Proving a debt (long)

[Mister_Rik]

Am I correct in by belief that it is the creditor’s responsibility to prove the validity of a debt?

Here’s why I ask: Many years ago, I attended and graduated from one of those fly-by-night “business schools” that were so popular in the late-'80s and early-'90s. While the program involved accounting, computers, and other business-related courses, I affectionately refer to it as “My $5,000 Typing Class”. The bulk of my tuition was paid with two student loans: a Gauranteed Student Loan (GSL) and a National Direct Student Loan (NDSL). The names of these loans have changed since then, to “Perkins Loan” and something else I can’t remember.

I began paying these loans off shortly after graduating. Each month, I submitted a $50 payment on the GSL, and a $30 payment on the NDSL. As time went by, I stopped paying these loans, primarily because I developed a major drinking problem. I “simplified” my finances during those years by dividing my income into two piles: “Rent” and “Beer”.

Needless to say, this system eventually led to legal action and to my wages being garnished. I went through the whole cycle of moving from job to job and making it difficult for my creditors to catch up with me.

I finally stopped drinking after several years of this, and began to make an effort to satisfy these debts. By this time, however, each of my loans had been sold multiple times, from one collection agency to another, each adding its own fees and charges to the total balances. Thus started the cycle of collection agencies making threatening phone calls, demanding immediate payment of my entire balance, me explaining that I couldn’t pay it all at once and asking for a payment plan, agencies refusing my offers, etc etc etc.

Eventually, and fortunately, laws regarding debt collection practices changed, the agencies suddenly became more polite and accomodating, and I was finally able to set up a plan to begin paying off my student loans. Well, one of those loans, anyway. Somewhere along the line, I lost track of my own records, and one of the collection agencies stopped contacting me. Thus, I had no idea who to contact about the second loan.

So, I made regular payments on the one loan, but had no choice but to wait for the holder of my other loan to track me down. Finally, it happened. I received a statement directly from the U.S. Department of Education (DoE), showing a reasonable outstanding balance and asking for a $30 monthly payment. Great! I began sending payments to the DoE, and continued sending payments on my other loan.

That’s when the trouble started. My wages were garnished by a third agency! But you see, I only had two student loans. Because I know that a creditor must go to court and prove the debt in order to obtain a garnishment order, I knew that the agency garnishing me had a legitimate claim. I allowed the garnishment to continue – I saw it as an easy way to settle the debt; I wouldn’t “forget” to make a payment this way. All good.

The other agency, to which I had already been making payments, had satisfactorily proved its claim earlier. So I sent a letter off to the DoE, explaining that I only had two student loans, but now had three agencies wanting my money. I politely requested that the DoE send me proof of the debt they claimed to hold. In response, the DoE asked me to prove that I didn’t owe them.

Now, wait a minute.

I made a few more attempts to clear this up with the DoE, with no success. So I said, “Screw you,” and stopped making payments to the DoE. Meanwhile, the wage garnishment ended, and the collection agency sent me my original promissory note along with a letter declaring that debt satisfied. I continued making payments on the other loan.

That was all about three years ago. The Department of Education has been faithfully sending me a statement every month since then. A few months ago, they apparently shuffled my alleged loan off onto another collection agency, and now that agency has taken over from the DoE. I have continued to send occasional letters to the DoE, and now this new agency, demanding proof of the debt. Neither agency has complied, instead continuing to insist that the burden is on me to prove that I don’t owe them anything.

So, I have in my possession: a) the original promissory note on one loan and a letter declaring that loan paid in full; and b) a photocopy of the promissory note for my other loan, provided to me by the other agency, who I am still paying. These documents confirm their respective debts to my satisfaction. I am convinced, beyond a shadow of a doubt, that the third agency is in error.

I want them to leave me alone, admit their error, clear my alleged debt from their records, and retract any negative reports they have made about me to credit reporting agencies.

So, am I correct that the burden of proof is on the creditor? And is there anything I can do in the way of legal action to get this collection agency straightened out?

[Roland_Deschain]

You should consult an attorney skilled in representing people over debt/credit disputes. In general the Fair Credit Reporting Act requires credit reporting agencies to verify the information in their files if challenged. However, if the creditor verifies the information (albeit incorrect) it will go back on your credit report. Ultimately, you could bring an action based on defamation/fraud/negligence against a collection agency that tried to collect an invalid debt. You may also be entitled to relief under Fair Debt Collections Practices Act depending upon the circumstances of your case. Not that this applies to your case, but some older student loans (before around 1992 I think) can even be included in Chapter Seven Bankruptcies (they still can, but it now requires that you meet a much higher threshold of the loans causing you an “undue hardship” and other requirements in order for them to be so discharged).

@Phase42

Am I correct in by belief that it is the creditor’s responsibility to prove the validity of a debt?

Here’s why I ask: Many years ago, I attended and graduated from one of those fly-by-night “business schools” that were so popular in the late-'80s and early-'90s. While the program involved accounting, computers, and other business-related courses, I affectionately refer to it as “My $5,000 Typing Class”. The bulk of my tuition was paid with two student loans: a Gauranteed Student Loan (GSL) and a National Direct Student Loan (NDSL). The names of these loans have changed since then, to “Perkins Loan” and something else I can’t remember.

I began paying these loans off shortly after graduating. Each month, I submitted a $50 payment on the GSL, and a $30 payment on the NDSL. As time went by, I stopped paying these loans, primarily because I developed a major drinking problem. I “simplified” my finances during those years by dividing my income into two piles: “Rent” and “Beer”.

Needless to say, this system eventually led to legal action and to my wages being garnished. I went through the whole cycle of moving from job to job and making it difficult for my creditors to catch up with me.

I finally stopped drinking after several years of this, and began to make an effort to satisfy these debts. By this time, however, each of my loans had been sold multiple times, from one collection agency to another, each adding its own fees and charges to the total balances. Thus started the cycle of collection agencies making threatening phone calls, demanding immediate payment of my entire balance, me explaining that I couldn’t pay it all at once and asking for a payment plan, agencies refusing my offers, etc etc etc.

Eventually, and fortunately, laws regarding debt collection practices changed, the agencies suddenly became more polite and accomodating, and I was finally able to set up a plan to begin paying off my student loans. Well, one of those loans, anyway. Somewhere along the line, I lost track of my own records, and one of the collection agencies stopped contacting me. Thus, I had no idea who to contact about the second loan.

So, I made regular payments on the one loan, but had no choice but to wait for the holder of my other loan to track me down. Finally, it happened. I received a statement directly from the U.S. Department of Education (DoE), showing a reasonable outstanding balance and asking for a $30 monthly payment. Great! I began sending payments to the DoE, and continued sending payments on my other loan.

That’s when the trouble started. My wages were garnished by a third agency! But you see, I only had two student loans. Because I know that a creditor must go to court and prove the debt in order to obtain a garnishment order, I knew that the agency garnishing me had a legitimate claim. I allowed the garnishment to continue – I saw it as an easy way to settle the debt; I wouldn’t “forget” to make a payment this way. All good.

The other agency, to which I had already been making payments, had satisfactorily proved its claim earlier. So I sent a letter off to the DoE, explaining that I only had two student loans, but now had three agencies wanting my money. I politely requested that the DoE send me proof of the debt they claimed to hold. In response, the DoE asked me to prove that I didn’t owe them.

Now, wait a minute.

I made a few more attempts to clear this up with the DoE, with no success. So I said, “Screw you,” and stopped making payments to the DoE. Meanwhile, the wage garnishment ended, and the collection agency sent me my original promissory note along with a letter declaring that debt satisfied. I continued making payments on the other loan.

That was all about three years ago. The Department of Education has been faithfully sending me a statement every month since then. A few months ago, they apparently shuffled my alleged loan off onto another collection agency, and now that agency has taken over from the DoE. I have continued to send occasional letters to the DoE, and now this new agency, demanding proof of the debt. Neither agency has complied, instead continuing to insist that the burden is on me to prove that I don’t owe them anything.

So, I have in my possession: a) the original promissory note on one loan and a letter declaring that loan paid in full; and b) a photocopy of the promissory note for my other loan, provided to me by the other agency, who I am still paying. These documents confirm their respective debts to my satisfaction. I am convinced, beyond a shadow of a doubt, that the third agency is in error.

I want them to leave me alone, admit their error, clear my alleged debt from their records, and retract any negative reports they have made about me to credit reporting agencies.

So, am I correct that the burden of proof is on the creditor? And is there anything I can do in the way of legal action to get this collection agency straightened out?