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Hatty Yip BANKRUPTCY ELEMENTS PROF. SLOAN, SPRING 2005 PART 1: INDIVIDUAL DEBT COLLECTION Collection Without Courts Non-Judicial Collection Methods Leveraging → Leverage : using legal position to gain a better bargaining position in negotiations; how to get someone to pay what they owe → Creditor’s Leverage: Threatening debtor’s credit rating Collateral Tax law: can report debtor’s “income” from uncollectible debt Credit ratings: creditor’s ability to make negative reports to the credit reporting agency and influence debtor’s credit rating → Debtor’s Leverage: Big borrowers or frequent borrows often have leverage Creditor Information Process → Fair Credit Reporting Act 15 USC §1681 : → Gives debtor access to the credit report information → Prescribes procedures to assure the accuracy of the information in the file → Provides control on use of obsolete information and requires verification of adverse info obtained through investigative reports and obligation to disclose the use of certain public records Restriction on Non-Judicial Collection: Consumer → Usury laws : If a creditor charged more than a predetermined rate of interest, the loan would be deemed usurious and the interest would be deemed uncollectible. → Common Law Remedies : → civil and criminal protections for the targets of nonjudicial debt collection (EX) Tort, invasion of privacy, libel, emotional distress → Federal Statutory Controls on Nonjudicial Collection : → Fair Debt Collection Practices Act (FDCPA) : represents a major effort to acknowledge the difficulties with debt collection and to fashion a federal remedy directed specifically toward debt collection abuses. Regulates debt collectors → Lawyers who are regularly engaged in consumer debt collection activity (i.e. litigation) is subject to the FDCPA. ( Heintz v. Jenkins ) Lawyers cannot threaten to do what they do not intend to do or what they cannot legally do b/c this constitutes misleading representations. → Exception : Store collecting its own debt would be exempt. Restrictions on Creditors: Business → Lender liability : lawsuits in which a debtor claims that the lender acted improperly in the course of the loan transaction, usually during the period when the debtor was in financial trouble and the lender was trying to protect its position. → Debtor claims that its business was destroyed or seriously injured by lender’s misrepresentation, breaches of K, or bad-faith conduct. → Effect: Effect of successful lender liability claim is the debtor becomes the creditor for substantial damages and the lender now owes money to its former debtor. → Standard
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