Debt Collectors Are Renting DA’s Letterhead

Final NoticeI became an expert in dealing with debt collectors when I decided to file for Chapter 7 bankruptcy two years ago. Every time I got a letter from a debt collector, I fired off a letter to assert my legal rights under the federal Fair Debt Collection Practices Act (FDCPA) and sent copies to my bankruptcy attorney. Debt collectors hate dealing with people who fight back when they have easier prey to go after. The newest tactic, as reported by The New York Times, is renting the district attorney’s letterhead to scare people into paying under the threat of criminal prosecution.

[The letters] bear the seal and signature of the local district attorney’s office. But there is a catch: the letters are from debt-collection companies, which the prosecutors allow to use their letterhead. In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.

[…]

Debt collectors have come under fire for illegally menacing people behind on their bills with threats of jail. What makes this approach unusual is that the ultimatum comes with the imprimatur of law enforcement itself — though it is made before any prosecutor has determined a crime has been committed.

Prosecutors say that the partnerships allow them to focus on more serious crimes, and that the letters are sent only to check writers who ignore merchants’ demands for payment. The district attorneys receive a payment from the firms or a small part of the fees collected.

If a civilian impersonates a law enforcement officer, that’s a crime punishable by one year in jail. If a debt collection company impersonates the DA’s office, and money is being exchanged underneath the table as part of a “partnership” that doesn’t benefit the public, that’s business as usual. Or, in the vernacular of the 2012 presidential election, the best government that money can buy. I was shocked—shocked!—to read that the Santa Clara County (Silicon Valley) DA’s office was involved in this questionable scheme to shake down consumers.

What do you do if you get one of these letters?

  • Call the DA’s office at the county office to determine if the letter was from them or a debt collection company. If the letter is from the DA’s office, read it carefully and take whatever steps needed to avoid further legal action.
  • If the letter is from a debt collection company, write a letter asserting your legal rights under the federal FDCPA and request that all communications to be in writing. (Your state may have a similar law that provides additional protections and should also be referenced in all your letters.) This begins the paper trail if you need to file a consumer complaint with your state attorney general’s office.
  • If the debt collector has a legitimate debt, pay off what you owe and not a dime extra.
  • If the debt collector has the wrong info and/or being abusive, make copies of the paper trail and file a consumer complaint. You need to be aggressive in dealing with these people. Like high school bullies, they will back down from a fight.

Send protest letters to the DA’s office, the county board of supervisors and your congressional representatives to end this insidious practice. The DA’s letterhead should represent the legal authority of the people—not the debt collectors.

Surviving A Chapter 7 Bankruptcy In The New Great Depression

If I had known that I would be out of work for two years and underemployed (working 20 hours a month) for six months, I would have filed for a Chapter 7 bankruptcy sooner and save myself some money.

Eight months after I was laid off from my tech job on Friday the 13th in February 2009, the credit card companies jacked up the interest rates on my three credit cards from 15% to 30% before the new credit card rules went into effect to limit such arbitrary increases. I could either pay the new interest rates or lock in the old interest rates of 16% by closing the accounts. Due to a quirk in the new credit card rules to help consumers pay down their debt balance, closing the accounts meant my minimum payments tripled from what they were before. I couldn’t afford to pay either the new interest rates before or the tripled minimum payments after. I went from paying $500 a month to $50 a month to cover my credit card bills. Eight months later I received my first notice from an attorney that one of my credit cards was deliquent.

A few days after my birthday in August 2010, I went to a bankruptcy attorney in downtown San Jose. I had at that time about $30,000 USD in credit card debt, which $10,000 USD came from the accumulated fees of paying less than what I owe. If I hadn’t been laid off and continued to work, all my credit card debt would have been paid off. Unfortunately, I had no choice but to exercise my constitutional right to file for bankruptcy to escape this overwhelming debt I was unable to pay. The attorney told me that I had a straight forward Chapter 7 bankruptcy, where I had no significant assets to pay off my debts and all my debts would be fully discharged so I can be debt free. The next four months I made payments on the attorney and filing fees ($1,299 USD). That was the easy part.

The next four months after that was pure hell as I gathered all the documents required for the bankruptcy petition. The major sticking point with the paperwork was that I had a small business as being a short story writer. If I had simply reported what little writing income I had on the Schedule C under my own name when filing taxes, the paperwork burden would have been significantly less. Since I had a business checking account opened under a fictitious business name, I had to determine the value of my copyrights and provide a profit and loss statement for 2011. These issues I have never considered before. I ended up valuing my copyrights for $375 USD (150,000 words written over five years) at 1/4-cent per word based on a recent short story contract that I signed, and providing a break-even profit and loss statement where I hope to make enough money from writing to cover my fixed expenses. Since everything I owned fell way below the minimum monetary thresholds, it really didn’t matter anyway.

Although I was under the protection of a bankruptcy attorney, the credit card companies sold the debts that I owe them to collection agencies that could care less. The one thing I learned about this side of the financial industry, debt collectors don’t like being treated the same way they treat people and backed off when people fought back. I once called a debt collector five times in a row for 15 minutes until they acknowledged that I had a bankruptcy attorney and to take my phone number off the autodialer. Filed consumer complaints against several collection agencies that were already under investigation to take a hint and leave me alone. One debt was sold to three different collection agencies before the last one found a note in the file that I had a bankruptcy attorney, which meant that the debt was worthless. I was mailing a dozen letters a month to assert my rights under the state and federal Fair Debt Collection Practices Act.

Finally, the bankruptcy petitioned was filed with the federal court in downtown San Jose. A month later I got a court date for the trustee hearing. The hardest part of attending the trustee hearing two months later was getting through post-9/11 security screening. The x-ray machines being down didn’t surprise me. I had to unload everything from my pockets into a wooden box, drink from the water bottle that I brought with me to prove that the water was drinkable, and walk through the metal detector. Fortunately my shoes didn’t have any metal in them and I didn’t have to take them off to walk through the metal detector again. The hearing was held in a large conference room with three dozen red chairs in back and a long table in front. I was fascinated by the slice of humanity that I witnessed in the hearing room.

The majority of the cases were split between two law firms with a representative from each one. Only one couple was there who were representing themselves without an attorney. Although you only pay a $299 filing fee with the court if you do it yourself, it’s not recommended. The bankruptcy process is a grueling process. Paying for an attorney to guide you through the process is worth the expense. Most of the Chapter 13 cases were homeowners trying to prevent the bank from foreclosing on their underwater homes (i.e., a million-dollar home was appraised at $800,000 USD) due to being unemployed and/or medical expenses. The only creditor who showed up for the hearing were a retired couple trying to get $10,000 USD in back rent from the DIY couple, where the trustee ordered a hearing before a judge. One older couple who had previously filed for bankruptcy three times before spoke only Spanish and the trustee put a translator on the speakerphone. Chapter 7 cases like mine were done in five minutes flat as the trustee swore the oath, asked a half-dozen questions and asked if any creditors were in attendance.

Two months later and 11 months after I first saw the bankruptcy attorney, I got my bankruptcy discharge notice in the mail a few weeks ago. Except for a $1,600 tax bill to the IRS that I’m making payments on, I’m now out of bad debt. I’ve been working two tech jobs for the last two months to pay my bills and rebuild my savings reserve (half in cash and half in silver). The bankruptcy won’t disappear from my credit record for ten years. However, when cash is king, your credit score doesn’t matter. Like the Great Depression taught my father the value of cash being king, the new Great Depression taught me the same thing.

Being A Working Stiff Again

After two years of being unemployed, five months of on-and-off-but-mostly-off contract work, and a Chapter 7 bankruptcy still in progress, I’m a working stiff again with two PC technician jobs. The first job is at a local Fortune 500 company that I had previously worked at in the past, and the other job is for a moving company in San Mateo county that does business with other Fortune 500 companies on the weekends. Both of these jobs are $7/hr less than what I was making in my last full time job before Wall Street cratered the economy in the Great Recession. With bankruptcy eliminating my credit card debt, I’m making enough money from both jobs to cover my living expenses and rebuild my savings. I’m hoping to work six to seven days a week from now through the summer.

I’m not kidding about being a working stiff. These are not comfortable jobs where I’m sitting down to stare at a computer all day. These are jobs where I’m running around, crawling underneath desks and hauling new/old computer systems. I haven’t worked this hard since I did construction work with my father for two years after my 18th birthday. I’ve been soaking in epsom salt baths—sometimes before and after work—to relieve my stiff muscles.

Not surprisingly, writing blog posts and short stories have taken a hit from my new work schedule. During two years of unemployment and five months of underemployment, I had 25+ short stories published in eight anthologies and published 14 ebooks with 32 short stories (new and reprints), poems and essays. That pace will slow down as turn my attention from creating new short stories to revising my first novel during the summer. My goal is to write/edit/revise for 90 minutes per day and do admin tasks in whatever free time that I can find. I’m already missing being an unemployed writer and looking forward to the day where I can write full time without having to crawl under someone else’s desk.

Teabagging The Credit Card Companies

Over the last few months, I been getting notices from the credit card companies that they are planning to raise the interest rates on my three cards to 30% in 2010.  What made me see red was a patronizing paragraph on one notice that stated if I was a good little boy and made my payment on time for the next six months, they will drop my interest rate by one percent.  Last week I cut up my credit cards and sent them back with a request to close my accounts at the current interest rates.  This week I decided to teabag the credit card companies with my own notice that I’m restructuring my finances on terms beneficial to me.

NEW DEBT TERMS

Due to the fact that I been out of work since Friday, February 13, 2009, I have seen my savings dwindled and my debt payments increased.  The debt payments, in particular, has been annoying since the credit card companies are determined to make me pay for their mistakes during the GREAT RECESSION.

I had reorganized my finances to increase my savings and decrease my debt payments until such time I have a job and six months of living expenses in savings.  Then, and only then, will I resume regular debt payments to pay down my outstanding debts.

If my account isn’t already closed, please do so now.

Thank you for your cooperation.

My monthly payments for all three credit cards will now be $50 per month instead of $500 per month that I been paying for years.  The extra money will go towards paying for my car insurance, smog test, and vehicle registration that is due next month, and the taxes on unemployment benefits due in April.  Beyond that, everything goes straight into savings.  The key advantage of taking charge of my financial priorities is that I’m no longer being stressed out by how I’m going to pay my bills.  I’m dictacting the terms, not the credit card companies.

I still have a credit card for my writing business (which is still collecting rejection slips and contributor copies) and a personal loan with the bank that has my checking and savings account.  The bank haven’t tried to stiff me and I can’t stiff the bank without jeopardizing my rent check.  That’s the downside of having linked accounts at one financial institution.  These accounts will be on my priority list to pay down first.

The plan is to prepare for the next layoff that might come sooner rather than later.  I’ll continue living with my reduced budget when I get a new job to use the extra money to build up a six-month cash reserve and start paying down debt.  I expect the economy to have wobbly legs for the next few years and I need to protect myself against the possibility of not having any unemployment benefits during that time.  If I’m debt free the next time I do draw unemployment benefits, I’ll be able to put money into savings since I’ll be living within my means.  An important lesson I’m learning from the Great Recession.

My credit record will take a serious hit for the short term.  All kinds of spurious fees will be added on to the debts I owe.  I’ll get nasty letters and phone calls from the credit card companies, but that’s all they can do if I continue to make regular payments on the accounts.  If they force me into bankruptcy, they can get in line behind the bank.  If they repossess my car (which they won’t since the insurance, registration and smog test is more than the Kelly Blue Book value), my commute costs will quadruple for public transportation, limit my chances of getting a new job, and I’ll have no money at all.

In short, the credit card companies will have no choice.

When I read that charge cards requiring full payment each month are becoming popular again, I applied and was approved for a basic American Express charge card.  I’m planning to use the charge card for gas and vehicle-related emergencies.  This is the only area of my finances that I need a credit card for.  I also upgraded my AAA membership for the 100-mile coverage since I been looking for jobs outside of my typical 10-mile commute range.

Talking to my extended family on Christmas Day, I’m not alone in this outrageous behavior by the credit card companies.  Everyone else had to cut up their credit cards.  My Dad in particular was angry about the percentage spread between interest being paid for savings and being charged for credit cards.  My niece was more explicit about getting a phone call on Christmas Eve: “Eat [expletive] and die!” We have all seen our rates jacked up, our credit limits hacked down, and suffered the snotty attitudes from the credit card companies.

For the record, the definition of teabagging that I’m using is: “The act of protesting certain fiscal policies[.]” Credit card companies are determined to maximize short-term profits by any means possible, including destroying relationships with their best customers.  Teabagging also refers to a certain sexual position.  (Remember that when a politician proudly announced being supported by the teabaggers.)  That’s what Wall Street and the financial industry are doing to their customers and the taxpayers, expecting everyone to respond like Oliver Twist by saying: “Please, sir, can I have some more?”

Not anymore.