A reader filed for bankruptcy and included a cell phone debt. Now he’s being contacted by a collection agency that’s threatening to report the debt as a new account if he doesn’t pay. What are his rights?
Q: About seven years ago, when I lived in California, I co-signed for a T-Mobile account for a friend. She stopped paying after running a bill up to $2000. I filed Chapter 7 bankruptcy and included my T-Mobile account. My debt was discharged in March of ’05.
I reviewed my credit report and saw a delinquent bill dated July ’05. The collector has said they will report it in 45 days and it can stay on my credit report because it starts over. Does the FCRA allow this? How long after the delinquent debt can it be reported? I have read 4 years. Next year will it will be seven years old and the credit reporting agencies would have to remove it by then, correct?
– Caught by Surprise in Illinois
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A: Some debt collectors threaten to report old unpaid debts as new accounts in order to get consumers to pay. That is illegal.
Under the Fair Credit Reporting Act, a collection account may be reported for seven years and 180 days from the date you fell behind with the original creditor. (In your case, that’s T-Mobile.)
After that time period the debt can’t be reported, even if it goes unpaid. The exception would be if the collector took you to court and obtained a judgment against you. If they did, the judgment itself could be reported as a new debt.
It is illegal for a collection agency to falsely represent the “character, amount, or legal status of any debt.” If the debt collector told you that he could report this debt with a new reporting period if you didn’t pay, that could be an illegal threat. Debt collectors also aren’t supposed to give you advice about the statute of limitations, which doesn’t matter here anyway, since the debt was wiped out in bankruptcy.
Finally, if you told the debt collector that you included this debt in your bankruptcy, he should have backed down immediately. Once you have discharged a debt in bankruptcy, you are protected by the discharge order. Violating it is serious stuff.
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It sounds like this collector is hoping you don’t know your rights and will be pressured into paying. You certainly have every right to contact a consumer law attorney who may be more than happy to take your case on a contingent-fee basis. If you successfully sue under the FDCPA, for example, you may be entitled to damages and the collector would have to pay your attorney’s fees.
Another approach would be to send the collector a letter (by certified mail) telling them that you discharged this debt in bankruptcy, and instructing the collection agency not to contact you again. After receiving your letter, the only reason the collector can contact you again is to acknowledge receipt of your letter, or to tell you that it is taking legal action against you. That wouldn’t be very smart on their part, but based on the statements you’re telling me, this collector doesn’t sound very bright to begin with.
However you decide to handle this, at least take the time to file a complaint against the agency with the Federal Trade Commission.
[Related article: Collection Agency Garnishment Threat Raises Red Flags]
Image: Ryan Dickey, via Flickr.com