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Do debt buyers cause a rise in Chapter 7 bankruptcy filings?

On Behalf of | May 12, 2016 | Chapter 7 Bankruptcy, Firm News

Far too many Florida residents have been sued over unpaid debts that companies say they owe. Since the 1990s, such lawsuits seem to have increased as “debt buyers” have used the legal system in an attempt to collect those debts — in some cases, from people to whom the debts do not even belong. It is only logical to wonder whether these debt buyers are contributing to the number of Chapter 7 bankruptcy filings here and across the country.

The companies buy old debts from other companies and pursue them through the legal system. Data gathered by one source indicates that debt collectors file nearly half of all civil claims filed across the country. For example, a company called Encore Capital Group collected approximately $1.2 billion — yes billion — in consumer debt. Records indicate that around half of that amount was collected using the court system.

In 2013, approximately four million consumers’ wages were being garnished as a result of debt collection lawsuits. The income of those individuals ranged between $15,000 and $40,000. Alarmingly, the data also indicated that black communities were affected more often than other communities despite income levels being the same.

It is possible that many of those consumers, including many here in Florida, sought Chapter 7 bankruptcy protection in order to deal with a wage garnishment. Hard working individuals who otherwise do what they can to make a living and pay their bills chose bankruptcy in order to feed their families. Fortunately, the process provided many people with the ability to start over financially free from the clutches of companies who buy old debts and then pursue payment by taking advantage of the court system.

Source:, “How the ‘debt collection machine’ uses the courts to screw over millions of Americans“, Paul Kiel, May 6, 2016

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