Rule

In rare circumstances, family members can be liable for a deceased loved one's debts. Namely, if you were a joint account holder for the account or you live in a community property state that applies the community property rules to debt as well as assets. That's important. Collection agencies and creditors alike would love for all consumers to believe that living in a community property state is enough to be saddled with their spouse's debts upon their death but it simply isn't the case. All community property states treat debt after death differently, so know your state's rules before you assume you have to pay your deceased family member's collection debts after they're gone. 

Related Posts:

Send a Cease and Desist Letter to Debt Collectors 

Fighting Collection Agencies