Recently, there have been many articles online about zombie debt. In one article in BusinessWeek, entitled prisoners of debt it discusses the practice of selling and buying debt by debt collection companies that had already been discharged in a bankruptcy filing. Unscrupulous debt collection companies try and revive the debt by using fraudulent credit reporting and collection. The reason this debt is so popular to debt collection companies is it can be bought for pennies on the dollar and sold for large profit. These debt traffickers have found new ways that they use to collect on this debt that should be uncollectible.
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Many of these companies intentionally search for debt that was discharged in bankruptcy and by law has been rendered uncollectible. Some of these debts have even passed a statute of limitations and are not even collectible because of that. The debt collection companies prey on individuals after filing bankruptcy by reporting the discharged debt to the credit reporting agency. The debt continues to show up on the credit report and prevents the debtor from getting a possible home loan or good interest rates on other loans. Even though the bankruptcy filing is way back in the rear view mirror, the debt collection companies keep it alive and well.
The good news is this practice is illegal and there are remedies under the law for those that have been violated. When the debtor has continued attempts to collect on a debt that was discharged when filing bankruptcy, they should immediately contact their bankruptcy attorney to go after the collection company. The bankruptcy attorney can go after the creditor using the remedies under the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. These laws were created to protect the consumer from overzealous creditors that try to enforce and demand payment for debts in an unreasonable fashion. When it comes to zombie debts, many debtors might know they don't owe them, but don't know what to do.
After filing bankruptcy, it's important to keep a close eye on your credit report to make sure that all the debts are reported correctly. Sometimes there is a mistake and sometimes it's outright malicious and needs to be reported to your bankruptcy attorney. The majority of the problems with zombie debts after filing bankruptcy is not from the original creditor, but from the collection company that is maybe down the list after three or four times the debt was sold. In the past few years, it's become the Wild West in the credit markets as many of these collection companies don't obey the laws. With large profits to gain, they will take the risk at breaking the law. Years ago, these stories were a rarity and now are becoming the norm. After filing for bankruptcy, many debtors are beaten down and don't know where to turn. In these cases, it's important to stand up, fight and don't let these guys get away with it. A bankruptcy attorney will enjoy taking the money off the table of these unscrupulous debt dealers.
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