Do you know who you owe?
Although this may seem like an odd question, it is actually quite common for consumers to not know how much money they owe, or even who they owe money to. Usually, when a credit card company places an account into collection, they stop issuing a monthly statement to the consumer, yet interest and other fees and penalties continue to accrue on the balance owed. As a result, the consumer often does not know how much money they currently owe on that account.
Also, credit card companies often assign an overdue account to a collection agency. The collection agency will attempt to collect on behalf of the credit card company, who continues to “own” the debt. Other times, the credit card company will decide to sell the debt to an unrelated company, often for pennies on the dollar. In this scenario, the purchaser of the debt is now the new “owner” of that debt, and will try to collect from the consumer - or perhaps even assign that debt to their own collection agency. The same debt can be resold an unlimited number of times, and it is not uncommon for the same debt to be resold 3 to 5 times. There is even an entire industry of companies that buy debt on the secondary market, so they can then try and collect on that debt.
Because of this, the consumer will often receive collection letters from companies they never heard of before, and the debtor often has no idea who it is they owe money to. It can all be quite confusing, especially since it is usually unclear whether an entity trying to collect on a debt is acting on their own behalf or on behalf of someone else. The name of the company which originally issued the credit card may not appear on these collection letters at all.
However, if a consumer files for bankruptcy, it is extremely important to list all debts, including the names and addresses of the creditors and the balance owed. And by listing the "creditor", that means listing the current owner of the debt, which, as explained above, may not be someone the consumer has even heard of before. And getting this right is extremely important, as debts which are not properly listed in your bankruptcy forms may not be eliminated (“discharged”) in your bankruptcy, thereby defeating the purpose in filing for bankruptcy in the first place.
Most law firms will simply tell you to provide them with a list of your creditors - and place the burden completely on you. If you inadvertently leave a creditor out (which is quite possible, given the above situation), the law firm will often then charge you additional fees to amend your bankruptcy forms. If you do not discover that a certain creditor was left out until after your bankruptcy case is closed, it may be too late to amend, and that omitted debt may not be eliminated. Often, a person will first discover that a debt was omitted when the left out creditor tries to collect on that debt, which may not be until after the bankruptcy case is closed.
We Can Help Avoid/Resolve these Issues by Obtaining a Comprehensive Liability Report:
The Law Office of Henry Ahrens can proactively help you avoid this dilemma by obtaining a comprehensive liability report for you. There is a $30.00 fee for this service ($60 for a joint filing), which is what we are charged by the reporting agency we work with. We provide this as a service to our clients, as we do not make a profit on this.
The liability report that we obtain is extremely valuable, as it will give you some vital information. First, it will tell us who the current owner of the debt is, this creditor's address, and the current balance owed. Second, this document will provide, in one report, all debts that have been reported to any of the three major credit reporting bureaus (Trans Union, Equifax or Experian). Third, the liability report will also indicate who the original creditor for a specific debt was, which is very useful information in determining if all of a person's debts have been included in their bankruptcy forms. Fourth, this report will list all prior lawsuits and bankruptcies that a person has been involved with.
And finally, the liability report will tell us what a person's current credit (or FICO) score is, and what it is projected to be one year from now, under the presumption that the person files for a Chapter 7 bankruptcy now. That is really helpful information, as many people are concerned about the effect that a bankruptcy filing will have on their credit score.
[As an aside, many people believe that their credit score will go down if they file for bankruptcy, and are pleased to discover that the opposite is usually true - their credit score generally goes up after they file for bankruptcy. This is because that by filing for bankruptcy, a person's debt-to-income ratio will dramatically improve (because most debts will be eliminated by virtue of the bankruptcy). A person's debt-to-income ratio is a key factor that is used to determine one's credit (or FICO) score. See FAQ # 8. ]