Question
My father defaulted on a discover credit card. the balance was around 9000. It went to a collection agency, he still never paid. A few years later, a law firm starts sending letters that state they "acquired the debt" and are now hounding him again. Is this legal? And secondly, he is almost finished paying off his house and wants to leave it to his grandchildren. Is this debt a lien on his property now? Can the deed be transferred? What is the best way out of this situation?
Answer
Of course its legal. Debts can be sold an infinte number of times. Once a debt, always a debt. They never go away unless they are resolved or discharged in bankruptcy.
However, whether he should or should not pay depends on his situation. You say the debt went into default. How many years ago was that? What was the date of last payment? Was the debt created while your father lived in PA? If so, the statute of limitations is 4 years.
Who is the law firm? Who is the junk debt buyer who now owns the debt? What is the balance on the debt?
If your father is still relatively young or just wants peace of mind knowing that this has been resolved, then he can resolve the debt when he has funds to do so. Debts on average settle for between 20% and 40% before judgment and 50% to 80% after judgment. The amount depends on the creditor and status of the debt.
If the statute of limitations has already expired, it is up to your father whether he wants to resolve or not. It may be unlikely that the creditor will sue. If they do, a lawyer can draft a proper answer raising the statute of limitations as a defense and get the lawsuit dismissed. however, your father must be vigilant and contact an attorney as soon as he gets sued because the time to answer is very short in PA (only 20 days). I know Attorney Greg Artim here at Law Guru does statewide credit card defense but I am sure there are lots of attorneys in your area as well if you live in the eastern part of PA. Getting an attorney and paying to draft an answer and dismiss the case will be a whole lot cheaper than paying the debt.
If the statute of limitations has not expired, then your father can be sued on this debt and in such case it would be better to resolve the debt. If he is sued and there are no defenses (like the statute of limitations), then the creditor may recover a judgment. The judgment will be a lien on any real property owned by your father. Assuming that your father owns the land solely, the land is at risk as PA does not recognize any homestead exemption and accoridng to your post, there is a lot of equity in the home.
The deed to the home cannot be transferred unless someone buys it. There is something called a due on sale clause and if your father gives the land away to someone while it is still mortgaged, then this will trigger the due on sale clause and the whole remaining amount will be due.
The best way out of this stiuation is to resolve the debt if the statute of limitations has not expired. I give free evaluations by email (I charge $50 for a 30-minute phone consult). I would like to review that letter your father received and speak to your father more about his asset/debt picture and the circumstances of the debt. I can also resolve the debt for a reasonable fee if your father has the funds (at least half of what the balance on the debt is as of now). Have your father contact me at [email protected]/* */ if interested. I cannot talk to you about the specifics of your father's situation unless you hold his financial power of attorney.
If you are confident that the statute of limitations has expired, what I would recommend is that your father send what I call a "drop dead" letter to the law firm. I would dispute the debt and request verification/validation as per the Fair Debt Collection Practices Act. Validation should include the date of last payment and since the debt has been sold, all proofs of ownership in the title. By proof of ownership, bills of sale or affidavits of transfer should suffice. Proofs of ownership should exist for each transfer of the debt - from Discover to junk debt buyer 1; from junk debt buyer 1 to junk debt buyer 2 and so on until you get to the current owner. There are lots of free samples on the internet - find one - just Google "Sample drop dead letter."
Basically, the letter tells the law firm that the debt is disputed because the statute of limitations has expired. The letter should be sent via certified mail or UPS/FedEx with signature confirmation so that you can prove it was sent and receiveed. Make sure to keep a copy for your files - it may be important later.
My guess is that if the statute of limitations has truly expired, the debt buyer and their law firm will just go away as they are not going to spend money getting all the proofs of ownership together if they are not going to be able to collect.
If you would prefer to have an attorney send this for your father, I can do that too for a small fee.
Answer
I agree with most of what Ms. Hunter stated and would be happy to discuss your father's options by phone or in person on a free initial basis.
