Some of this is pretty scary – the article points to a woman who had her car siezed on a five year old debt that had been paid off:

Dimanche is one of thousands of Massachusetts residents who have had their cars seized and lives upended by a pair of debt collection companies, Commonwealth Receivables Inc. of Watertown and Norfolk Financial Corp. of West Roxbury. Run by two brothers, one of whom was disbarred this year for his business practices, Norfolk and Commonwealth have become two of the state’s most litigious and aggressive collectors, a Globe Spotlight Team investigation of the debt industry has found.

The problem appears to be caused by a small subset of collectors – but they’re so aggressive that they can cause a severe set of problems. Some of the other problems come when the people who seize the cars charge outrageous fees:

LoConte is disabled as a result of lupus and Crohn’s Disease. She lost her cleaning business more than a decade ago, and, by 2000, had stopped making payments on a $430 Providian credit card balance. She wound up paying $1,758, draining her savings and borrowing from a friend, to erase the debt and get her car back.

Of that, $158 went to the tow lot, which kept her car for a day, and $800 to the constables, dispatched by Sorenson’s firm. To ransom the car, LoConte had to drive 70 miles to Sorenson’s office in Chelmsford to pay her bill, then another 55 miles to a Bridgewater tow lot.

For Jeanmarie Fitzpatrick, the constable’s visit was even more costly. An $800 constable’s fee would have seemed a bargain to her.

When Dorsey, the former bar manager turned constable, arrived at her door last Dec. 14, he demanded $1,250 in fees for seizing her 2000 Dodge Neon.

It’s a very informative article and I recommend reading the whole thing even if you’ve managed to get yourself out of debt entirely. The point of it is that you can’t guarantee your stuff is safe if there are aggressive collectors running around who don’t care whether you’ve actually paid the debt off or not. So even if you are 100% debt free, if you’ve got old debt this could end up happening to you.

So what do you do about it? The problem with trying to answer this is that the law varies so much from state to state that it’s very difficult to tell you what’s correct. One thing you might want to check out is this guide on how to deal with people trying to repossess your car.

You should also monitor your credit report regularly if you’ve had any past problems. It’s pretty cheap to do – and even if you think you’re square with a company, you can find out that they report you or send you to collection anyway. The credit report will often tip you off beforehand.

Paying off all your debt is obviously a good thing to do – as is making sure that you’ve got a forwarding order in on any old addresses. One of the tactics the article mentions the collectors using is sending notice of a lawsuit to an old address. If you get a notice like that and think it’s in error, above all else DON’T IGNORE IT. You have to deal with it even if it’s wrong.

And finally, I’ve mentioned his blog before, but I’ll plug it again – go read Debt Collection Lawyer if you think you might be in this situation. A lot of good, insider tips on dealing with this kind of thing.

Discuss this in the Free the Drones Personal Finance Forums here.

BUT – it isn’t as simple as the chart makes it out to be. Making a payment on the debt can bring it back to life, allowing them to sue you again. There are also various other things that can revive the debt, depending on the state, such as promising to pay. Be very careful what you do – it makes sense to do some more specific research on your state.

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A decade ago, few creditors tried to collect on old accounts, figuring it wasn’t worth the effort.

Today, however, collecting on old debts is a rapidly expanding industry. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar or less. Then, they use credit-scoring and other new technologies to identify which debtors are most likely to pay. The players in this “junk debt” market range from fly-by-night outfits to well-established companies funded by Wall Street investors.

So an entire new industry has arisen related to trying to get something, anything on these old debts. The main way of doing this: harassing and threatening the credit of the people who owe them. The logic is easy to follow:

The oldest debt is by far the cheapest, sometimes costing the collector 25 cents for every $100 in face value. If the collector can convince the borrower to cough up even $1, the company has made back its costs.

Weston lists a number of abuses consumers have faced from the most aggressive collectors, including faking the age of the debt to the credit agencies, giving you a credit card so they can take the old debt back on, and promising to do anything if you’ll make a tiny payment on the debt. Why are they doing all this? The answer turns out to be simple: there’s a statute of limitations on the debt in all states. You can’t be sued for repayment after a certain amount of time passes – it varies from state to state. The debt collectors have figured out a variety of techniques which are designed to get you to do something that will “revive” the debt back to life. That’s why Weston says the best advice is to just hang up the phone and stop talking to the collection agency.

I’d be more careful about ignoring them entirely, however. Threats of litigation may be very real, especially if they’re written – and if you don’t show up for a court date, the statute of limitations won’t be of much help to you. This is one of those situations where contacting a consumer lawyer is probably your best bet. See if you can find one who will represent you using statutes that allow them to collect their fee from the collection agency. It’s actually pretty common, and the lawyer will be happy to turn the tables if you can document actual abuses.

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He gives some advice on fighting the suit every step of the way – including a couple of easy steps that shouldn’t be too difficult for a layperson to follow. I’m not sure how practical it is for a person with no legal experience to try to conduct a trial, but he tells you the basics of what you’d need to try to do anyway. At the very least, if you follow the first few steps, you can buy yourself some time.

I would add that one thing he doesn’t mention is that you shouldn’t be fighting the lawsuit in a vacuum. You should be using your actions here to try to help negotiate with the company you owe money to. The steps he gives are intended as signals to the debt collection attorney that you’re not going to roll over, and that it won’t be cost effective to keep suing you. Use that to your advantage – if you’ve got any cash you can spare, make an offer to the attorney to settle the whole thing. Even if you’re only offering 20 cents on the dollar, at this point that might be the most money the creditor can expect to wring out of you, and they might be happy with it.

Discuss this on the Free the Drones Debt Forums here.

Would you let your kid go through life without telling them not to smoke or explaining what drugs are? Then don’t let them be oblivious about credit cards, either.

Discuss this on the Free the Drones Forums here.

Discuss this on the Free the Drones Forums here.