California Bankruptcy Attorney Blog

Our Yucaipa unfair debt collection lawyers were interested to note a legal settlement involving a collection agency accused of illegal, anti-consumer practices. The Buffalo News reported July 28 about a settlement reached between the state of New York and a company in the area, Lewis Hastie Receivables of Hamburg, N.Y. State Attorney General Andrew Cuomo had accused LHR of violating the Fair Debt Collection Practices Act and a similar New York state law with harassment and intimidation that included multiple phone calls at work as well as failure to investigate disputed debts. The company will pay $125,000 in penalties and costs and has agreed to reform its business practices.

According to Cuomo's office, LHR was accused of making multiple phone calls in the same day to some victims, including calls to victims' workplaces made after they were told that the employer does not allow this type of call. It also allegedly tried to recover debts from several people who did not owe any debt, and in one instance, three times the cost of the original debt. One woman in Oswego received 16 calls in a day about her husband's 10-year-old debt. The debt collector told her, incorrectly and illegally, that if she refused to pay, she would be arrested, her wages would be garnished, her car would be repossessed and a lien would be placed on her home. Another victim was an Iraq war veteran who was deployed overseas when the contract was signed for the debt at issue. He provided proof, but the calls kept coming.

The article notes that Cuomo's office has made abuses by debt collectors in New York state a priority, and our Pomona debt collection harassment attorneys are glad to hear it. The abuses listed in the article are flagrant violations of the laws -- multiple violations in cases like the Oswego woman's -- but a certain kind of collection agency routinely breaks those laws because it believes breaking the law works. All too often, they're right -- these illegal tactics scare consumers into believing they must pay up now. Before they have time to think about whether and what they might truly owe, they have sent checks or authorized the crooked debt collector to pull money from their accounts. This is easy money for the debt collector, but it is an illegal and exploitive practice victimizing consumers who may not understand their rights.

Continue reading "Buffalo-Area Company Settles Debt Collection Violations Case With State Prosecutors" »

Our Perris personal bankruptcy attorneys also work with homeowners who are seeking to avoid preventable foreclosures, so we were very interested in a recent CNNMoney.com article on using bankruptcy to stop a foreclosure. The July 21 article explained that it's true that bankruptcy can allow some people to keep their homes. And even if a bankruptcy can't save the home, the article noted, it may be able to prevent a huge tax bill if the home is foreclosed and the remaining debt is forgiven. But bankruptcy won't allow everyone facing foreclosure to keep their homes, the article said -- only those who have a steady income with which to make payments.

Anyone who files for bankruptcy gets an automatic legal order stopping collection on all debts, including foreclosure for non-payment of a mortgage. However, the article said, it's important to have a steady income if you wish to keep the home, because bankruptcy can't stop mortgage payments for good. Typically, homeowners file for Chapter 13 bankruptcy, which rearranges their debts and puts them on a long-term payment plan, rather than Chapter 7, in which filers sell most of their assets. The article noted that bankruptcy judges can't "cram down" the mortgage to the current value of the home, but they can remove second mortgages if the home's value is below the amount owed on the first mortgage, which can shrink the total owed significantly. And because the IRS considers forgiven debt a form of income, bankruptcy can protect homeowners from owing taxes on the "income" from a mortgage debt that was written off after walking away.

As Fullerton individual bankruptcy lawyers, we're glad to see major news outlets discussing these issues in detail, because we know more and more homeowners are having to think seriously about them. The article notes that bankruptcy has major disadvantages, including a black mark on your credit for ten years as well as sale of your assets or handing over control of your finances to a trustee. We believe the advantages for people with serious financial problems may outweigh the disadvantages -- but this is a very personal decision, based on each person's individual financial circumstances as well as personal feelings. Individuals and married couples who are considering a bankruptcy as a way to avoid foreclosure should speak with an experienced attorney who can explain their options before taking any legal actions.

Continue reading "Homeowners Considering Walking Away May Be Better Off Choosing Bankruptcy" »

At the beginning of 2009, our Fontana loan modification lawyers wrote about many articles outlining the struggles homeowners face when they seek a loan modification. This type of news coverage has dropped off in recent months -- not because it's no longer true, unfortunately, but because it's no longer surprising. That's why we were pleased to see a June 22 report from radio station KPCC about the ongoing struggles faced by at least some homeowners who are trying to get a permanent loan modification, but face indifference, delays and mistakes by their lenders. In addition to costing thousands of dollars with no guarantee of success, the article noted, the delays are bad for the overall economy and cause serious emotional distress to the people whose finances, homes and lives hang in the balance.

The article focuses on the experience of Jean Wilcox, who lives in an upscale gated neighborhood in Irvine. Wilcox has been trying for more than two years to get a loan modification through the Home Affordable Modification Plan, the federal program for distressed homeowners. She says she's completed three-month trial modifications of her loan three times, but that each time, her bank denies her a permanent loan modification for no reason that was made clear to her. Unfortunately for her mortgage holder, Chase Bank subsidiary EMC, Wilcox is a banking and real estate attorney, which means she understands her rights. She is now looking into suing the bank. An attorney with the Orange County Legal Aid Society added that banks frequently claim they didn't receive her clients' paperwork, sometimes five or six times in a row, despite fax confirmation sheets and other documentation. Chase is among those most frequently cited for such delays, as well as for denying permanent modifications.

As Hesperia loan modification attorneys, we wish we could say that Chase is the only such bank. But in fact, our experience, through our practice as well as the media, has been that many servicers are guilty of this same behavior. Lenders that have little trouble staying organized in other areas of their business are unable to retain even basic organization in their loss prevention departments. We do not believe that the problem is genuine lack of organization, especially since this crisis has been going on for more than a year. Rather, we believe the banks are making cynical financial calculations using, as the article said, the net present value of the home to determine whether they would make more money selling it as a foreclosure or modifying the loan. If they think foreclosure is the more lucrative move, we believe they will do everything they can to avoid granting a loan modification -- even if that means deceiving the homeowner for months or years. This is why less than one half of one percent of the money allocated to HAMP has actually been spent.

Continue reading "Report Examines Ongoing Problems With Loan Modifications Even in Wealthy Areas" »

As Corona debt collector harassment attorneys, we were interested but not surprised to read an article about a Florida man who sued after repeated legal violations by debt collectors. Hernando Today reported July 21 on a lawsuit by Anthony Zoda of central Florida, who sued Hudson Valley Collection Agency after a series of actions he alleges violated the Fair Debt Collection Practices Act and Florida's Consumer Protection Practices Act. Zoda does not dispute the debt he owed, which was a car loan for a Range Rover, on whose payments he later fell behind. But he was surprised by the lengths to which the collection agency went, including calling about once an hour over a 36-hour period and contacting family members in other states.

Zoda got behind on payments after his work truck needed repairs and other financial problems. He was still hoping to work something out with the bank that had the loan, Wachovia, when he got a call informing him that the debt had been sold to Hudson Valley. Over the next weeks, he says he logged about three dozen calls in a 36-hour period, including calls very late at night. When she reached Zoda, she told him he would be arrested for stealing the Range Rover if he didn't pay -- a legal impossibility. During one call, the debt collector told Zoda that she had seen lists of his friends and family through his MySpace page. Shortly afterward, Zoda got calls from his mother, his stepfather and two friends saying the collection agency had called to repeat the false threat of arrest. He also said the caller badmouthed his mother for failing to lend Zoda the money to repay the debt. The Range Rover was eventually repossessed, but Zoda is now suing Hudson Valley in Orlando federal court for $1,500 in damages.

The article didn't specifically note this, but our Cypress unfair debt collection lawyers counted three to four violations of the Fair Debt Collection Practices Act described in the article, in addition to any violations of the Florida statute. It is illegal for debt collectors to call after 9 p.m., your time; to threaten legally impossible actions; to call repeatedly or continuously; and to contact anyone other than the debtor, any spouse or any attorney. Unfortunately, this is not unusual -- debt collectors routinely break these and other parts of the law, because they know it works. They have also gotten especially aggressive recently thanks to the bad economy, which makes it harder than usual for many people to make ends meet and have enough left over to pay debts. As a result, the FTC recently reported a 50% increase in complaints about debt collectors between 2008 and 2009.

Continue reading "Florida Man Sues Debt Collectors for Harassment, Calls to Family and False Threats" »

As San Bernardino loan modification attorneys, we were interested to see a piece saying California is seeing its lowest rate of default notices in three years. Default notices are the first step toward a foreclosure, and according to a July 22 article in the Los Angeles Times, the number of such notices dropped dramatically in the second quarter of this year. Statewide, default notices dropped 43.8% over the same quarter in 2009 and 13.6% over the first quarter of 2010. Here in Southern California, the plunge was even more pronounced, at 46.9% over the past year and 15.23% over the first quarter. Troubled Riverside County saw the biggest one-year drop at 49.2%. The numbers come from MDA DataQuick, a real estate information company based in San Diego.

The article suggested that the drop may be due to a slight increase in housing prices and increasing willingness by banks to consider short sales and other foreclosure alternatives. Increased housing prices put fewer homeowners underwater, which economists believe means fewer of them will consider walking away from their mortgages. Furthermore, the article noted, the housing crisis has forced banks to tighten their lending standards dramatically, which means newer loans are more likely to be performing well, and that underperforming subprime loans have not been written. However, the article also said that lenders have increased their seizures of homes that have already been foreclosed on, which have been in foreclosure for an average of 9.1 months. Banks feel increasing pressure by federal regulators to get those loans off their books, the article said, and one result is that trustee's deeds in California are up 11.2% from the first quarter and 4.4% from last year.

Our Chino Hills loan modification lawyers hope the trend toward fewer foreclosures lasts, because a housing recovery would benefit our clients and almost everyone else. We believe the decrease in new foreclosures may have something to do with home prices bouncing back, but we also suspect that the market is simply running out of loans that are candidates for foreclosure. This far into the housing crisis and the recession, many folks who are in serious financial straits have made decisions about how to handle their mortgages, or had decisions forced upon them. And as the article notes, tighter lending standards mean fewer bad loans have been written in the past year or so. We'd also like to note that the large amount of homes that have been foreclosed on for months but not seized seems a lot like a "shadow inventory." We hope lenders are responsible in the way they put these homes on the market.

Continue reading "California Default Notices Hit Lowest Rate in Three Years, But Repossessions Increase" »

Last fall, we wrote about the Medical Bankruptcy Fairness Act, a bill in Congress that would change how the bankruptcy courts treat people who are driven into bankruptcy by high medical bills. Our Ontario personal bankruptcy attorneys were pleased to see that the bill is getting some attention, at least in the House of Representatives. According to a July 15 post to The Hill's Healthwatch blog, experts testified before the House Judiciary Committee's Commercial and Administrative Law subpanel that day about the desirability of such a change. The subpanel heard from U.S. Bankruptcy Judge Cecelia Morris and Professor Peter Wright of the Franklin Pierce Law Center in New Hampshire, who disagreed strongly with another speaker, Aparna Mathur of the American Enterprise Institute.

The House version of the bill was introduced by Rep. Carol Shea-Porter, a Democrat from New Hampshire, and five co-sponsors. It would create different rules for bankruptcy filers who paid more than $10,000 or 25% of their income in medical bills for any year in the three years before filing, or who lost a substantial amount of income because of a medical problem. These "medically distressed" debtors would be able to protect up to $250,000 more in real estate property from the bankruptcy, and would have a better chance of qualifying for Chapter 7 bankruptcy. At the hearing, Morris, the bankruptcy judge, said debtors with medical problems get into credit card debt because it's more important for them to get needed care than to worry about money. Mathur, from the American Enterprise Institute, said the bill is so broad that debtors can claim any credit card debt as medical debt.

Mathur also argued that the problem of medical debt driving bankruptcy is overstated, citing his own study saying that just 2.4% of filers reported any medical debt once medical debt was clearly separated from credit card debt. Our Whittier consumer bankruptcy lawyers believe this is a false distinction. Bankruptcy is not fun, financially or emotionally, and in our experience, the vast majority of filers do everything they can to avoid it. In the case of medical debt, that means families will use credit cards or home equity lines of credit and drain their investments to pay their medical bills, even when it's clear that they still won't have enough to pay all for the care they need. That's why other kinds of debt are impossible to separate from medical debt without interviews with debtors. The only studies we know of that used interviews to examine medical bankruptcy are from Harvard University, which in 2005 found that medical debt was cited in about half of bankruptcies -- not 2.4%.

Continue reading "Congress Hears Mixed Testimony on Need for Medical Bankruptcy Legislation" »

As Anaheim commercial real estate loan modification attorneys, we were interested to see a recent item in the Orange County Register's Lansner on Real Estate blog. The July 15 post reported on a study saying the number of California hotels whose mortgages are in "high financial distress" rose by 18% in the second quarter of 2010. High financial distress means the mortgage is in default or foreclosure. The information comes from Atlas Hospitality Group, a company that sells hotels in California. The blog noted that past reports have suggested firmer room rates and fewer vacancies at hotels, but that trend is not reflected in the report. This post comes on the heels of a similar July 14 post saying one in four Orange County office properties are still empty.

In all, the report said, the rate of distressed properties was 132% higher than it was in the second quarter of 2009. This large number is not a surprise to people who have followed the commercial real estate market crash. Atlas said that in Orange County, four hotels were owned by banks and 19 were in default. That's up from two foreclosed properties and 14 in default in the first quarter. Those numbers also represented a big jump from the second quarter of 2009, when one hotel was in foreclosure and nine were in default. Riverside County had the most foreclosed hotels in the state, at 11. The report suggested that the real number of distressed properties may be much higher, with more than 1,000 California hotels operating on "some kind of forbearance agreement." Interestingly, however, it noted that only 12 of the 100 foreclosed properties in the state had been resold by banks.

Our San Bernardino County commercial real estate loan modification lawyers suspect that banks would love to sell more properties -- if they could. Having followed the commercial real estate market throughout the year, we believe banks are having a hard time selling foreclosed properties for the same reasons that their former owners had trouble paying the mortgages. The bad economy means commercial property owners are having a hard time filling vacancies in their buildings, which in turn means they aren't making the revenue they need to pay their loans. This, in turn, means there just isn't a lot of money in commercial real estate right now. The bad economy also depresses commercial real estate prices, which could attract investors -- but only those who are willing to take on some risk.

Continue reading "Hotel Seller's Study Says More California Hotels Are in Financial Distress" »

As Chino unfair debt collection attorneys, we were pleased to see a recent New York Times article about an anti-consumer practice by collection agencies. The July 13 article said courts around the U.S. are seeing a marked increase in debt collection lawsuits. In a bad economy, this may not be so surprising. But according to the article, many debt collection law firms are filing those lawsuits almost automatically, using software that sends letters, summonses and other notices without the need for a human being to pay close attention. As a result, one New York firm files about 5,700 cases per lawyer every year. Critics believe this allows cases to be filed incorrectly, resulting in unjust judgments that legally compel people to pay debts they don't owe.

Debt collection lawsuits are always likely to go up in a bad economy, one collection attorney noted in the article, because more people aren't able to pay their bills. But judges, legislators and the Federal Trade Commission have complained about the high volume of cases, particularly of cases that are cannot be substantiated if the defendant challenges them. The FTC called the legal system for collecting debts "broken" the day before the article, and North Carolina passed a law last fall requiring extra documentation for a debt collection suit. In New York, some courts are demanding this on a case-by-case basis, whenever debtors challenge the claim. One judge in the article dismissed a case brought by the 5,700-case-per-lawyer firm, after its attorney could not prove it was suing the right person. That firm has also been sued for trying to collect a debt that has already been paid.

The trouble, as the article notes, is that most people who are sued by debt collectors don't show up to court. In some cases, the collection agency intentionally evades legal requirements for notifying the defendant. But in many others, the defendant does not show up because he or she believes the case is hopeless or already decided. As Fullerton abusive debt collection lawyers, we strongly advise readers not to do this. If you don't show up for a lawsuit, the debt collector wins by default -- and it's rare to get another chance to defend yourself. Even if it's a debt you don't really owe, you will likely have your wages or property garnished to pay it. You can sue debt collectors for attempting to collect on an illegal debt or collecting in an illegal way, but the chances are good that you will face a lot of financial strain and personal stress before succeeding.

Continue reading "Courts See Flood of Debt Collection Lawsuits Prepared Automatically by Software" »

Our Newport Beach loan modification lawyers saw an article recently suggesting that the wealthy handle mortgage distress differently from the rest of society. According to a July 9 article from the New York Times, the wealthy are far more likely to stop paying their mortgages than working-class and middle-class homeowners. Using data compiled by real estate data company CoreLogic, the newspaper said more than one in seven mortgages of more than $1 million is delinquent, as compared to one in 12 mortgages below $1 million. The newspaper noted that this does not in itself prove anything, but suggested that wealthy people may default at a higher rate intentionally, because they view an underwater home as a bad investment.

The article also looked specifically at homes purchased as investments. Among those with mortgages of over $1 million, the delinquency rate is 23% -- nearly a quarter of all such homes. Those with mortgages under $1 million had a delinquency rate of about 10% -- higher than the rate for owner-occupied homes, but less than half of the rate for the more expensive investment homes. Here in California, the wealthy Bay Area community of Los Altos had five foreclosure auctions listed in the local weekly paper. Before the crash, one worker at that paper said, it was surprising to see even one foreclosure listing a month. Observers in the article suggested that the wealthy are more likely to see defaulting as a matter of cutting their losses from a bad investment, whereas less well-off people may see walking away as morally or civically bad. The economist also said the rich are more likely to have resources to fall back on when they walk away.

As Rancho Palos Verdes loan modification attorneys, we believe both of those interpretations are right. Getting rich does not necessarily require ruthlessness, as the economist said, but it certainly helps to have good sense when it comes to money. If you believe your million-dollar property will never be worth what you owe, it makes good business sense to abandon the investment and minimize your losses. This logic applies to less expensive homes as well, but as a law professor told the Times, the business sense of the wealthy may not be as affected by arguments that abandoning a home is irresponsible or shameful. However, it's also very much worth noting that the wealthy are far more likely to have somewhere else to live, or the means to find a home quickly, if they do walk away from their homes. Less wealthy people may be more likely to keep paying because they don't have those resources.

Continue reading "Data Shows Walk-Aways More Common Among Mortgages Over $1 Million" »

As Ontario consumer bankruptcy attorneys, we were very interested to read about a Supreme Court ruling that affects bankruptcy filers' rights. As the Wisconsin Law Journal reported July 1, the U.S. Supreme Court ruled recently that personal property exempted by the bankruptcy filer can be brought back into the bankruptcy assets, even after the deadline to object has passed. The case, Schwab v. Reilly (PDF), concerned a woman who exempted assets from her catering business from a Chapter 7 bankruptcy. That debtor lost at the Supreme Court, which means she must turn over the assets for sale to her trustee. But because the 6-3 ruling also provides clear guidance on how to exempt assets, some commentators said it might actually benefit debtors.

Nadejda Reilly estimated the value kitchen equipment for her catering business at $10,718. Her Chapter 7 bankruptcy trustee did not object. Later, however, an appraisal showed that the equipment could be worth as much as $17,200, and the trustee filed a motion to sell the property. The bankruptcy court, district court and Third Circuit Court of Appeals all ruled against the trustee, saying Reilly had indicated her intent to exempt the full value of the assets. But the Supreme Court reversed them, ruling that the trustee had no duty to object because the estimated value Reilly gave her equipment was within the bankruptcy code's guidelines. Significantly, the court included guidelines for similar future disputes in its ruling, saying debtors can show that they intend to exempt full market value of the asset by claiming "full fair market value" or using similar language.

The article included commentary by attorneys in the bankruptcy field, many of whom said the ruling was good news for bankruptcy filers. Thanks to the court's guidelines, they said, debtors have clear guidance on how to exempt the full value of their assets. One exception was brought up in the dissent by Justices Ginsburg, Roberts and Breyer, who objected that self-represented debtors won't know how to use this information. Another criticism raised in the article said the ruling will mean more work for trustees and bankruptcy courts, because trustees will now have to routinely object to exemptions.

As Covina individual bankruptcy lawyers, we have mixed feelings about this ruling. The clear language provided by this ruling allows debtors to be very clear in their filings, which in turn means there's less risk of those exemptions being successfully challenged. This is generally good news for debtors and bankruptcy attorneys like us. However, we are not so pleased with the Supreme Court's decision as to Reilly herself, which went against all of the lower court rulings. By allowing trustees to challenge exemptions after a deadline for doing so has passed, the decision helps to render that deadline meaningless. This in turn takes away confidence and, arguably, rights from bankruptcy filers. As the article noted, it also gives trustees and filers more reason to fight over exemptions in courts, dragging out the process and costs for everyone.

Continue reading "Supreme Court Ruling Against Bankruptcy Debtor May Benefit Debtors and Attorneys" »

Our Upland personal bankruptcy lawyers have been tracking bankruptcy filings throughout the recession. Experts in those articles have consistently predicted filing rates that meet or exceed the record spike in filings seen in 2005, just before the bankruptcy reform laws took effect. So we weren't surprised to see a report that bankruptcy filings are at their highest point since that 2005 peak, as the Wall Street Journal's Real Time Economics blog reported July 2. Through the first six months of 2010, there were 770,117 filings in the United States, an increase of 14 percent over the numbers for the first half of 2009. The American Bankruptcy Institute, the source of those numbers, predicted a total of 1.6 million filings in 2010.

According to the blog post, June actually saw a decrease in filings from the month before. In fact, it was the third consecutive month that saw a decrease. However, the Journal noted, filings in June were still 8 percent higher than they were in June of 2009. The highest filing rates were in the southeast and southwest of the United States, with Nevada seeing 15,000 filings per million households -- more than double the national average of 6,800 filings per million households. That information comes from a study by Columbia Law School professor Ronald Mann. The lowest filing rates come from South Carolina, Alaska and Washington, D.C. In fact, while the southeast generally has a high amount of filings, some Southern states, including Alabama and Tennessee, have actually seen reductions in their filings.

No information specific to California was reported in this piece, but as Fountain Valley consumer bankruptcy attorneys, we suspect that California remains relatively high. Unfortunately, our state has one of the highest unemployment rates in the nation, and many regions -- including the Inland Empire here in southern California -- have also been hit hard by the foreclosure crisis. Both of these drive bankruptcy filings and are likely to be factors in Nevada's high filing rate. In fact, the San Francisco Chronicle recently reported that bankruptcy filings have hit record levels in California, and a spokesman for the ABI noted that the states with high filing rates tend to be the same as those with severe housing crises. That article examined whether the 2005 reform law has failed to stop bankruptcy filings. It came to no conclusion on that question, but did conclude that the law increased the cost of filing by about 50 percent.

Continue reading "Bankruptcy Filings in First Half of 2010 Reach Highest Point Since 2005" »

As Riverside commercial real estate loan modification attorneys, we were interested to see an article in the Wall Street Journal July 7 identifying the trend toward "extend and pretend" among commercial real estate lenders. Also known as "delay and pray," this is a slang term for the practice of modifying or simply renewing a loan to a commercial real estate borrower who cannot pay, in hope that the market will recover and the borrower will eventually be able to repay the loan. The term is used by critics of the practice or skeptics who doubt that the tactic will pay off. But according to the article, banks who grant these commercial loan modifications are coming under scrutiny by people who are concerned that the practice will ultimately hurt the health of banks and hide the extent of the commercial real estate crisis.

According to the article, commercial real estate values are 42% below their peak in October of 2007, the height of what is now acknowledged as a commercial real estate bubble. Banks hold $176 billion in CRE loans that are going bad, according to one analyst, and about two-thirds of the CRE loans maturing between now and 2014 are underwater. Some lenders say that extending loans or modifying them in some other way is smart -- it can allow the bank to collect the full amount of the loan later, rather than foreclosing now and dumping the property into a depressed market. In essence, it's a bet that the CRE market will improve. But if the market doesn't improve, the article noted, banks had better have the cash on hand to write off those properties later. And some critics say loan modifications deter new loans by tying up capital, or keep the real estate market from hitting bottom and rebounding.

Our Los Angeles County commercial real estate loan modification lawyers believe that banks that "extend and pretend" are making the best business decision they believe they can with the economy they're dealt. Commercial investors are having trouble repaying loans right now because the bad economy is keeping businesses from renting space and keeping rents low when they do sign on. The commercial real estate crash has also plunged properties underwater, making it impossible to refinance. Lenders faced with this situation can foreclose, which makes them owners of underwater properties in a depressed market -- or they can hold on for a year and hope the economy improves. This benefits everyone in the long run, as long as those lenders have made contingency plans in case the economy doesn't improve. The practice may tie up capital, but as the article points out, writing off a loss also wipes out capital.

Continue reading "Lenders 'Extend and Pretend' to Handle Commercial Borrowers Who Can't Pay" »

As Redlands unfair debt collection attorneys, we were disappointed to see a recent article about debt collector harassment of a woman whose credit card was stolen. The Home News Tribune of East Brunswick, N.J. ran an article July 6 about Linda Wright of South River, N.J., who was held responsible for $15,000 in debt on a credit card that her adult children stole. Despite a police report and a probation sentence for the perpetrators, Bank of America told Wright that she was being held responsible for the charges, then turned the debt over to a debt collector when she couldn't pay. Only a call from a reporter convinced the debt collector and the bank to take a second look at the situation, the article said.

Wright, 54, left her credit card in a dresser drawer when she moved away from home temporarily to care for a sick uncle. She left her daughter, 28-year-old Lisa Wright, to pay the bills -- not using the credit card. Instead, the article said, Lisa Wright and her brother, 31-year-old Isaac Wright, ran up $13,000 in debt for food, cab rides, cash withdrawals, cell phone bills and entertainment. Meanwhile, the elder Wright was away from home and knew nothing about it until she received a phone call at work from Bank of America. Wright had to call the police on her children, who were eventually convicted of fraud and put on probation. But despite the fact that she explained the situation many times, Wright says, Bank of America rejected the fraud claim, saying she "provided access to [her] account and/or account information" to her children.

Wright says the bank placed 200 to 300 phone calls at the flower shop where she works over a period of about four months, then turned the debt over to a debt collector working with a Nebraska law firm. Wright says she called that law firm, but it didn't help. In fact, she says, the law firm ignored her request that it not call her at work, a violation of the Fair Debt Collection Practices Act. She eventually quit the job, in part because of the phone calls, and says her credit was ruined. It wasn't until a late June phone call from the Home News Tribune that the debt collector agreed to drop its pursuit of Wright. The same afternoon that the newspaper called, Wright called the debt collector and was told that her account would be "zeroed out"; Bank of America later confirmed this.

Our Riverside County debt collection harassment attorneys are glad Wright's situation has been cleared up, but we're disturbed that it took a phone call from a reporter -- with an implicit threat of negative publicity -- to achieve that. A police report saying that a credit card has been stolen is one of the clearest ways to prove that the cardholder has been defrauded. That the victim happens to be the perpetrators' mother does not mean the police report is lying; it means this woman's trust has been violated by her own children. Ruining her credit and making her legally responsible for the fraud injures her yet again, and it's difficult to think of any motive other than profit. In addition, the article suggests that the debt collector violated at least one provision of the Fair Debt Collection Practices Act with the repeated calls to Wright's workplace. As the article notes, it's difficult to pursue a FDCPA lawsuit -- but it's one of the few ways to enforce your legal rights when you don't have a government agency or a newspaper on your side.

Continue reading "Debt Collectors Harass New Jersey Woman About Debt From Stolen Credit Card" »