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Credit card debt collection flawed, may affect bankruptcy

Arizona residents may remember the settlement money banks paid out for errors in the foreclosure process. Unfortunately, the same inaccuracy and flawed documentation seems to be plaguing the credit card debt collection process. With more people falling behind on their credit card payments, borrowers are behind by $18.7 million--roughly three percent of total credit card debt.

Lenders are now turning to courts to collect debt, and they may not always follow the proper legal procedure. They sometimes add erroneous fees or go after people who have paid off their debt. Since credit card debt can contribute to bankruptcy filings, these inaccurate documents may cause people to consider filing for personal bankruptcy to wipe out their debt.

Some cases depend on mass produced documents, and lenders are unable to produce documents that prove borrowers ever borrowed any money, such as the original contract or any payment history. For these reasons, credit card companies are under fire. Some judges are seeing more of these problems in lawsuits.

Unfortunately, these problems may even go undetected at times, since borrowers often do not go to court to defend their rights-in their absence, default judgments are given to lenders. With a default judgment in hand, creditors can freeze bank accounts and garnish wages. Even if judges suspect flaws, they cannot question banks unless a consumer challenges the lawsuit.

Arizona residents facing piling credit card debt should comb their bills and be aware of their rights, to ensure they are not facing creditor harassment without reason. Where they have fallen behind on their payments and are facing wage garnishment and various other forms of creditor harassment, they should not hesitate to consider all available options, including filing for bankruptcy. Chapter 7 or 13 bankruptcy can to put an end to debt collection procedures and make a fresh financial start.

Source: The New York Times, "Problems Riddle Moves to Collect Credit Card Debt," Jessica Silver-Greenberg, Aug. 12, 2012