If the obligation is protected by a security interest, like a car loan, they might be able to use a short form of legal action to recover the property, but such is not ordinarily the case with credit card debt.

In order to recover property on a debt (other than a secured debt), the creditor (bank) has to establish in court that you owe the debt and the amount you owe. They must reduce their claim to a judgment against you.

Even after that, they would require supplemental proceedings and get a court’s approval, before they can just come and take your stuff.

Ordinarily, they would simply seek a writ of attachment or a garnishment, because they really don’t want to take over your property. They want their money.

The process is time consuming and costs money, lots of it and banks usually don’t like to invest their time and money in credit card battles in court.

Unless it is a particularly large amount or there is some type of fraud involved, most banks simply sell the debt to a collection agency and “charge it off.”

Then it is up to the collection agency to chase you for the money.

Of course, this process causes lots of damage on your credit report.

The original debt is listed as are the late payments.

The charge off is also listed.

In addition, the sale to the collection agency is posted and collection agencies can post further derogatory items on your report.

Consequently, the same obligation can be posted multiple times and each one hurts your credit.

Collection agencies are very good at collecting debts. They pay pennies on the dollar for the claim and inflate it.

They also harass and threaten debtors with all sorts of horrible consequences for not paying the debt back.

However, you should NEVER pay a collection agency anything, simply because they demand payment and assert that they are now the lawful owner of the claim.

You should also NEVER engage in discussions, in person or on the phone with them.

When you receive the first collection call, nicely take down the name and address of the collection agency, the name of the creditor, the amount of the claim and the claim number, if any.

After you have that information, simply tell the person on the phone that you do not discuss your personal finances on the phone and that you insist that all communications be in writing.

Then send a letter to the collection agency by certified mail, return receipt requested. Reference the creditor, the claim amount and the claim number.

Inform the collection agency that you will not engage in verbal discussions of their claim and insist that all communications regarding it be in writing.

Under the Fair Debt Collection Practices Act, collection agencies are forbidden from engaging in certain acts in collection of debts.

Many frequently ignore those laws in their phone calls. Forcing them to do business only in writing will compel them to abide by the rules or leave a trail for the Federal Trade Commission to follow.

Once the collection agency has begun communicating with you solely in writing, you have two choices.

First, you could ignore them. Many times, this will result in them selling the claim to another agency, because they simply don’t want to spend the money taking you to court.

The alternative is to tell them that you need them to validate the claim. This means that:

1.They have to prove that they are the lawful owners of the claim. Your debt was owed to another creditor.

The collection agency is claiming that somehow it now owns the debt. If they do, they should have a proper assignment of the debt from the original lender.

If they cannot produce that, then NEVER PAY THEM A THING.

I know it sounds like a simple thing, to prove they own the debt, but many of these collection agencies deal in bulk and rely on their ability to harass debtors into paying without the requisite proof, so they do not actually have the paperwork they would need to win in court.

2.They have to prove that you actually owed the original debt and that their claim is for the correct amount of the debt.

This means that the collection agency has to produce the original paperwork and documentation of the debt that the original creditor created to keep track of the debt.

Very often they don’t have this paperwork either, because they never got it from the bank in the first place.

If they cannot produce it, DO NOT PAY THEM A THING!

3.They also have to prove that they have the legal right to collect debts in your state.

All these things are required by the law. If they cannot satisfy any one of them, you do not have to pay them.

As a practical matter, the original creditor may not want to go back through its old files to get the information it needs to prepare a proper assignment and to establish the bona fides of the original debt.

They have already written the debt off and have nothing to gain.

Depending on how long it has been since they “sold” the debt, they may not even have the documentation any longer.

Also, the collection agencies generally have so little financial investment in the debt, it may not be worth their while financially to try to get all this information to collect it.

The point is that, if they cannot validate the debt properly, the law requires them to stop collection efforts and remove the derogatory items from your credit report.

Timing is important as is the proper wording of your correspondence.

I suggest that, before you start writing the collection agencies, anything other than the letter requiring all communications to be in writing, you engage the services of a competent professional, either a debtor’s rights attorney, a qualified credit counselor or a reputable credit restoration service.

Hope this helps. Good luck!

But they can sue you, garnish your wages, take your tax refunds, ruin your credit, making it nearly impossible to get a loan, or buy a house…