Collection on Large Debt

[ThatGuyFromNJ]

Hi everyone,

I'm dealing with a situation that is bothering me, but I've found a lot of great info on this site that makes me feel that all is not lost. Due to medical and financial issues(no excuses, time to pick up the pieces), I lost my house to foreclosure, I have been unable to make a payment since last December. Unfortunately I was in a hurry and a bit naive when getting my mortgage and ended up with a first and second mortgage to not have to pay PMI. I contacted both mortgage holders regarding a short sale but long story short neither accepted. First mortgage holder took the house and as far as I know is not pursuing a deficiency judgement. The second mortgage holder(Citi) has sold the debt to Forster, Garbus & Garbus(NY/NJ) to collect their part. I recieved a collections letter from FG&G November 30th, I sent them a debt validation following the template on this site which they recieved on December 20th, I recieved a small packet in the mail Feb 15th that included a copy of the loan application, and some of the loan agreement papers from the original mortgage holder. The mortgage was sold 3 times before ending up with Citi, do they need to document this? Also they did not show that they own the debt or have the right to collect the debt. Should I respond asking for this additional info or should I just bring this to an attorney due to the large amount of money at stake(44k)? Also in their cover letter there was no request for action or an intent of action on their part, is this because they assume that they've met the requirements for debt validation?

Thanks for all your help,

Josh

[Robert Nashville/Savannah]

I don't see a lot of value here in asking for more info unless you think they don't have what they actually need to prove the validity of the debt and/or or the amount and/or that you owe it. If you do have legitimate questions about the foregoing then by all means, no harm in asking for more info.

I don't know much about this firm (how often they sue or how often they are successful) but if this debt is within SOL then I'm afraid you are likely looking at a lawsuit somewhere down the road - most creditors aren't going to just let a $44K debt go.

Maybe someone here knows more about this particular firm/JDB...in the meantime and if you are financially able, it might be time to start thinking about trying to reach a settlement before it gets to court.

I would also be concerned about the first mortgage holder - if you owed very much I find it unusual that they would just eat the debt.

I wish I had better news.

[racecar]

Hackensack law firm Forster, Garbus & Garbus has agreed to pay $35,000 to settle claims that it filed hundreds of debt collection suits against consumers without individual attorney review.

The firm allegedly violated the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692e(3), by giving a false impression that an attorney was involved in the filing of those complaints, when in fact they were mass-produced.

The suit, Krug v. Forster, Garbus & Garbus, 10-cv-1844, touches on an inchoate area of law — namely, how much investigation an attorney must perform to determine the validity of an alleged debt before filing a collection suit.

“It’s a new area and the case law hasn’t developed yet,” says the named plaintiff’s lawyer, Philip Stern, head of a Maplewood firm.

A joint motion filed Monday in District Court in Newark seeks approval of the settlement, which calls for Forster Garbus to pay $7,500 to class members and $27,500 in legal fees.

The plaintiffs are debtors who were served with complaints filed by Forster Garbus on behalf of Arrow Financial Services in Special Civil Part in Cumberland County for a one-year period starting in April 2009.

Named plaintiff Karl Krug, of Millville, was alleged to have defaulted on a $4,947 credit card bill to Washington Mutual Bank. The bank sold the debt to Arrow Financial Services of Nile, Ill., which, in turn, retained Forster Garbus in an attempt to collect from Krug.

In April 2009, Forster Garbus sent Krug a dunning letter which stated, in part, that “at this time, no attorney with this firm has personally reviewed the particular circumstances of your account.” In June of that year, a nonattorney at the firm left two phone messages on Krug’s answering machine. On June 5, the firm sued Krug on behalf of Arrow. Partner Glen Garbus signed the complaint.

Krug retained Stern, who won dismissal of the collection case in April 2010 after Arrow was unable to present business records to show the debt was valid. The current suit was filed that month.

Stern says a ruling in the Eastern District of New York, a few months before Krug’s suit was filed, was the first to hold that an attorney violated the FDCPA by filing a collections suit without anything more than a cursory inquiry into whether the debt is valid. In Miller v. Upton, Cohen & Slamowitz , 687 F. Supp. 2d 86 (E.D.N.Y. 2009), which stemmed from an alleged default on a Lord & Taylor charge account, the court rejected the lawyer’s assertions that his general knowledge of credit practices at the retailer and its national collections counsel were a substitute for specific knowledge of an individual file.

Krug’s complaint cited New Jersey Court Rule 1:4-8, which requires a lawyer signing a complaint to have read it and to have conducted a reasonable inquiry that the allegations of the case have factual support.

The suit also claimed that Forster Garbus placed telephone calls to class members that falsely conveyed the impression that the person calling was an attorney, and those calls failed to provide meaningful disclosure of the law firm’s identity as caller or to disclose that the firm is attempting to collect a debt and that any information obtained will be used for that purpose — all in violation of the FDCPA.

Of the $7,500 payable to class members under the settlement, $2,500 is to go to Krug and the rest will be distributed among the roughly 200 class members, who stand to receive around $25 each. Stern says that although the recovery may seem modest, it’s more than the class members would get as damages under the FDCPA if the case were tried.

The pool of $5,000 distributed to class members is greater than would be available if the case was tried, says Stern. The FDCPA limits recovery in such cases to the 1 percent of the defendant firm’s net worth, but Forster Garbus agreed in the settlement to go over the 1 percent limit, says Stern. He is bound to keep the firm’s net worth confidential.

Forster Garbus was represented in the case by Gregg Kahn of Wilson Elser in Newark, who did not return a call. Garbus, a named defendant, also did not return a call.

Source: New Jersey Law Journal

[ThatGuyFromNJ]

Hi everyone,

I'm still dealing with this debt, and am trying to get things resolved without going the route of bankruptcy. I recieved a letter from Forster/Garbus offering to settle on a 45k debt for 26k. While this is an ok deal I don't have this much money for a lump sum settlement. If I sell my truck and compile every dollar I have I figure I can come up with 14k, figuring out to be about 30% of money owed(on foreclosed 2nd mortgage). I'd like to respond with this offer, even if they don't accept it. My question is this, on the stub for remittance of payment it says to make check payable to Citibank, the lender, so if I submit a counter offer to I submit it to the law office of Forster and Garbus or to Citibank's collection department? I'm wondering if I'll have better luck if I cut out the 'middle man.' Any help or input is welcomed, thanks!

[WhoCares1000]

Simply send a counter-offer back to F G & G and see what happens. The worse thing they can say is no. Even low ball the offer to 20% or 25% of the debt to give you some wiggle room for negotiation.

First off, negotiations for settlement cannot be used against you in a court of law. Otherwise, our courts would be clogged because no one would try to settle.

Second, the lawyers would have to be fools or not have 2 functioning brain cells (which could be the case if they are doing debt collection work) to not accept a 20% - 30% offer in this scenario. A great majority of the unsecured 2nd mortgages that do not get anything in a foreclosure end up in BK at the end of the day. If the people that had these things had that kind of money lying around, they either A) would not have a 2nd mortgage to being with or would have not faced foreclosure. Now that the house is gone, they are effectively an unsecured creditor which means in a CH 7, most of the time they get nothing.

Also realize that although you can put together $14k by selling every asset you have, more likely than not, the $14k would be exempt in a CH 7 BK. In fact, NJ allows you to use the Fed exemptions and so between the truck and wildcard exemptions, that comes up to $13k. That would leave $1k for ALL of your unsecured creditors to divide up and it you have a secured creditor (say a loan on your truck), they get first dibs before the unsecured as a result of a quirk in the 2005 BK law.

So I say, start at $10k and work up to $14k. The worst thing that will happen is that they sue you, get a judgement, you file CH 7 BK after a foreclosure. For your credit report this would be like dropping an atom bomb on some place that was already hit by a nuclear cruise missile.