Debt collectors and the lies they tell

06 Apr Debt collectors and the lies they tell

Bankruptcy clients often call me telling the that the bankruptcy we discussed won’t work for them … because the creditors told them that! Stories from clients lately are full of another round of inventive and utterly false statements about the law from the mouths of debt collectors. These lies are effective because the hearer doesn’t understand either the law or the economics of debt collecting.

Some of the most often repeated lies are:

  • This debt is not dischargeable in bankruptcy
  • I can continue to call you until you give me the bankruptcy number
  • We’ll foreclose our HELOC regardless of senior debt or property value
  • We’ll take everything you have even if you file bankruptcy

Debt collectors realize that most consumers don’t understand how little legal leverage a debt collector has until they get a judgment. The consumer’s ignorance of collection law and bankruptcy law allows the debt collector to speak authoritatively without fear of contradiction. And there seem to be little constraint on their willingness to say anything that works.

The tools of the debt collector are fear, harassment, and shame. They seek to use one emotion or the other to get the debtor to write them a check for money that they can’t get quickly or cheaply any other way. They know people don’t want to file for bankruptcy, so they scare them about that too.

The real harm done here is that collectors often stampede the debtor into paying the least important creditor first. Important creditors are taxing authorities, mortgage lenders, and car lenders. Unsecured credit card claims are at the bottom of the heap of priorities.

The important creditors aren’t nearly as insistent on the phone; they have collection options like bank levies and foreclosure. They don’t have the same need to harass the non paying as the credit card collectors.

Understand the game. Don’t get your legal advice from the debt collector. Pay the important creditors first.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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