What if I incur new debt during my bankruptcy?

Someone we know recently called to ask for help. She had filed bankruptcy with a big local firm, and about a month and a half after filing her case, her son had a medical emergency and they needed to call an ambulance. The bill was going to be high. But since the debt was incurred after she filed her case, the debt wouldn't be discharged in bankruptcy. We told her that she may be able to dismiss her bankruptcy case and then file a new case. But her bankruptcy attorney had made a mistake. When she completed her second credit counseling course, the attorney filed it with the court right away, even though it didn't need to be filed for more than a month. Once the credit counseling certificate was filed, the case was put on track for a discharge, making it much more difficult to dismiss the case.

We're always looking out for our clients, and we want to make sure we can take care of it when there's an unexpected emergency. We almost always wait until the last possible day to file the credit counseling certificate, just in case something bad happens to the debtor and they need to dismiss their case. If they need to dismiss, we just let the deadline pass without filing credit counseling, which automatically dismisses the case.

Every once in a while, a little procrastination can pay off.

How to stop fraudulent debt collection calls

I occasionally get calls from people dealing with debt collection scammers. The scammers acquire an innocent consumer's contact information and begin bombarding him with debt collection calls. The callers, who usually call from overseas with a VOIP phone line, make blatantly illegal threats, such as threatening to have the consumer arrested. When I talk to victims of this scam, I usually explain the nature of the scam and tell them that an FDCPA lawsuit isn't appropriate because there's no way to identify the scammers. But I've never really had a good answer for making the annoying calls stop. Until now, that is, thanks to "Steve". Steve (it's not his real name) was an innocent consumer suffering from this very problem. Rather than live with the harassing calls, Steve decided to set up a website with information about how to put a stop to the calls. Here's his tips for protecting yourself:

• Inform your employer.  You are likely getting calls at home and/or at work, so make sure your employer is aware the calls are part of a scam and to not take them seriously.  Advise the callers that they are no longer allowed to call you at work.  If they continue to call, document the date and time of the calls you received.  Save voice mails left if at all possible.

• Change your number(s).  For some this may not be an option, for others a one-time number change can be done free of charge.

• Use Google Voice.  Google Voice is a great replacement voice mail system for just about any phone number you use.  Messages can be transcribed and voice mail recordings can be saved as mp3 files. Pro Tip - call the fraudsters with a Google Voice number before turning off your old phone numbers.  Make sure when you call you identify yourself so they can start up their script.  At any point after they have your information pulled up just hang up.  They will then start religiously calling your Google Voice number.  At this point, you are free to change your regular phone number(s) and enjoy not having these people ever call you again. 

Can a debt collector call my parents about my debt?

Under the Fair Debt Collection Practices Act, debt collectors can only communicate with you or your attorney about your debt. There's a very narrow exception that allows debt collectors to contact third parties, such as your parents, but only to obtain location information. Location information means your address and telephone number. During this conversation, the debt collector must tell your parents that he is attempting to confirm your location information, he can't tell them that you owe a debt, and he is only allowed to identify his employer if asked. Of course, your parents have no obligation to give the debt collector your address and telephone number. And once the debt collector has your location information, there is no permissible reason under the FDCPA to contact your parents, or any third party for that matter. In other words, if you've already talked to a debt collector and he knows how to contact you, it's a violation of the FDCPA for him to call a third party because he already knows your location information.

It's fairly common for debt collectors to contact people's parents about their debt. And it's not just college students and recent college graduates. I've had clients in their 40's and 50's whose elderly parents were called by debt collectors. I suppose it's possible that some debt collectors contact consumers' parents by mistake. But I also think that some debt collectors call people's parents as a collection tactic to put pressure on the consumer to pay the debt. Either way, its a violation of the FDCPA, unless it falls under the very narrow "location information" exception described above.

Dealing with secured debts in bankruptcy

One of the really great features of bankruptcy is that you can use it to get rid of the financial anchors that have been weighing you down. These often include houses that are worth significantly less than you owe on them (very, very common in the current housing market) or cars (also common as cars often depreciate ahead of the payoff schedule). These types of debts are called "Secured," because the property that is the subject of the loan is used as collateral. When you file bankruptcy, you will have some choices with regard to to secured debts. You'll generally have three options:

Surrender the property

This, quite literally, involves handing the keys over to the bank. You are then freed from any liability relating to that debt.

Reaffirm the debt

After you file bankruptcy, the party that holds your mortgage or car loan may reach out to you through your attorney. They may propose that you sign a Reaffirmation Agreement. This means that you would agree to repay a debt that would otherwise be discharged in the bankruptcy. As a general rule, we discourage our clients from signing these agreements, because they aren't always in the client's best interest. There are some instances where a reaffirmation makes sense. Sometimes lenders will agree to reduce the interest, the principal or the term of the loan. Of course every situation is different.

Retain and pay

Retain and pay is the most common solution. Essentially, this occurs when you do not sign a reaffirmation agreement, but keep using the collateral and making your scheduled payment to the lender. The lender has the right to foreclose/repossess, but they don't have any incentive to do so, because they are getting paid. The advantage to retain and pay is you can use the collateral as long as it suits you (even through payoff), and still decide to surrender it with no consequence if it ceases to meet your needs (if your car blows a transmission you may not want to keep paying for it)..

Foreclosure fallout

Thousands of Minnesotans have lost their homes to foreclosure in recent years. For many it is a gut-wrenching experience filled with fruitless attempts to get caught up on payments or negotiate a short sale. One would hope that the pain ends with the handing over of the keys to the bank. Unfortunately, this is not always the case. Minnesota permits what is called Non-Judicial Foreclosure or Foreclosure by Advertisement.  This means that instead of going through a formal legal proceeding to foreclose (Foreclosure by Action), the mortgage holder merely needs to publish a conforming notice in a local newspaper for six weeks prior to the foreclosure sale. This method is less costly for the mortgage holder than Foreclosure by Action, so it is quite common.

One benefit for consumers of Foreclosure by Action is that foreclosing mortgaging holders cannot sue them for a deficiency judgment (a deficiency arises when the sale price of the property is less than what is owed on the mortgage).  This means that they will ONLY get the proceeds from the sale of the foreclosed property. This can be good news for the person losing their house, BUT, and this is a very significant BUT... most home buyers in recent years financed their homes with a first and second mortgage.

If the holder of the first mortgage forecloses and the sale price of the property isn't enough to pay off both the first and second mortgage, the holder of the second mortgage can sue the homeowner for the deficiency. That was a pretty convoluted sentence, so let me use an example:

Mortgage 1: $160,000

Mortgage 2: $40,000

Property sells at Sheriff's Sale for $150,000.

Even though the holder of Mortgage 1 lost $10,000, it cannot go after the homeowner for the deficiency

The holder of Mortgage 2 can still go after the homeowner for the full $40,000

This situation adds insult to injury for people who have just lost their home.  We frequently have clients come and ask what they can do about it. Of course every individual's situation is different, but one possibility to consider is Chapter 7 bankruptcy. Since the second mortgage is no longer secured by the home, it is simply another unsecured debt, which can be discharged in bankruptcy.

Why you should stay out of the bankruptcy bargain bin

As bankruptcy filings have been on the rise, it seems like the legal market has been flooding with new bankruptcy practitioners. And with the intense competition, we're seeing what looks like a price war, which is generally great for the consumer. But as we're seeing prices cut drastically, we also suspect providers are cutting corners on quality. That's why it might not be a good idea to go bargain hunting when there are serious issues at stake.

• "Limited scope representation" and petition preparers. You'll find these services scattered across Craigslist--they advertise bankruptcy for $300-$600 and offer significantly less service than a specialist attorney would. But it's not like you can just check some boxes in a bankruptcy case and head off to have tea with the trustee. Don't believe it when someone says bankruptcy is simple--your bankruptcy may be simple, but you won't know that until you discuss your situation with an experienced practitioner.

• Pre-bankruptcy planning issues. There are several things that can possibly derail an entire Chapter 7 case. For example, cash advances on a credit card made in the month before filing may be nondischargeable. Or if the client has sold property to a family member at a discount price before filing, the trustee might argue fraud. An experienced attorney can help you avoid these pitfalls.

• The means test is tricky. Pop quiz, petition preparer. On the means test, do you count expenses on a six-months-in-the-past basis or do you deduct expenses ongoing? How do you treat the $600/month the client is sending home to Africa? Can you count the car ownership deduction if the client owns the car outright? If someone gives you a quick answer to any of these questions, be cautious.

• 341 meetings can be scary. Getting grilled by the trustee at the meeting of the creditors is no fun. We prepare our clients by letting them know what kinds of questions the trustee will ask--and we know it's different from one trustee to the other. If practitioners are not accompanying clients to the 341 meeting on a routine basis, they don't know what sorts of issues trustees have been digging at. For example, I heard one trustee recently ask whether the filer had any credit card points that could be cashed in (because if the filer didn't exempt those, the trustee could seize them as part of the bankruptcy estate.) Nobody would know to look out for that issue unless they'd been there hearing the trustee ask about it. You need an attorney who knows all the potential traps.

These issues only scratch the surface of the legal analysis an experienced bankruptcy attorney will undertake when they represent you. If you're skipping this level of detail in your case, you may be leaving yourself vulnerable to having your case dismissed or your property seized.

How to kill 'zombie debt' using the statute of limitations

They call it zombie debt because it's so old that by the time a debt collector picks it up, you've totally forgotten about it. Creditors sell old, uncollected debt to debt buyers for pennies on the dollar--that's why you may be getting phone calls or letters on a debt you don't even remember having. Just as there are very specific ways to kill a zombie (click here only if you don't scare easily), there are specific defenses you may have against zombie debt. One of these is the statute of limitations.

Statute of limitations: The statute of limitations is the legal term for how long a party can sue you on a debt. The statute of limitations for suing for breach of a credit card contract in Minnesota is six years. This means that a creditor or debt buyer can sue you anytime up to six years from the date of your last purchase or last payment, whichever was later. There are some exceptions to this, so you'll want to consult an attorney.

Special statute of limitations: There may be a shorter statute of limitations if the debt was a store credit card. It's a store card if you could only use it at one store (store-branded cards with Visa or Mastercard logos don't count.) Those lawsuits are governed by a different law, called the Uniform Commercial Code (UCC), and they may have a shorter statute of limitations of only four years.

Super-special bonus statute of limitations: Minnesota has a borrowing statute. In short, this means that if a legal claim "arises" in another state with a shorter statute of limitations, that shorter statute of limitations may apply. This may be relevant for credit card companies based in states such as Delaware, which has a three-year statute of limitations. But be warned, the law is tricky on this. We would recommend you only try this defense under supervision of an experienced attorney.

Can my employer run a credit check on me?

If you've had financial issues, you might not want a potential employer to know--and you sure don't want the jerk that's your boss to know your private business. But more often employers and potential employers are pulling credit reports on you. This is especially common in workplaces where you may handle money, like a bank. Under the federal Fair Credit Reporting Act (FCRA), an employer can only perform a credit check on you if you have given your permission. They may get it by adding a line into your job application, something like "by signing below, you authorize Acme Inc. to obtain credit reports." If you are already employed and not sure whether your boss has authority to run a credit report on you, you can ask your human resources department.

But here's the tricky part for employers. If they decide to take an "adverse action" (i.e. not hiring you, not promoting you, or firing you) as a result of information contained in a credit report, there are rules they have to follow:

• The employer must provide you with a copy of the report they used before they take the adverse action

• The employer must provide you with a notice explaining which credit reporting agency supplied the negative information, and that you have a right to dispute the accuracy of your credit report

• You are entitled to a free credit report within sixty days of the adverse action--even if you've already gotten your free credit reports from annualcreditreport.com. Just contact the credit reporting agency to order it

If they fail to give you the required notice, they may have violated the FCRA. Violations can result in being awarded actual damages, statutory damages between $100-$1000, and attorneys fees, which means you may only have to pay your attorney if you win your case.

Fighting debt collectors vs. filing bankruptcy

We make a point of not selling any particular service to our clients. We're here to listen to your story and then lay out the different options you may have. Often, consumers call us when they've been sued by a creditor. Getting sued is a scary thing and the person sitting across the table from us is often nervous and upset.  We do our best to take fear out of the equation and get focused on reaching a resolution. In a situation like this, we generally start with a few questions, like:

-Do you actually owe the debt claimed in the lawsuit?

-Does the amount demanded in the suit seem like approximately what you thought you owed to this creditor?

-Who is suing you (original creditor or debt buyer)?

We'll then turn to a more holistic discussion of your situation. In order to set forth your options we will need to learn about your work situation, your monthly obligations, your assets and your other debts (are you at a point where other creditors may sue you?). We will also ask about your future plans. If you're planning to buy a house or a new car in the near future and will require the ability to get new credit, that will impact the way you deal with the suit.

In any case, your unique situation will determine what options are open to you, but the two most common remedies our clients choose are defending/settling the lawsuit or filing bankruptcy.

Defending a lawsuit: If you are interested in defending the lawsuit, we will determine what defenses and potential counterclaims you have. Sometimes we can develop counterclaims that really turn the table on the creditors. We will let you know if we think your case has that potential and give you our opinion on the strengths and weaknesses of the creditor's claims. We can also discuss whether it makes the most sense for you to litigate the case or try to settle it.

Bankruptcy: You can find more detailed information on the bankruptcy process here.

If you are facing suits from multiple creditors we can discuss whether a bankruptcy, either Chapter 7 or Chapter 13, makes more sense than fighting a series of lawsuits. In terms of legal fees, it costs about the same to hire us to file a Chapter 7 bankruptcy as it does for us to defend one debt collection suit. Of course there are ramifications either way, but rest assured that we'll discuss them at length with you and help you make the best decision.

Who will find out about my bankruptcy?

Bankruptcy can be a touchy subject--something that our clients want to keep as private as possible. In general, there are very few people who need to know that you filed bankruptcy.

1. My employer? No, your employer does not need to know that you filed bankruptcy.We will not send notice to your employer unless there is a particular reason to do so and you agree.

2. My landlord? It depends. If you have a lease on a residential property, we will generally need to give notice to your landlord that you are either keeping the lease, or dumping it in the bankruptcy. Also, if you owe money to your landlord, you may have to give notice.

3. My family? Generally not. There are only a couple of reasons any of your family members will get notice of your bankruptcy. The most common are if they cosigned a debt with you (or vice versa) or if you owe them money. Your attorney can probably give you some tips on dealing with family member/creditors in bankruptcy.

4. Is it on the internet? No. Your bankruptcy case will generally not be Google-able. There are public court records that attorneys can access on the web, but they're password protected, and someone would need to be looking for your name in particular to find it.

Will they take my stuff if I file bankruptcy?

One of our clients' biggest worries when they come in for a bankruptcy consultation is whether the court is going to take away their stuff. And they're right to be concerned-- a bankruptcy trustee has the power to order turnover of certain assets to pay off debt in a bankruptcy. But one of the biggest jobs of a bankruptcy attorney is to advise clients how to protect their things, and we can often help our clients save their assets. For many of our Chapter 7 clients, we can protect everything they own using the bankruptcy exemptions. There are are two different sets of legal exemptions--state and federal--each with different strengths and weaknesses. Once we've had a chance to review what a client owns, we get to choose whichever set of exemptions is more beneficial.

Here are some of the most common exemptions:

• Some amount of cash

• Equity in your home (this is the biggest difference between the state and federal exemptions--the state offers a much larger home equity exemption)

• Car

• Furniture/household goods

• Clothing

• Jewelry (including wedding ring)

• Individual Retirement Account (IRA)/401(k)

• Tools of the trade (things you need for a business)

• Wildcard exemption (federal exemptions only--you can use this to exempt anything that is not covered by another exemption)

• And others.

Each exemption has a dollar amount cap, but that will depend on whether you choose the state or federal exemptions.

Debt collectors are increasingly trying to collect debts from people that don't owe them

A recent Washington Post story highlights a growing problem, which the story calls debt "tagging". Debt tagging happens when a collection agency tries to collect from someone that doesn't owe the money. In some cases, it appears to be an honest mistake. For example, the collectors may accidentally pursue someone with the same name as the person who owes the money. In other cases, it appears to be intentional. The article tells the story of a Rhode Island woman who was pressured to give her social security number to a debt collector. Shortly after, she received a bill for $4,197 from a electric company for a home in Connecticut. The woman never lived in Connecticut. Only after many calls were made on the woman's behalf, did the collection agency stop.

And even when it's an honest mistake, the innocent consumer can have a very difficult getting the collector to stop. The main problem is the lack of information passed from collector to collector. It's well know that many debts are sold, often several times. As the debt bounces from collector to collector, very little information is passed along. So a consumer being pursued for a debt that she doesn't owe has a difficult time getting the debt collector to acknowledge its mistake because there's often no way for the collector to verify the consumer's story. And debt collectors are trained to assume the consumer owes the money unless they can prove otherwise.

The story advises that people being pursued for debts they don't owe should send a certified letter to the collector explaining why they don't owe the money. If the collection calls continue, the consumer should consult a lawyer.

'Debt tagging' by collection agencies a growing problem | The Washington Post | August 8, 2010

Can I record phone calls from debt collectors?

If you've been getting harassing calls from debt collectors, you can fight back by recording your phone calls to catch them in the act and prove they've violated the FDCPA. Depending on what state you live in, it may or may not be legal to tape-record your phone calls. Minnesota is a one-party consent state, meaning that you can record a phone call without another party's consent, as long as you are one of the parties to the call (you can't record a call between two other people). Your cell phone may have a recording feature. Otherwise, you can buy a telephone tape recorder for a pretty reasonable amount of money.

There are two types of recorders we've used in the past. One is designed for landlines. It has a telephone cord input and output, and you just run the phone cord in and out of the device. Here's an example.

The other is designed for cell phones. This is an adapter that plugs into a regular recording device. It comes with an earpiece that you insert into the ear you're holding your phone up to. It picks up both ends of the conversation through the sound coming out of the receiver. Here's an example of one of these.

Even if you live in two-party consent state--one where you are not allowed to record calls without the other party's consent--here's a little trick. You know how debt collectors sometimes play a recorded message saying "This call may be recorded for quality purposes?" Try using the very same line on them. If they don't hang up, you can feel free to tape away. At the very least you may confuse the caller too much to give you any trouble.

5 steps for canceling a credit card without hurting your credit score

So you want to cancel a credit card, but you're worried that it will damage your credit score. FICO, the company that calculates your score, recently explained that the main thing to be concerned with before canceling a card is your credit utilization ratio. This is basically how much credit you're using compared to how much credit is available to you--the higher the ratio, the more it negatively affects your credit. So if you're looking to close an account without hurting your score, you need to have zero balances on all of the cards that you want to keep before canceling an account. That way, your credit utilization ratio doesn't change because it's still zero. Don't worry about a canceled card shortening your credit history--FICO recently explained that that's a myth. So, assuming that all of the credit cards that you want to keep  have a zero balance, here are 5 steps for canceling a credit card:

• Pay the balance in full

• Because interest may have still be accumulating, call and confirm that the card has a zero balance.

• After confirming that you really have a zero balance, call and cancel the account.

• Send a letter confirming that your account is closed.

• Because it often takes awhile for the credit card company to update your credit report, wait 60 days, then use the free credit report at AnnualCreditReport.com to confirm that the account is closed.

How to request validation of a debt

The Fair Debt Collection Practices Act (FDCPA) gives consumers the right to request validation of a debt. Under the FDCPA, a debt collector must send you a written notice within 5 days of their first communication with you. The notice must tell you, among other things, about your right to request validation of the debt. In my experience, consumers should almost always request validation of the debt, particularly if a debt buyer is involved, because the more information you have, the better.  But here are a couple things to keep in mind about the validation process:

• You must request validation in writing and you must request it within 30 days of your receipt of the required notice. Under the FDCPA, a debt collector doesn't have to honor a request for validation unless it's in writing and unless they receive it within 30 days of your receipt of the notice. As a practical matter, many debt collectors will honor a verbal request for validation and some will even honor a request made after the 30 days. But if you want to protect your right to have your debt validated, you must do it in writing and within 30 days. I recommend sending the letter via certified mail so that you can prove that they received it and when they received it.

• Once you've properly requested validation, the debt collector must cease all collection attempts until they provide it to you. There are some websites that claim that a debt collector must validate a debt within 30 days and if they don't the debt is forgiven. This is simply not true. There is no time limit to how long the debt collector has to validate your debt. They just can't call you, write you, sue you, or take any other action until they validate. If they do, they've violated the FDCPA.

• A debt collector can't use your failure to request validation of a debt against you. The FDCPA prevents collectors from using your failure to request validation as evidence that you owe the debt.

• There aren't any clear requirements about what type of documents are sufficient validation. The FDCPA doesn't define validation, and the FTC has said that validation only needs to confirm that the debt collector is pursuing the right person and the right amount.

• Collection activity during the 30 day validation period can't "overshadow" your right to request validation. This can be a little tricky, but here's an example: let's say you receive the validation notice on March 1 and then they serve you with a lawsuit on March 5. Under the FDCPA, you have 30 days--or until March 31--to request validation. And in Minnesota you have 20 days--or until March 26--to respond to a lawsuit. So because you have to answer the lawsuit before your time to request validation is up, the lawsuit "overshadows" your right to request validation. This is a violation of the FDCPA.

What is debt collection harassment?

Although it sounds like an easy question, there has been a lot of litigation over what exactly is considered debt collection harassment under the Fair Debt Collection Practices Act. It's often a question that turns on the unique facts and circumstances of each individual case. But based on the text of the FDCPA itself and the related court decisions, it can be said with some certainty that the following tactics are collection harassment:

• Debt collectors cannot threaten violence to collect a debt. This one is pretty common-sense. This prohibition also covers threats against your children, friends, and other third parties.

• Bill collectors can't use profane or abusive language. Obviously different people have different definitions of "profane or abusive". But at least one court has ruled that name calling and racial or ethnic slurs are profane and abusive.

• Collectors can't call you repeatedly. This not only applies to actual telephone conversations, but also to causing the phone to ring. For example, redialing your number after you've hung up the phone.

• Debt collectors must tell you who is calling. In virtually every communication, the debt collector must identify himself and notify you that he is a debt collector. But there is some debate about whether collectors can use a consistent alias. Not surprisingly, many collectors would rather not use their real name when on the job. So some courts have allowed the use of aliases.

• Any other debt collection conduct where the "natural consequence" is to harass, oppress, or abuse. This is the catch-all provision. Again, it can be tough to define what conduct has the natural consequence to harass, oppress, or abuse. In some cases, it's easy. In other cases, it's more difficult. Courts have said that mere "bad manners" is not harassment. But the use of words like "liar", "deadbeat", or "crook" probably cross the line and would be considered harassment.

Debt collectors can't threaten to sue you unless they really mean it

The Fair Debt Collection Practices Act (FDCPA) prohibits a debt collector from threatening to do something that they don't really intend to do. The most common violation of this part of the FDCPA is when a debt collector threatens you with a lawsuit if you don't agree to pay the debt. This FDCPA violation requires two things: (1) that the debt collector threatened to sue you; and (2) that they didn't really mean it. So how do you know whether the debt collector is lying when they threaten legal action? Here are a couple of indications:

• the amount of the debt is small;

• the debt collector does not have an office in your state;

• the debt collector does not have a licensed attorney in your state;

• the collector threatened a lawsuit and months or even years went by before they sued you.

There are other indications as well, but its tough to know whether they apply before bringing a FDCPA lawsuit. For example, the debt collector may not have the creditor's authorization to sue you, but there's really no way to know that until you get into litigation and can use discovery to figure it out.

This part of the FDCPA probably also applies to many veiled or implied threats of a lawsuit. For example, courts have found FDCPA violations from the following statements:

• The collector "can" or "may" sue

• The debt would be referred to a lawyer "for collection action"

• The collector is authorized to proceed with legal action

Does the FDCPA apply to my situation?

It is an unfortunate and little-known fact that the Fair Debt Collection Practices Act (FDCPA) does not apply to every debt collection situation. Two requirements must be met before the FDCPA comes into play.

First, the debt that is involved must be a "consumer debt". The FDCPA defines "consumer debt" as any debt where the money was used to buy goods or services that were "primarily for personal, family, or household purposes." What does this mean in English? It means that business debts are not covered by the FDCPA. Only debts incurred to buy goods or services for use by you, your family, or in your house.

Second, there must be a "debt collector" involved. Under the FDCPA, "debt collector" is a term of art that means a business that collects the debts of another. This means that the original lender or creditor is not covered by the FDCPA. So if you had a Capital One credit card and the Capital One collection department is calling you, they are not required to follow the FDCPA. But if ABC collection agency is collecting on behalf of Capital One, the FDCPA applies to them. Law firms are also covered by the FDCPA if they regularly collect consumer debts. So the FDCPA definitely applies to a collection law firm, but probably doesn't apply to a law firm that only occasionally handles consumer collection cases.

Of course, even if your situation involves a consumer debt and a debt collector, there must still be a violation of the FDCPA.

Debt collectors cannot violate one part of the FDCPA in an attempt to comply with another

The Fair Debt Collection Practices Act (FDCPA) requires that every voice message left by a debt collector tell you that the communication is from a debt collector. The FDCPA also prohibits debt collectors from telling third parties that you owe a debt. This can create a problem for debt collectors that leave voice messages. On the one hand, the debt collector must disclose that the communication is from a debt collector in the message. But on the other hand, disclosing that the communication is from a debt collector may violate the FDCPA's prohibition of telling third parties about a debt. Debt collectors often whine about this conundrum.

The recent case of Edwards v. Niagra Credit Solutions, Inc. involved this exact scenario. The debt collector, apparently as a policy, did not disclose that the call was from a debt collector in voice messages. When it was sued under the FDCPA, the debt collector complained that if it left the required notice, it risked violating the part of the FDCPA that prohibits disclosing that a consumer owes a debt to a third party. The judge brushed aside the debt collector's complaint of being in an impossible position by pointing out that the FDCPA "does not guarantee a debt collector the right to leave answering machine messages" and held that it is not legal to violate one part of the FDCPA in an attempt to comply with another part.

What is an Order for Disclosure?

When a creditor obtains a judgment in Minnesota, they can request that the court send you a form called an Order for Disclosure or OFD. The form asks you where you work, how much you make, where you bank, and other questions about your assets. The purpose is to allow the creditor to discover what assets you have that may allow you to pay the judgment.

But here is the critical part:  you MUST fill out the OFD and return it to the creditor within 10 days. If you don't, then the creditor can go to a judge and ask the judge to issue a bench warrant for your arrest. That's right, they can haul you to jail for not filling out a form. So if you get an Order for Disclosure in the mail, make sure you truthfully fill it out and return it. Not every debt collector will seek a bench warrant for failure to return an OFD, but some will and you don't want to spend time in jail just for failing to fill out a form.