Credit and Collections – What you really need to know to protect yourself…

Katz & Associates Legal Blog:
In REGARD TO CREDIT, very few consumers understand that they have legal rights and that they are protected in regard to illegal practices by creditors and aggressive collection agencies (or attorneys) who many times commit flagrant crimes against the general public. These culprits get away with their unscrupulous conduct because people just do not understand the laws that protect them against such improper activities and thereby the crimes against consumers go unreported.
Before getting too deep into the laws that protect you, instead it is important for you to understand as a consumer that you have rights guaranteed to protect you against flagrant abuse by creditors and collection agencies. Many people also are not aware that predatory collection lists includes: banks, collection agencies, and debt collection attorneys/law firms. Just because someone calls and or sends you a letter on bank or law firm stationary does not give them the legal right to threaten or get aggressive against a consumer unless they follow two regulating guidelines: 1) Statutes of the State; and 2) Federal Statutes that protect all citizens’ rights and internally governed by a Federal Watchdog called the Federal Trade Commission (“the FTC”). The FTC was created to protect the consumers of the United States against improper actions of agencies, collection law firms, and or creditors or their agents (collections agencies) from doing unlawful acts against you as a consumer.

Many consumers with creditors receive calls at all hours of the day and night, seven days of the week, regarding late payments, bills, by collectors trying to get consumers to pay for a bill they may not even owe using high pressure techniques. Collectors get paid based on commissions from money they bring in the company. An aggressive collection agent can make a very lucrative living. So, agents will use any tactic in their bag of demands. Some bank customer service personnel also get paid on commission and they too are considered collection agents for their employer. FIRST OF ALL: In this country it is NOT illegal to not pay your bills when they are due! You will NOT be arrested, and you will NOT be put in jail for not paying a bill. We have all seen stories of collection agencies that threaten people with being arrested or jailed. NOT SO! Consumers need to report these kinds of tactics to local police, immediately, if it ever happens to you – and to consider filing a complaint with the FTC and the subject creditor. Get the phone number, from the caller ID or simply ask and get the name of the caller (it more than likely will be a bogus name anyway, so record the time of the call). If you should get more than 3 such calls in succession (and/or calls after hours) you may file a formal complaint with the police and FTC directly and you will need to have all that information available. See
If in fact you are being threatened with a lawsuit and you want all calls to stop right away A) First send a letter by U.S. Mail to the creditor and request that they immediately STOP CALLING you; then, B) you should take measures to hire an attorney, then you can advise the caller(s)/creditor that you have an attorney, then give the caller the name of the attorney and the phone number for your lawyer, then simply hang-up! Do not get into any conversation with a collection caller because any information you may give a creditor or agent can be used against you. By statute, once they are told that you have an attorney, the collector simply must not call you or write you again; however, almost all creditors and collection agencies ignore this statute in violation of a Federal rule. In order for an attorney to prosecute a case against such collection tactics, again you must get the phone number of the caller, the name of the caller (even if bogus) and note the time of the call (and take notes about what the creditor stated on the call). If more than 3 calls in succession are made to you after you have filed the above suggestions, or violations of creditor calling after hours, or creditor failing to make proper disclosures to you after following the above suggestions do you have a claim against the creditor. The Federal Penalty can be charged to the aggressive callers and they may be fined $500 per day for each call, and for each repetitive call, and you may be awarded reimbursement of $1,000 per case if the caller is found guilty as charged. As attorneys, we can obtain records of all calls, to your phone number, and litigate with just cause (generally on sizeable case matters).
At the end of this blog we include a very informative legal statement from Attorney General Bill McCullom. It is important you read the Attorney General’s message so that you are aware of your rights. Also, the FTC has produced a short video (see link below) that is available in English or Spanish to alert all consumers about credit.

With recent Christmas stockings put away for another year now the bills come next! Many clients already are calling and asking if we can reduce their credit card debts without resorting to bankruptcy. The answer is absolutely YES! We work with many clients who qualify for debt settlements where the creditor has agreed to take a portion of the owed debt in a one lump sum payment or in a few payments. In other words, we have seen many creditors take sometimes between 20%-50% off the amount of the debt in exchange for a full settlement. In those cases, many of those clients are concerned that if we do get a reasonable debt settlement if there is a tax liability. Income does include any forgiven debt and it may be reported to the IRS by the creditor and charged to the debtor (you). If such is reported, you will receive at the end of the tax year, a 1099-C, reporting the forgiven portioned amount. Generally forgiven debt is considered income and taxable. But do not be alarmed. Most people with these issues actually do not have to pay taxes on the forgiven debt, despite what you read or hear on poorly investigated news reports or other blogs. THE FACT IS: IF you receive forgiven debt from a creditor (i.e. income) it can be excluded by the IRS in most cases when a Form 982 is filed properly. The Form 982 wipes out the forgiven portion of debt and acts like a credit back to the consumer so no tax liability will be owed on any forgiven debt portion. There are different instances that one will qualify for Form 982 – and the most common is someone who is INSOLVENT. In other words, if you have more liabilities (debts) than assets (money) to pay those liabilities you are insolvent. Once you settle the debt with the creditor for less than what was originally owed you will most likely receive a 1099 from the Creditor for the difference between the originally owed debt and the amount they agreed to settle for. IF you are insolvent or meet other qualifiers, you can file the FORM 982 listed above to have that 1099 zeroed out – allowing you to exempt that income reported on the 1099.

When Katz & Associates is hired to get debt reduced, we go right to work on the basis of those Federal guidelines that control debt-negotiated settlements. It is not a fast cure process and it can take upward of 9-months or longer to get satisfactory results in this current economy since most creditors and lenders and banks are not immediately cooperative and do not want exposure to liability. Some clients have used debt consolidation companies or agencies (who claim to be non-profit) and later find out that the creditors are never paid! The only true means to resolve debt is through an attorney, or do it on your own. Debt consolidation companies charge huge fees and usually take one half or more of the monthly payments as their own fees and less than half to 1/3rd of the monthly money that you pay goes to creditors and with compounding of costs charged for the consolidation service, the debt never gets paid. True negotiated work-out settlements freeze the debt, no added interest is charged and the debt is settled at the lowest dollar, net of settlement in full. And best of all, you control all your money at all times and you approve or reject any offers for settlement on your own terms. You have financial control.
After 7 or more months from the date all debt is settled we can refer clients to an affiliate law firm who will actually work on your behalf to attempt to have all negative credit reporting removed from your three personal credit reporting agency profiles and usually within a year the credit score actually improves based on fully settled debts.
Whether you are looking to get rid of debt in 2011 as your new economic resolution, and personal wealth management plan; or, if you have pressing credit and collection matters you need to know the subject of Attorney General Bill McCullom’s memorandum link below. Watch the video to arm yourself and call on Katz & Associates Law Firm to help you negotiate settlement of debt, or get relief with Chapter 7 Bankruptcy Protection (your legal right to discharge all debts) or to protect you from unscrupulous collection agencies, lenders, credit card companies, and banks. We are here to help you. Clients do have legal rights, and you are entitled to be protected under the law!
“How to Protect Yourself: Debt Collections”

Source: Florida Attorney General Bill McCullom’s Office:

“A “debt collector” is someone who regularly tries to collect debts owed to others. A debt collector may contact you if you are behind in your payments to a creditor on a personal, family or household debt, or if an error has been made in your account.
A debt collector may contact you in person, or by mail, email, telephone, telegram or fax. However, a collector may not communicate with you or your family with such frequency as can be reasonably considered as harassing. A debt collector may not contact you at work if the collector knows your employer does not disapprove, nor may a collector contact you at unreasonable times or places, such as before 8 a.m. or after 9 p.m., unless you agree.
A debt collector is required to send you a written notice within five days after you are first contacted, telling you the amount of money you owe. The notice must also specify the name of the creditor to whom you owe the money and what action you should take if you believe you do not owe the money.
You may stop a collector from contacting you by writing a letter to the agency telling them to stop. Once the agency receives your letter, they may not contact you again except to say there will be no further contact, or to notify you if the debt collector or the creditor intends to take some specific action.
If you do not believe you owe the debt, you may write to the collection agency within 30 days after you are first contacted, saying you don’t owe the money. The agency may not contact you after that unless you are sent proof of the debt, such as a copy of the bill.
A debt collector may not harass or abuse anyone. For instance, a collector may not use threats of violence against the person, property or reputation; use obscene or profane language; advertise the debt; or repeatedly or continuously make telephone calls with the intent to harass or abuse the person at the called number. In addition, debt collectors are required to accurately disclose their identities to the person at the called number.
A debt collector may not use false statements, such as falsely implying that they are attorneys, that you have committed a crime, or that they operate or work for a credit bureau or misrepresenting the amount of your debt, the involvement of an attorney in collecting a debt, or indicating that papers sent to you are legal forms when they are not. Debt collectors may not tell you that you will be arrested if you do not pay; that they will seize, garnish, attach, or sell your property or wages unless the collection agency or creditor intends to do so and has a legal right to do so; or that a lawsuit will be filed against you, when they have no legal right to file or do not intend to file such a suit.”


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