I was divorced in 2007. It was an amicable split and, as stipulated in the divorce decree, I took some of our combined debt and she took one of our debts in the form of a bank credit card.
She remarried and together she and her new spouse decided not to pay on the debt that she assumed in the divorce decree. They declared bankruptcy and listed me as one of the creditors.
I was then contacted some months later by a legitimate collection agency that I was responsible for the debt and that the divorce decree was not applicable since it was a "civil matter" and the debt was a "legal matter."
My divorce lawyer never explained this to me and since I was listed as a creditor on my ex-wife's bankruptcy, I was unable to pursue any legal recourse. The amount of the credit card debt was $20,000.
By the time I was aware of the credit card being in collections, I was notified that I was not only responsible for the principal but the interest rate had increased to 18% (missed payments and all!) and totaled more than several thousand dollars.
I cannot afford to make a settlement with the collection agency and have been paying $600/month which the collection agency has stated goes to the principal on the account. They have also stated that the interest has continued to accrue. I am nearing a zero principal amount but now have at least $6000 in interest to pay on.
My questions are these:
On my credit report, I have the original bank credit card debt amount listed and showing severe delinquency and I also have the collection agency listed showing the same thing. Shouldn't the bank credit card show that the debt was referred to collections? I have attempted to contact the credit reporting agencies showing documentation and all they say is that the debt has been "verified" as mine. How do I fix this or am I just stuck with it?
Secondly, I was under the impression that collection agencies "purchase" the debt from the bank credit card. Are they allowed to continue to charge interest? Whenever I had mentioned any type of potential settlement offer in the past they always said they would have to discuss it with the bank credit card company. When I call the bank credit card company they simply said that the account is in collections. I have a lot of interest to pay on and would really like to just get this done and put all of this behind me.
Any help or recommendations would be greatly appreciated! This has been a very difficult and convoluted learning process to say the least!
(Do you have a credit- or debt-related question you'd like to ask me? Just click here. I'm happy to help for free.)
I think my article "Making a Clean Financial Break at Divorce" would have been a big help back when this was all being decided.
This idea of separation of debt in divorce is commonly a problem, and it is easy to understand why. In the divorce process the parties talk about who is going to take on this or that debt and be responsible for it. But as the collector mentioned to you, a divorce agreement does not change the liability of the debt. Joint debt remains a joint liability.
In the case of a joint debt, when one party files bankruptcy and terminates their responsibility for the debt, the burden then shifts to the other joint account holder. In that case it is you.
As I wrote in "Making a Clean Financial Break at Divorce":
Your divorce agreement doesn't change your existing obligations to your creditors. So even if your ex agrees to pay the bills as a part of your divorce settlement or was ordered to do so in a divorce decree signed by a judge, the agreement or decree is binding on you and your ex alone. If your ex gets laid off or refuses to pay, the creditors may come after you for payment. If you refuse to pay on the grounds that the debts "belong" to your ex-spouse, your credit will be damaged and the creditors may sue you. If you do pay the bills, your only remedy is to try and get your ex to reimburse you.
It's understandable that divorce creates financial problems. When you take one household and break it into two, without increasing income, the numbers are not going to add up.
As far as who owns the debt now, let's assume the debt was purchased from the original creditor. The new debt buyer still has the authority to pursue the terms of the agreement. Essentially they have stepped in as the new creditor.
But it can be very hard at times to tell the difference between a debt buyer and a collection agency. The debt buyer will have a different name from the original creditor, but so will the collector.
So to try and get to the bottom of who really owns the debt at the moment, you may want to dispute the debt and ask to see proof. Here are some sample debt-validation and dispute letters you can use to do just that.
There are large numbers of accounts where debt buyers never acquired basic evidence to prove the consumer they are going after really owes the debt. They might not be able to prove it at all, and if you fought back, chances are you might win and the debt could be eliminated. You should speak to a lawyer licensed in your state for specific help with this.
On the credit report, the account may show up as with the original creditor and then the debt buyer or even the collection agency, but the date of delinquency and balance reported should be consistent.
For example, if the original creditor sold the debt to someone new, the balance should now show as $0 with the original creditor. The new debt buyer should show the date the account went delinquent as the date reported by the original creditor. The account should be removed from your credit report from seven years after the account last went delinquent with the original creditor. All references to the account should then be removed from your credit report.
A common error I see is when a collection company reports the account with a different account number or default date and makes it appear to be a new account when it's not.
Bottom line: This debt got dumped back into your lap.
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