Credit Card Collections

You might be wondering who are these companies that are sending collection notices on my credit card debt? I never borrowed any money from any of them. It’s a good question for a confusing situation.

Credit card companies routinely sell (or assign) debts owed to them by their customers. Unfortunately, this is entirely legal. Credit card debts can be assigned or sold to anyone. This often leads to confusion and makes it difficult for you to determine who exactly you owe. Why do credit card companies sell your debt? If you owe the money, why don’t they try to collect it themselves?

Credit card companies will, in fact, often sell your debts for a small percentage of what is actually owed. They will then write off this loss for tax purposes. Some may conclude that the debt is unrecoverable. Or they may be simply looking to balance their books. Regardless, it leaves you now owing a new, different company. This often results in problems because these companies specialize solely in collections, harassment, and lawsuits., and they are able to go after the entire balance owed on the loan. This is why you may have originally owed Capital One or Discover, but are now being sued by Midland Funding or Portfolio Recovery Associates.

So, what can be done about these collections? The good news is these debts are still eligible to be discharged through bankruptcy. Nothing about the transfer or assignment makes them immune to a bankruptcy filing. Even if they file the lawsuit against you, that too can be discharged through bankruptcy. If you don’t wish to file bankruptcy, these debts can still be negotiated on, possibly for less than the full amount. Keep in mind, these companies have already purchased the debts for less than the full amount and therefore may be motivated to take less than what the original creditor previously wanted.

These collection agencies may make it tricky to figure out who you owe and how much, but they still can be dealt with. Call us at 412-414-9366 if you are being inundated with collection notices. I am an experienced bankruptcy attorney who would be happy to discuss your situation and see if there is an option for dealing with this problem. There almost always is, so don’t despair!

Can I Keep a Credit Card in Bankruptcy?

A common question asked by my bankruptcy clients before filing is, "can I not include one of my credit cards in my bankruptcy and keep it?" The reasons differ. Most people want to keep a card in case of an emergency, or at least for convenience. Some want to keep it for travel. Sometimes, the reason is pure nostalgia. "I've had it since I was a teenager!"

Unfortunately, regardless of the reason, the answer is always "no." Credit cards may never be retained in a consumer bankruptcy. The reason is that creditors of the same class must always be treated the same. If you pay back one credit card, you must pay them all back. If you keep one, you must keep them all. Otherwise, the credit cards not being repaid through your bankruptcy will object to your filing, basically asking, "hey, if they are getting paid, why aren't we?"

Closing out all of your credit cards isn't a big deal in Chapter 7 bankruptcy. You will be able to apply for credit cards several months after filing when your case is discharged. Whether or not you want to may be another issue. Many of my clients profess they never want to use another credit card, and while I encourage them to eventually get one to rebuild their credit, I can understand the sentiment. But, in any case, you will be able to access new credit before very long.

The issue is a bit trickier in a Chapter 13 bankruptcy. These bankruptcies last 3 to 5 years, and you are not permitted to use credit cards during this time. All of your credit cards will be closed. This makes planning and savings important in a Chapter 13 bankruptcy. You will need to maintain savings in case of emergency, as you will not be able to access quick credit. Debit cards will need to be used primarily for convenience (most people don't want to carry around large amounts of cash or trying to pay with checks). The advantages of Chapter 13 bankruptcy far outweigh this inconvenience, but it is something worth planning for and considering.

Not having a credit card for awhile can be an inconvenience in a modern economy, but given the advantages offered by filing bankruptcy, it should be seen as a temporary disruption for the greater good.

Contact us if you are facing large credit card debts. While you can't keep them, it is more important to remember that you can make them go away!