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William Manchee

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Debt Collector Put Out of Business In Texas
4/26/2009 6:14:12 PM    [ Flag as Inappropriate ]

It was a good week, we put a predatory debt collector out of business in Texas...
The court enjoined the collector from engaging in business in the State of Texas until they posted a bond with the secretary of state. In Texas, as is probably the case in many other states, a debt collector must register with the secretary of state and post a bond in order to do business in the state. In this particular instance the debt collector was trying to collect a debt that had been discharged in bankruptcy. This is not uncommon, as delinquent debts are traded in the marketplace like stocks and bonds. Creditors package a large number of debts and then sell them to debt buyers for pennies on the dollar. For instance, in a recent case I was involved in the debt buyers paid approximately $750,000 for 17 million dollars in debt.

The buyers are supposed to scrub the accounts to make sure the debtors haven't filed bankruptcy, but they don't always do it. Typically the debt buyers then hire collection agencies to collect the debt. These collection agencies have a duty to scrub the account for bankruptcies too, but often don't or ignore the result. If the collector doesn't collect the debt within a reasonable time the debtor buyer takes it back and sends it out to another collector.

The problem for consumers is a debt may change hands four or five times without notice such and each one may send it to a different collection agency! That's why they don't recognize the account when the collector starts calling them or sending letters. Frustrated consumers often pay discharged debt just to get relief or to improve their credit score so they can get a car or a house loan.

To make matters worse many of these collection agencies will report the debt on the consumers credit report. When the account is returned to the debt buyer they don't always report the transfer. If the next collection agency reports the debt the result is two blights on the consumers credit for the same debt. This could go on and on. I have seen the same debt reported three or four times on a debt that wasn't even collectible.

This kind of behavior is in violation of the bankruptcy discharge injunction as well as many state consumer statutes like the Texas Finance Code. Offenders can be sued by consumers in the bankruptcy court or under state law and recovery damages. Damages can include mental distress, loss of time, statutory damages as well as punitive damages if the action will willful or intentional.

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More Blogs by William Manchee
• Why Many Intelligent and Talented People Fail in Business - Monday, May 07, 2012
• Getting the Mail Can Be Risky Business - Friday, May 04, 2012
• Consumers Suffer Grievous Injury When Creditors Improperly Report Their Credit after Bankruptcy - Thursday, May 03, 2012
• The Effect of Print on Demand to the Small Press Author - Monday, July 04, 2011
• Nine-Eleven's Impact on the Small Press Author - Sunday, July 03, 2011
• Has Your Mortgage Company Ripped You Off? - Saturday, August 07, 2010
• Wrongful Foreclosure - Tuesday, February 16, 2010
• Don't Throw Away The Evidence - Friday, January 15, 2010
• Brandy - Saturday, October 17, 2009
• Why I Write in Different Genres - Wednesday, August 12, 2009
• Cash for Clunkers Bad Idea for Many Consumers - Monday, August 03, 2009
• Beware of Debt Negotiators - Tuesday, May 05, 2009
• Top Ten Reviewers - Tuesday, April 28, 2009
•  Debt Collector Put Out of Business In Texas  - Sunday, April 26, 2009  
• Defending the Small Business - Part 23 - Changing Your Ways - Tuesday, April 07, 2009
• What Every Bankruptcy Filer Should Know - Part 3 - Will Filing Bankruptcy Ruin Your Credit? - Thursday, March 19, 2009
• Defending the Small Business - Part 22 - Bookkeeping and Accounting - Wednesday, March 11, 2009
• Chill, It's No Big Deal - Sunday, March 01, 2009
• What All Bankruptcy Filers Should Know - Part 2 - Wednesday, February 25, 2009
• Defending the Small Business - Part 21 Form of Business - Thursday, February 19, 2009
• What Every Bankruptcy Filer Should Know - Saturday, January 31, 2009
• Defending the Small Business - Part 20, Getting an Attorney - Sunday, January 25, 2009
• Defending the Small Business - Part 19 - Employees, Double Trouble - Sunday, January 11, 2009
• Defending the Small Business Under Siege - Part 18, Loan Consolidations & Workouts - Sunday, January 04, 2009
• Defending the Small Business: Part 17 - Bankruptcy: Friend or Foe? - Monday, December 29, 2008
• Tarizon: The Liberator Launch Update - Friday, December 26, 2008
• Defending the Small Business - Part 16 - When the Constable Knocks - Friday, December 05, 2008
• Defending the Small Business - Part 15 - State & Local Taxes - Saturday, November 22, 2008
• Defending the Small Business - Part 14 - Dealing With IRS Collections - Wednesday, November 12, 2008
• Defending the Small Business - Part 13 - Uncle Sam, The Sleeping Giant - Thursday, November 06, 2008
• Defending the Small Business - Part 12 It's Not As Bad As It Looks - Monday, November 03, 2008
• Defending the Small Business - Part 11. Misfortune - Tuesday, October 28, 2008
• Defending the Small Business: Part 10. Competition - Thursday, October 23, 2008
• Defending the Small Business. Part 9. Theft & Embezzlement - Monday, October 20, 2008
• Defending the Small Business - Part 8. Greedy Lenders - Sunday, October 19, 2008
• 7 - Defending The Small Business: The Credit Conspiracy - Saturday, October 18, 2008
• 6 - Defending the Small Business - Giving it away. - Thursday, October 16, 2008
• 5. Defending the Small Business: Starting on A Shoe String - Wednesday, October 15, 2008
• 4. Defending the Small Business: Suffocation - Tuesday, October 14, 2008
• 3 - Defending the Small Business: Looting - Monday, October 13, 2008
• Understanding the Current Economic Meltdown - Saturday, October 11, 2008
• 2 - Defending the Small Business - Doomed From Day One - Saturday, October 11, 2008
• 1 - Defending the Small Business: Introduction - Friday, October 10, 2008
• The Stan Turner Mysteries - Sunday, March 25, 2007

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