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Common Concerns & Questions About Bankruptcy

Watch out for phantom debt collection scams

| Dec 21, 2017 | Creditors' Rights |

Tyler residents struggling with consumer debt may be familiar with some of the tactics that debt collectors use. These all too often cross the line from the legitimate exercise of creditors’ rights into harassment, even threats. Making matters even more complicated and disturbing is the fact that the information about one’s debt relied upon by collectors may be incorrect or even completely made up.

A few years ago, a man living in the northeastern United States received a call from a collector concerning a debt that the man knew he did not owe. The caller became angry, threatening violence against the man and even threatening to rape his wife. The man was so upset by the call that he became determined to track down the caller and the company employing him and confront them.

His efforts continued for two years, during which he unraveled an ever-widening phantom debt scheme. Phantom debt arises when information like loan applications, old debt information, perhaps even information obtained illegally is collected and intentionally organized to seem like a legitimate roster of debts. The fraudulent list is then sold to a debt collection agency, which will try to collect any amount it can.

Through extraordinary efforts, the man eventually did identify a company across the country. He managed to collect evidence that they had made up debt that he — and millions of other victims — never owed. He contacted the Federal Trade Commission, which took action to recoup millions of dollars from the perpetrators.

While the story ended with a vindication for one victim of debt collector harassment, victims of phantom debt schemes are usually trying to manage heavy debt already and may not recognize the scam for what it is. Filing for bankruptcy puts a freeze on any and all debt collection efforts, and a legal professional can further help to make sure that the rights of victims in phantom debt and other financial scams are protected.

Source: Bloomberg Businessweek, “Millions Are Hounded for Debt They Don’t Owe. One Victim Fought Back, With a Vengeance,” Zeke Faux, Dec. 6, 2017