Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
John Watts ============
My name is John Watts. I’m a consumer protection attorney in Alabama, and we’re going to do our normal consumer protection question and answer webinar. We will be answering some questions that have been asked over the past week. If you would like to have us answer a question you can contact us through our website, Alabama Consumer, or you can comment below this video, or you can even call us. 205-879-2447. Just let us know what your question is and we’ll be happy to put that in the list.
We have about, let’s see, about 6 questions today. Most of these are about collection matters. Then we do have one related to foreclosure. We’ll go ahead and get started.
“If my bank account is garnished are my funds protected if I receive disability income?”
Now, I think a couple things here. Make sure we’re on the same page. The way you get garnished is you have a judgment against you. It means that you lost a case and you were served with the lawsuit before you lost the case.
If we’re dealing with a situation, and I have a lot of these, where we were never actually served, then that’s a whole different matter. Assuming we were served, assuming we legitimately lost the case, either a default judgement, or we lost at trial, or summary judgment, now can they garnish our bank account if we receive disability income?
I presume the person means, when they say disability income, Social Security Disability Income, or SSDI, which is Social Security Disability Insurance. The short answer is no.
You cannot have your Social Security Disability check garnished, and your bank account cannot be garnished if all the funds in there are protected, or exempt, funds such as Social Security Disability. Now, if you are putting that money in, and you’re putting in money that your spouse makes, and putting in birthday money, and an inheritance that you received, it’s all mixed up, now that’s going to be difficult to say when that collector reaches in to grab that money after a judgement that what they’re really grabbing is the exempt money.
You want to keep things very clean and separated there so that it’s clear, but if you believe that what the company is trying to garnish is actually exempt funds, then what you need to do is either get with a lawyer or let the court know. There’s various procedures that you go through with that. Hopefully that answers that question.
Our next question is, “If my bank account is garnished and I have CD’s at that bank, would they be affected by the garnishment?”
The short answer to that is yes. If you’re being garnished and your bank account’s being garnished then the fact that you have CD’s there, well they’re going to be garnished as well. Now, we go back to, are these funds being garnished any type of exempt funds such as Social Security? If that’s the case, then those CD’s should be protected.
In other words, if we look at the CD, imagine we kind of break it open and say “What went into the CD?” You go “Oh, that was when I got my lump sum. My back pay for Social Security. All that money came it went into the CD.”
You can show that that’s the case then it should be protected. Again, you get with a lawyer or you let the judge know, either through your lawyer or on your own if you’re handling
it yourself that, “Hey, these are exempt funds.” You let the bank know, let the court know, let the other side, the collection lawyer know. “Hey wait a minute. Don’t touch my CD number 12345 because those are exempt funds. Here’s the proof of what went into those.”
Our next question is, “If you respond to a collection letter and acknowledge the debt, does that extend the statute of limitations?”
We’ll again make sure we’re using these words in the same way. Statue of limitation is the time period to sue you. That may be 3 years, 4 years, 6 years, whatever it may be. The question is, “If I get a collection letter and then I respond to it, maybe I call, maybe I write a letter back to that debt collector, and let’s assume the time limit, statute of limitation is over, just by responding to them, does that just restart the statute of limitation?” The answer is no, unless you say in there something that might trigger it.
I’ll tell you this. We’re not in this answer going to cover everything you do when you talk to a debt collector, when you write a debt collector. We have other videos on that. I think we have an upcoming webinar all about how do you talk to these guys? You get a letter from them, or you get a phone call from them.
How do you speak to them? Here’s a very short version. When somebody sends you a letter through the mail, or they call you on the phone, it would be very unusual for you to know, when dealing with a debt collector, that “Oh, this debt collector is legitimate. This debt collector has the right to collect this debt. This is who I should pay.”
I just, about 2 days ago, met with somebody. They are paying a collection law firm for a particular debt. Now they have another collection law firm from out of state trying to collect that same debt, saying “You have to pay us.” Well, they were already sued for that debt. They’re already paying on that debt as part of a settlement. Now this other debt collector’s trying to collect it.
My point in bringing that up, first of all it’s illegal for that other debt collector to do that, and we’ll take care of that in Federal court, but when you get a letter, you get a phone call, I’m not sure why you would ever say “Oh yeah. I admit it. I owe you the money.” How do you know you’re dealing with the right person?
When you’re talking to them on the phone, you say “Send me proof.” They send you a letter. You should send them a letter back. We have a sample letter on our website. I think the name of the article’s like “A simple dispute letter sent to collectors.”
Let me just tell it to you. You send them a letter, certified mail, otherwise they throw it in the garbage. Certified mail so you can prove they got it. You say “I dispute owing any debt to you.” That way you don’t have to worry about getting the right account number. What if you transpose the number and they go “Oh, well we didn’t know you were talking about this debt, because you wrote the wrong number.”
Just avoid all that.
Say “I dispute owing any debt to you. If you think I owe you a debt, send me proof in writing.” That would be more than just a letter. It’d be some proof. We’ll get into that in another webinar, what that means. Then you say “I dispute owing any debt to you. If you think I owe you any debt send me proof in writing.
By the way, do not ever call my cell phone number.” Then you write down your cell phone number. “If you think I every gave you or anybody you’re acting on behalf of permission, I revoke that. I take back that permission.” You put your name, your address, last 4 of Social, date of birth, so that they know who you are.
By doing that you are not extending the statute of limitations. Now, if you write them a letter and say “I know the statute of limitations is expired and I’m voluntarily paying you $10, so that you can restart the statute of limitations.” Now you may have restarted it.
But if you are not doing something kind of crazy like that then you’re not going to restart it. It’s fine to ask them for proof. The FDCPA, their Debt Collection Practices Act even gives you that right to say “You’ve got the right to dispute it, to ask for validation of this debt.” You need to do that.
Okay. Our next question is, “Is the collection department for a medical facility considered a debt collector?”
It’s a great question.
Here’s the thing.
It depends on what we mean by the collection department. If you go to, let’s just say St. Vincent’s Hospital, and then you get a bill from St. Vincent’s Hospital and it says on the bill “St. Vincent’s Collection Department”, then no. They’re not going to be a debt collector unless there’s something really unusual going on. I’ll use Brookwood as an example, Brookwood Hospital in Birmingham. They send you a letter and it says “From Brookwood”. Well, then they’re not a debt collector. But if they send you from, at least at one time they had a company called “Syndicated Office Solutions”, or “Systems”, or something like that. It’s SOS.
There’s no statement on there. “Hey, we are a part of Brookwood Hospital.” Well, even though it really is part of Brookwood Hospital, or at least the parent company, then I’ve sued them for being a debt collector because they’re using a name that’s not the name of the creditor. The creditor in this case being the hospital.
I forget the other one. Something Central Office or something. I’ve sued Chase for example, because they’ve used a name that is not Chase. It sounds like a debt collector. We even got a judgment against Chase for doing that. If they are using a name that makes it sound like a debt collector, then even though it’s not technically a different debt collector, if they tell you that they are then they are.
It kind of makes sense. The law says “Look, if you’re going to pretend to be a debt collector so it’s more intimidating, then you are a debt collector.” The hospitals go “But, it’s really us. We were just lying. We were just making it up.” Well, too bad. You just made it up that you’re a debt collector now.
To answer this question “Is the collection department for a medical facility considered a debt collector?” It depends. Is it clearly the hospital? Well then they’re not. Is it clearly appearing to be a debt collector? Then they are regardless of whether they truly are a separate entity or not.
Our next question. “Can you sue an original creditor for suing you if you win your case against them?”
Let’s take, for example, Discover Bank, because I’ve had a number of these cases. Discover Bank sues us. We win at trial. Now, what can we do about that? If it was a bogus lawsuit, what’s called malicious prosecution, then yes you can sue.
Maybe you never had a Discover Card. Discover Card, through their lawyer, they write you a letter saying “You better pay or we’re suing you.” You go “I’ve never had a Discover Card.” They go “We think that you have. We got your letter disputing it, saying you never had a Discover Card. We think you’re lying. We’re going to take our chances.” They sue you and they got nothing.
They come to court and the documents don’t have your name, or maybe they do and you had filed an identity theft dispute with them. The judge says “Are you kidding me? This is terrible.” And throws the case out. Well, then you may can sue them for malicious prosecution.
More commonly what you sue Discover Card, Capital One, Citibank, and all these places that we’ve sued, is you win at trial. They sue you and say “You owe $5,000.” You get this lawsuit. You write your answer down. Say “I don’t owe you this money.” You go to trial. The judge enters an order. It says “No. Plaintiff loses. Defense verdict.” That means you do not owe that creditor that money. There’s the proof right there in word.
Then you go to Equifax. You go to Experian. You go to TransUnion. Any credit bureau that’s reporting Discover, Capital 1, Citibank, whoever it may be. Regent’s Bank, Wells Fargo. I don’t care who it is. Whoever’s reporting on you. You go to that credit bureau and you write them a letter. Send it certified mail.
You pull the green card back so you can prove they got it, otherwise they’ll lie and say they never got it. You say “Look, I got sued by Discover Card. I don’t owe Discover Card. The proof, right here. This order. The proof is I don’t owe them this debt. Get it off my credit.”
If you’re sending that, particularly to Experian because they’re infamous for having this just completely bogus process where they’ll reject your dispute and say “Well, we don’t know it’s really you. You have to send us your driver’s license, a utility bill, bank statement, something like that.” So go ahead and send that to them. “Here’s my driver’s license. Here’s a utility bill or a bank statement.” They’ll probably still reject it because that’s what Experian does. Then you probably want to just sue them for refusing to investigate.
The other guys, TransUnion, Equifax, they’ll actually investigate. There may be a terrible investigation, but they’ll investigate it. They should delete, but sometimes they don’t. Even though you send them an order from a judge, they’ll call Discover.
They don’t literally call them. It goes electronically. Somebody at Discover will go, “Oh yeah. Keep that.” The credit bureaus will go “Okay. You tell us to keep it we’ll keep it.” With Experian, we had, actually it was a Discover Card case. Pretty sure it was Experian this happened, too.
Our guy called Experian because he got the results back. They said “We’re keeping it.” He goes “I sent you an order. Are you going to believe Discover Card over an order from a judge in Alabama?” You know what they said? You got to appreciate the honesty.
They go, “Yes. We will believe our client, our customer, over a judge. We don’t care what the judge says. If Discover says keep it then we keep it.” Just understand even though you’re sending them the proof, they may do that. Now, if they delete it great. If they don’t delete it, then you look at suing Discover, Capital 1, Citibank, whoever and you sue the credit bureaus for doing that.
To answer your question “Can you sue an original creditor for suing you if you win your case against them?” Yes, you can. Usually though, this is different than under the FDCPA when you’re dealing with a debt collector, usually though you need to do a dispute through the credit bureaus so that you have the Fair Credit Reporting Act so that you can then sue under that law, the FCRA. That’s the typical way that we sue the creditors after they lose a collection lawsuit against us.
The final one is, “What happens if you walk away from your house when facing foreclosure? Are you responsible for that debt?”
This is sometimes called a deficiency issue. You owe $200,000 but your house is fallen down in value to $120,000. That’s what it gets sold for. What about that $80,000? It sold at foreclosure sale for $120. What about that $80,000 gap? Well, in some states, I think California is one, they say “Nope. Can’t touch a California resident”, or whoever it is, “For this deficiency.” Certain rules that require, it doesn’t matter if you want to live in California.
In Alabama we don’t have that rule. They can come after you for that deficiency. I’ve had clients that have been sued for let’s say the most was about $500,000 deficiency. It might be 50,000, 150,000, 20,000. Whatever it may be. To answer your question are you responsible for that debt? You may be. We need to look at “What did we owe? What was the amount at the foreclosure sell?” Not talking about what happened afterwards. Sometimes people say “Well, my house was 200. They sold it at the foreclosure for 200, but then that person sold the house for 350. I want the difference.” No, you don’t get the difference.
You owe 200, it gets sold for 300. Yeah, you’re going to get some of that difference. But if it sold for less you may owe the difference. It just depends on what happened at that foreclosure sale. Sometimes there’s been a foreclosure and there’s a bankruptcy before it. You did not reaffirm the debt, you discharged the debt. Well, you don’t owe it. I don’t care what it was sold for. You don’t owe it. You just really need to look and say “Did I have a bankruptcy? Did I owe the debt? Then, if I owed the debt, how much did the whoever bought it, how much did they pay for it?”
Usually it’s the mortgage company. Whether it’s the mortgage company writing a check to themselves, “How much did they buyer pay my mortgage company? Then was that above what I owed? Well then maybe I’m getting some back. Was it equal?” A lot of times it is. “Then I owe nothing. Was it below it? Then I may owe that deficiency.”
You need to check that out. Usually you’ll have a letter from the mortgage company called an acceleration letter. It says “You owe the whole amount, all day, right now. That is $200,000.” Then the foreclose 2 weeks later, 4 weeks later. Then you pull the foreclosure deed. Go down to the probate court.
You can call the foreclosure lawyer. Maybe they’ll send it to you. You look at that foreclosure deed. Read on there on, today’s August 28th I think. Yeah, August 28th. Say it happened today. Foreclosure deed would say “Today on August 28th, 2015, the property was sold to the high bidder for $135,000.” If I got a letter saying I owed 200 and then I get the foreclosure deed saying it was sold for 135, now I’m going to owe that difference, potentially.
Hope that that answers that question. Just want to remind you. We try to do these every Friday. We start at 11:30 Central time for the consumer question and answer. Then as soon as we’re done with this we start a new webinar on elder law and estate planning issues in Alabama. There’s a lot of overlap between those because what we’re ultimately talking about are threats to your financial security. It may be a debt collector, foreclosure, bankruptcy, nursing home, whatever it may be. That’s why we do these webinars.
You can call us at 205-879-2447, or go to Alabama Consumer. Contact us there. Or you can comment below this video on YouTube and we’ll be happy to answer your question next week. Thanks and have a great day. Bye bye.