Legal troubles over a decade-old debt to bank
February 13, 2009 2:35 PM   Subscribe

[I am asking this for a friend.] Legal troubles over a decade-old debt to a bank. I am being sued by a law firm representing a collection agency. I would like to find a way to resolve this situation that does not involve hiring a lawyer, since I cannot afford one. I receive income via Social Security Disability.

I recently received a letter from a law firm hired by a collection agency which has been trying to get me to pay a debt incurred about ten years ago through an overdraft credit line at Bank of America. The collection agency has owned the debt for probably six years now, and recently decided to sue me for the money. The letter came about the same time as a summons from District Courts of Massachusetts (Cambridge Division) letting me know that I had 20 days to respond to both the court and the law firm.

I would like to find a way to resolve this situation that does not involve hiring a lawyer, since I cannot afford one. I would like to negotiate a settlement, if possible, and am seeking advice about how this can be most effectively done.

I cannot really afford to make payments on the debt--as for my financial situation, I am the parent of a minor, and my income is derived from Social Security Disability Insurance and food stamps. I am officially "disabled" by Social Security standards, after having undergone a long process of evaluation a few years ago, and do not work. My annual SSDI income for 2008 was $10,692 plus food stamps amounting to approximately $2760 for a grand total of $13,452. I do receive significant financial help from my child's father, though this is not officially or exactly on the record.

During phone conversations with the collection agency in 2006, I explained and documented my financial situation, proposing to settle the debt for significantly less than the amount they then said I owed including interest. Following these phone conversations, I wrote to them via certified mail to make this same offer in writing. [I've pasted the letter below.] My offer was also less than the amount they were willing to settle the debt for, which was $4785.93. (This figure is several hundred dollars less than the original debt incurred by me). I received no response to, nor acknowledgement of, this letter. Instead, I received continued demands for payment by phone and mail.

My credit is otherwise fine; I have student loans in good standing (deferral) and I am able to get credit cards and have always paid them on time in the rare instances that I use them. This particular loan, however, I have paid almost nothing on, due to a continuous state of financial exigency and, honestly, a long period of denial and irrationally hoping it would "go away".

Any advice would be much appreciated.


Here is the letter, and the offer I am still able to make now:

"I am writing to reiterate the offer I made with representatives of your company, [person 1] and [person 2], during our telephone conversation on 6/17/06. At the time of this writing, the offer still stands: I would be able to get a loan of $2000.00 from my mother on the condition that I show her a letter from [the Debt Recover Company] agreeing that this amount will settle my debt. Upon receipt of such a letter, I would be able to get $2000.00 from my mother and would be happy to pay it to you immediately.

"It was explained to me that your company wouldn’t accept this amount to settle the debt, and has opted instead to accept a monthly payment from me in the amount that I can afford to make. Enclosed is a check for five dollars, to be applied to my balance, as well as documents outlining my financial information.

"As you can see from my financial documentation, it is not possible for me to make anything beyond a "good faith" payment unless my health improves (or some other windfall occurs!) allowing me to substantially change my financial situation. Unfortunately, because my illness is degenerative, this is unlikely. For this reason, and because I don’t know how long the offer from my mother will continue to be available to me, I urge you to reconsider accepting the $2000.00 to settle the debt."
posted by not_on_display to Work & Money (16 answers total)
It might be worth checking into Legal Aid in your area to see if you qualify for their services, but in any case I'm pretty sure they can't garnish or attach your Social Security payments.
posted by dilettante at 2:52 PM on February 13, 2009

Oh, and IAAL but IANYL and TINLA.
posted by dilettante at 2:53 PM on February 13, 2009

Contact your local consumer credit counseling service. Please don't make any more offers of settlement until you do so.
posted by Lyn Never at 2:56 PM on February 13, 2009

IANAL, but you will also want to check into whether or not the statute of limitations on the debt has passed.
posted by JakeWalker at 3:00 PM on February 13, 2009

The statute of limitations on debt is a frequent topic on Consumerist. You should Google further, but this chart has the length for each state, and Massachusetts is six years. I seem to recall there are some scenarios which can restart the clock, and I think paying anything is one.
posted by Horace Rumpole at 3:12 PM on February 13, 2009

This particular Consumerist article might be a good starting point.
posted by Horace Rumpole at 3:18 PM on February 13, 2009

Someone I know who works in such a firm tells me that in today's financial climate, the firm is settling many debts at substantially lower figures than they were willing to do even a few months ago, so along with the suggestions above, you may find they are more amenable to coming to a meeting of the minds with you now, than before.
posted by mumstheword at 3:27 PM on February 13, 2009

Consumer debt can't be collected from SSD. See 42 USC Sec. 407. I'm not aware of any exception to this rule that would apply to an overdraft line of credit, but IANYL. You would still owe the debt, and it could be collected from non-SSD monies, like if you won the lottery, inherited money, or worked part-time.

If you would like to stop receiving collection calls, send a letter to the law firm citing The Fair Debt Collection Practices Act, 15 U.S.C. § 1692c. They must stop contacting you after receiving your letter, except for a few exceptions. There are a ton of form letters for this online through the google. Send it by certified mail! I can't access at the moment, but as I recall, it was pretty user-friendly and had a lot of great information about debt collection.

Look into the statute of limitations since it's an old debt, but in my jurisdiction (which is not Massachusetts), making a payment can restart the statute of limitations. So the $5 check you sent would start the clock running, if this is the law in your state.

Also contact free legal services in your area. Consumer debt is a burgeoning area of law and your local office may be able to answer these questions for you fairly quickly and advise you on how to advocate for yourself.
posted by Mavri at 3:48 PM on February 13, 2009

Someone in a recent thread on described doing the following successfully: they wrote a letter very much like the one you did, but included the check and said something to the effect of "cashing chis check indicates that you accept this proposition and this debt is settled in full".

There was more legalese included and probably more formal terminology, but it seemed like a decent idea to me. A bird in the hand and all that...even though they might want to not take your offer, if it is an offer with a check they might be more likely to jump on it.
posted by arnicae at 4:30 PM on February 13, 2009

What you must do immediately, within the 20 days, is answer the complaint. To represent yourself, which you may do, it is enough to respond to each paragraph with a "denied", except of course for the obvious stuff (that you live in Massachusetts, for example).

Then, and this is crucial, add a paragraph that says "Affirmative defense: The claim is barred by the statute of limitations". If you do not answer, or if you do not include that defense, it is waived. Trust me, you do not want to waive it.

Make sure you sign the answer. File it with the court, with a copy to the lawyer representing the creditor.

Then, and only then, follow the other ideas listed above.
posted by megatherium at 4:43 PM on February 13, 2009

If you are in Boston you are surrounded by law schools. I'm sure one will have a legal clinic that can probably call you. Just start looking at the various law school websites and start calling their civil or general clinics (or they might have even more specific clinics that would serve you). Give them a call and see if they can help you or direct you towards someone that can. I had a lot of friends in law school who were in clinics and were able to get very good settlements for their clients. It's non-profit so they won't charge you anything.
posted by whoaali at 5:26 PM on February 13, 2009

A good place for learning about how to deal with this situation is
posted by salvia at 6:34 PM on February 13, 2009

Let's just hope that in Massachussetts a promise to pay only part of a debt does not restart the statute of limitations.

Never promise to pay a delinquent debt or pay part of a debt without a written agreement, preferably including the deletion of any negative reporting related to the debt on your credit reports and the capacity to immediately make good on it.

For now, megatherium has the right idea. Either get a lawyer immediately or respond to the summons and include every defense you might possibly have available to you.

They are banking on the (very high) chance that your friend won't respond and they'll get an easy default judgement against him/her.
posted by wierdo at 8:42 PM on February 13, 2009

Contact legal aid immediately. Do not respond to the letter without contacting a lawyer first, and do not fail to contact a lawyer. No one here has sufficient information to provide competent legal advice, even if we were your lawyers, which we're not.

It really is really important that you do this. Representing yourself will almost certainly result in you getting screwed. Fortunately, as whoaali indicates, Boston is chock full of legal aid clinics, so finding someone to help you shouldn't be that difficult, but again, it is critical that you receive legal counsel.
posted by valkyryn at 6:01 AM on February 14, 2009

Initiating legal action costs the collector money.

The only reason a collector does this is if they have to, and for such a small, old debt, the "have to" is usually precipitated by an approaching statutory deadline. If they can get a court to judge against you, the statutory deadline no longer applies, because they are no longer collecting on an old debt, they are collecting on a fresh judgment.

It is in your friend's best interest to find some way to defend against this. The advice recommending free legal clinics is good.
posted by Sallyfur at 9:28 AM on February 15, 2009

Thanks, everyone! My friend responds:

"I really appreciate the time and thought everyone put into considering the (long) question!

"It's been hard for me to begin the process of dealing with this--obviously, I guess--and although a lot of the information and advice I received was very common-sense, just asking the question and getting some responses has been enough to allow me to think this through clearly instead of continuing to procrastinate and deny. I have begun correspondence with a legal aid bureau, and plan to make further efforts to find out the particulars of my situation and hopefully take some decisive action tomorrow (Monday).

"The whole thing is starting to feel less like a nightmare (unreal, dreamlike, etc) and more like simply a crappy situation that I can deal with."
posted by not_on_display at 12:03 PM on February 15, 2009

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