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Saturday, November 17, 2007
Federal courts vs local courts
Questioner: Need Help
Category: Collections Law
Private: No

Subject: Debt Collection
Question: QUESTION: Hello,
I let my son use a credit card back in 2004, he ran it up and I told him it was his debt so he started making payments. He got late a few times and the bank called me. I told them what had happened and asked them to not call me, they seemed fine with that and was working out payments with my son. The he got in a wreck and was off work for 6 months, again him and the bank worked out a payment plan. Well I guess he didn't pay on time so they placed it as a charge off on my credit report. I disputed it and it has been removed, but now I am getting calls everyday from a debt collection company. They said if I don't settle this with them they will take my house, send me a 1099 tax form and take any tax refund. What should I do?
Thank you for your time.

ANSWER: Did they say any of that in writing or just in threatening phone calls? Most likely only in threatening phone calls. They can't take your house but they can put a lien on it so you can't borrow money against in very easily and they can keep you from selling the house unless they get paid in the process but they can't take it away from you and make you move out. And they really can't send you a 1099 tax form unless they know that the original creditor has not done so. There is quite a bit to know about 1099 and the IRS rulings and law dealing with that and I can't explain it all here but for the time being I wouldn't worry too much about that. However that gives them no right to attach your tax refund. Seems to me the first thing you need to do is get a good digital tape recorder with a USB port so you can download whatever you record and then visit and you will learn how to deal with debt collectors and their phone calls. You need to record every time they call even if you have to write it down and keep a careful record of all their calls, date, time, phone number it came from and at least a synopsis of what was said on the call. You need to start learning about FDCPA and FDCPA violations and how to deal with them.

---------- FOLLOW-UP ----------

QUESTION: Thanks for your answer, and yes they did it all over the phone. I really don't know the laws. So this debt was on my credit report as a charge off. I disputed it and it was removed. So this third party collection company can now place a line on my house? This debt is up to $11,685.00
I don't know what to do. My son was dealing with the credit card company for the last 3 years not me.

Answer: If they sue you in local court they probably can get a lien on your house. In order to even have a crying chance to prevent that from happening you are going to have to start gathering evidence of wrong doing on their part which is never hard to do then sue them in federal court.

That won't stop their attempting to put a judgment on you because federal courts can't interfere with the functions or orders of local state courts in most situations. Stopping them has to be done through private but court ordered negotiation and the best way to get those negotiations going is to sue them in federal court and do your negotiating during the process of the rule 26(f) meetings.

The rule 26(f) meetings are designed as a method whereby the parties can attempt to work out their differences without actually having to take it to a full blown hearing. A settlement conference in other words.

If you have enough evidence of wrong doing against them they will be very interested in settling with you outside of court and that is the point where you can try to demand that they dismiss their local court suit against you and you stand a pretty good chance of getting it done that way.

The major difference is that the only real question before the local court is whether or not you owe the debt and if you do then they will get a judgment and can put a lien against your house among other things. In federal court the only issue before the court is whether they broke the law or not and the fact of your owing them money or even their having a judgment will not be an issue before the court. Therefore the tables are turned and you have an excellent chance of winning if you have the evidence of their wrong doing. If you have them caught red-handed there is little chance they will want to go to trial at any price. That's the way you have to make it work for you. It's about the only chance you have to keep them from getting a lien on your house.

The only real problem to the whole thing is that it is very easy to file motions, pleadings and briefs in local courts but they are considerably more difficult in federal court in many ways. You really have to pay strict attention to both the federal rules of procedure and evidence as well as the local federal rules of evidence and procedure.
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