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Rutgers University, Newark School of Law
Ondersma, Chrystin



Summer 2013

State Debt Collection System

Collection of Debt

– Creditor’s leverage

o Garnishment

o Payment plan

o Get collateral

o Threat to court

– Fair Credit Reporting Act

o Consumer debtor access to their own credit reports

o Ability to contest reports by creditors and process for updating/ changing credit report

o Limited liabilities for creditors for false reporting

Nonjudicial collection method

– Usury Law

§ If creditor charge more than pre-determined rate when in collection è The debt become uncollectable

– Fair Debt Collection Practice Act p. 16

o Applicable : debt collector § 803

§ Person collecting third party’s debt

· Collection own debt but using other name indicating third part is collectiong debt

· In-house attorney who regularly collects debt for the creditor (Heintz v. Jenkins)

§ Applicable to Personal debt only

o Acquisition of location information § 804

§ Can identify himself, but not

§ Says the debtor owes debt

§ Contact others more than once

§ Must communicate with the representing attorney

o Communication manner §805

§ Not at unusual time (before 8 am or after 9 pm) or place

§ No call to debtor’s workplace if creditor collector knows the debtor’s employer prohibits

o Harassment and abuse § 806

§ No harass , oppress, or abuse

§ No use or threat of violence

§ No obscene or profane language

§ No publication of debtor’s name

§ No advertisement for sale of any debt to coerce payment

§ No repeat phone ring to phne with the intent to annoy, abuse, or harass

o False or misleading representation § 807

§ No false presentation as a US or states official or authoritys

§ No false presentation of the collector being an attorney if he is not one

§ No representation of implication that the unpaid debt will result in arrest , seizure, garnishment, attachment or sale of property unless the action is lawful and the debt collector intends to take such actions

§ No false representation or implication that the debtor is committing a crime

§ No use of false representation or deceptive means to collect or attempt to collect debt or the consumer’s information

o Unfair practice §808

§ Collecting of interest, fee, charges that is not expressly authorized by the agreement creating the debt

§ No postdated check more than five days unless a notice of intent to deposit issued between 3 to 10 business days prior deposit

§ Treat or deposit the postdated check prior to the date on the check

o Violator will be responsible for actual loss, attorney fee, and fines (1000).

Judicial Collection System

Involuntary Lien creditors

– Judgment (still unsecured) judgment creditor

– execution (collection process)

o Writ of Execution or writ fi. fa.

o Levy ==> judgment lien creditor (secured creditor)

o Sale of levied property

o Distribution

Competition of Lien Creditor

– Who levy first

When it is Levied

– Majority Rule: (Creditor Bureau of Broken Bow v. Moninger)

o No physical possession is required

o Property is present and subject to the control of the sheriff hold the writ of execution, and that the sheriff announce the dominion over it

o BUT if the levied-upon good left in the debtor’s hand for a unreasonable time, the levy will be lost.

– Minority Rule

o Needs physical possession or appointment of an independent custodian.

– Some state also use the day of delivery the writ of execution to Sherrif as the date of levy, not the actual date of levy

Turn-over order

– For property debtor possess but not present (like a letter of credit)

· Violator will be jailed

· Proof not in possession

Voluntary lien

– UCC article 9

– Secured party v. lien judgment

– If secured party prefect before levy, secured party wins

– If buyer recode certification of title before levy, buyer wins

Judgment Liens by Recordation

– Recording judgment on deeds of sale or mortages

– Most for real property, few states als personal property


– Unenforceable because of inactive judgment

– Needs revived

– 1 year


– Statute of limitations

– 10 years

Statutory Liens and Trust Funds

– Artisan’s lien

· Possessory lien on personal property for unpaid service

· State Statutory

· UCC 9-333 priority

Charging lien

– For laywer’s service

Trust fund statutes

· Debtor as trustee of property for the favored creditor (beneficiary)

Enforce debt in other jurisdiction

· Full faith and creditor clause

· 28 USC 1962

· Fed R. Civ. P. 64


– Tax refunds

– Alimony or support arrearages

– Security deposits

– Pledged goods at pawnbrokers

– Personal injury claims

– Consumer claims

– Employment-related claims

– Pending insurance claims

– Pension plans

– Cash value in whole life insurance policies

– Department store layaway deposit


– Debts of others that debtor consigns

ority of payment

Possession of estate


Debtor unless specified in the repayment plan §1306


Filing bankruptcy §521

General requirements for both Ch 7 and 13 (§521)

– Petition form

– List of creditors

– Schedule of assets and liability

– Schedule of current income and expenditures

– Statement of financial affairs

– Attorney’s name if applicable

– Copies of payment devices received within 60 days

– Statement of current income

– Statement of anticipated income or expenditures for 12 months following the petition

– Surrender all property of estate and any records related to the estate property to Trustee, if assigned

– If individual filing : Certification of nonprofit budget and credit counseling agency 180 days before petition 109(h)

Chapter 7 Specific

– Mean Test – Form 22A

– Estate secured by security interest

o In 30 days of petition filing, to file statement of intention to surrender, retention, reaffirm, or redeem

o Meeting w/ creditor

– PMSI collateral, 45 days after meeting creditor to enter reaffirmation agreement or redeem the property

o if fail, the stay in such property is lift and creditor can do whatever entitled under state law, unless trustee challenge § 521 (a)(6)

Chapter 13

– mean test Form 22C

– proposed plan

Consequence of failing to comply with 521

Dismiss of Filing § 521(i)

– 45 days automatic dismiss if information under 521(a)(1) is not properly filed

– Party in interest may request dismiss the filing unless trustee motions to decline dismiss and the debtor is in good faith attempt to provide (a)(1) information and the creditor’s best interest is served.

Non discharable – Fail to List debt and property to be exempt

– Fail will led the debt become NON-dischargeable 523(a)(3)

– False statement will led entire denial of discharge to all debtor’s debt 727(a)(4) & perjury prosecution