Christopher Todd Morrison, P.C.
Affordable Bankruptcy
713-396-3704

Phantom debt and consumer rights

Some consumers in Texas may be contacted by collectors of what is known as "phantom debt." This term is used to describe debt that is either already paid off or never belonged to the person. According to the Consumer Financial Protection Bureau, in 2016, more than 40 percent of the complaints received about debt collection were about debt the consumer did not owe in the first place.

There are two types of collectors that might call and try to force a person to pay this debt. Some are scammers. The others are legitimate debt collectors that are misinformed. Over time, a debt may be sold multiple times, and the records of those sales can get mixed up.

Consumers have rights under the Fair Debt Collection Practices Act, and there are several things a person can do if contacted about a phantom debt. The first is to stay calm and avoid panicking and paying the debt just to get the collector to stop. The consumer should get a validation letter from the collector and avoid giving out or confirming any personal information. Next, a person can request in writing that the collector cease contacting him or her. The consumer also can send evidence of payment. If this is unsuccessful, the CFPB, Federal Trade Commission or Texas attorney general's office may all be able to help.

However, in some cases, a person may be fielding a number of collection calls because of legitimate debts. Someone who is overwhelmed by debt might want to consider filing for Chapter 13 bankruptcy. This type of bankruptcy allows a person who has an income above a certain level to keep some assets. He or she must then work out a payment plan to pay back creditors over three to five years. With a Chapter 13, an individual also may avoid a home foreclosure.

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