Lenders are increasing foreclosure rates, and filing more and more lawsuits against borrowers, forcing many people to seek legal forms of debt relief, including bankruptcy. What is causing financial institutions, and their lawyers, to act in this manner? TARP stands for the Troubled Asset Relief Program, enacted during the end of President Bush’s last term of presidency, that provided for the federal government to purchase troubled assets from banks and other financial institutions to help strengthen the economy. Under TARP, the federal government would purchase up to $700 billion in defaulted loans, mortgage backed securities, and other troubled assets. Lenders would repay the finds at very favorable rates and the program would come at a hefty cost to taxpayers.
Lenders Filing Lawsuits to Collect Debts
Initially, when they were receiving TARP money, lenders were less aggressive in the collection efforts. The federal government was buying back their defaulted loans in their portfolios and they were effectively collection on troubled loans. The troubled assets held by lenders clearly exceeded the $700 billion in TARP funds pledged by the federal government. Eventually, TARP money ran out. Sadly to say, some of it went to pay huge bonuses and expensive vacations for CEOs and other management executives of lenders.
It seems that now that the TARP money has run out, lender lawsuits to collect bad debts are on the rise. I see more and more clients each day who are getting sued by their lenders for unpaid credit card debt and personal loans, sometimes debts as small as $2,000 in credit card debt. My opinion is that there is an increase in lender lawsuits against consumers because after the TARP funds ran out, lenders, who are plagued by troubled assets and bad debt, had to resort to collecting money any way they could to keep investors happy. One way for a lender to collect money is to sue everyone for anything and everything that they can.
In-House Collection Departments
Lenders such as Chase have an in-house legal department set up that files and handles credit card collection lawsuits. This means that Chase doesn’t even have to hire a law firm to sue you. All they have to do is press a button. They hand your file to their in-house legal department and shortly thereafter you have somebody knocking on your door and handing you a collection lawsuit that you have to answer in 30 days or file bankruptcy to stop a lawsuit, or else Chase can get a judgment and garnish your wages.
What You Can Do
So what can you do to protect yourself? You have to decide whether you are going to pay off all of your debts, either in full or by settling your debts, or you need to decide that you’re going to file a San Diego bankruptcy and get a fresh start. You can’t just stop paying your credit cards and other debt and just sit back and hope you don’t get sued. If the lenders keep filing lawsuits at the current rate that they are filing them, you will likely get sued, perhaps multiple times on most or all of your debts, and even on small debts such as a $2,000 credit card debt.
