My Stepmother Turned Over My Forgiven Loan to a Collection Agency. – Cathy

“Dear Steve,

Several years ago my stepfather finally remarried after he and my mother divorced more than 10 years earlier. A few years later I was having a hard time and was between jobs. My stepfather offered to make me a $2000 loan to catch up on bills; he said it would have to be paid back monthly, starting when I got my first paycheck. Everything was working out okay; I had been a few days late with some payments but none were very late. My stepmother was never the friendliest person to our family and she definitely controlled the home and finances. Well my stepfather died a few months later after surgery. A couple weeks later my stepmother said the debt was forgiven because my stepfather had wanted to give me the money and not make it a loan but she disagreed, saying they would need that money.

About 3 months after she said that, she called me and asked when I was going to start making payments again. She said she never remembered a conversation saying the debt was forgiven. So I agreed on a date to start. On each receipt she always put the remaiing balance.

My last payment was at least 9 years ago and I still have the receipts. This week I found out she has turned me into a collection agency for $1,800 she says I never paid. The original loan was only $2,000. She is in her 80’s and I’m wondering if she isn’t getting senile or have Alzheimer’s.

But wouldn’t the collection agency need proof; I don’t remember signing an agreement so I don’t know what she gave the agency. Plus they never contacted me and I never received a letter. A family member said she was getting dates mixed up. I declined to visit her because she has such a disagreeable person and is always critical of me and my family, so we’ve not had a discussion about this.

I was more than hurt and certainly shocked to hear she had turned me into collections. This came from a church friend of hers who knows us both. She said Matilda had told her she couldn’t reach me and I still owed her money; she said she was mad at the time she was telling her. I’m not sure how many people she has shared this with and it’s not true.

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Two years ago I had to file for Chapter 13 bankruptcy; her claim was not on the list nor was it on any of the three credit reports. I did not get a statement last year but the law firm said one was sent.

I got one this week and was shocked that the collection agency had made a claim on my bankruptcy filing. Her name was on there and I assumed she had made the claim, but the law firm said it came from the collection agency.

The law firm called me when I had sent a change of address and updated employer information directly to the court and not them, but they couldn’t call me when other claims had been made and ask did I want to object to them.?

Is there another way I can get this off my list of creditors if the bankruptcy trustee declines my request? The lawyer with the bankruptcy law firm has said he doubts it since it’s been over a year. He said he’ll petition the court anyway. I never received a previous statement and I had not moved at the time it supposedly was mailed. I moved about 5 months later and notified my lawyer and the court. I have all the receipts with the balance she put on each.

If the court refuses to take my objection, can I deal with the collection agency and ask them to withdraw or does that need to come from my former stepmother?

Even after all these years I kept the receipts and some other receipts that are old from other creditors. I learned a long time ago not to go by the standard way of thinking that you only keep cancelled checks and receipts for a few years; I don’t think you can ever destroy them, especially with companies buying out one another all the time and trying to collect what may have already been paid.

She may need the money and I feel sorry for her, but it was a difficult time dealing with her while I paid this off and now that $1,800 could go to two or three other bills on that list – things I actually DO owe. She’s living in a reduced income apartment that is nice and not in a rundown area. I know she sold her car and truck as well as the house so I wouldn’t think this is because she needs money that badly.

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Dear Cathy,

Wow, that stinks.

It sounds like she just forgot the whole chain of events and picked up where she thought she remembered.

I’m confident this will get taken care of. The best place to start would be with your bankruptcy attorney and ask them if there is any proof it is a valid debt. It sounds like there is little to no proof there is a remaining balance.

Heck, the debt might even be outside the statute of limitations in your state and she would not be able to sue you for it but you’d have to ask your lawyer that.

It sounds like more of a colossal process screwup and we just need to unwind this mess.

Alternatively, even if it was to be included in your bankruptcy how much would she ultimately get on it at this point anyway? Probably not much.

Please post your responses and follow-up messages to me on this in the comments section below.


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Steve Rhode

4 thoughts on “My Stepmother Turned Over My Forgiven Loan to a Collection Agency. – Cathy”

  1. Thanks for the information; I didn’t know when the bankruptcy ends, remaining debts not paid out in full are discharged. The lawyers didn’t tell me everything and i don’t remember the trustee going over this part.
    even before my stepfather died, I had been making payments. It was after the funeral that she said the debt was forgiven, but a few weeks after saying that, she called and wanted to know when I would start paying again. LOL
    I think the reason she’s only received $30 so far is because the law firm and court gets their share first & they are paying secured items first. My car and the attorney fees are just about all that’s showing any payments, even after two years.
    I’m just going to let it go. Do you know if she dies before this is over, will her heirs, if any, be able to come after me for the rest? Wouldn’t they have to sue me – then I would be able to use my proof I guess.

  2. I think there was some misunderstanding in my question about my stepmother; the headline of the article refers to ‘forgiven debt.’ The debt was ultimately not forgiven and I paid the entire $2,000 and I have receipts that total that amount – with the last one ‘paid in full’ written across the receipt.
    The statute of limitations on debt in our state is 6 years. So far the bankruptcy court has paid her $30 so it doesn’t look like any laws are being applied or she’s given the collection agency a different date.
    I appreciate you answering my question and I hope for a good outcome too. My lawyer said she would need proof but if they’ve already made one payment to her, it looks like a done deal in the court’s opinion..

    • I took it from your statement “A couple weeks later my stepmother said the debt was forgiven…”

      I realize she changed her position later but only so much room in a title.

      Courts make mistakes all the time. There is a process for reversing them.

      Your bankruptcy has been going for some time. She’s only received $30. One option would be to let it continue as is and she’ll get a few more dollars but by the end of the bankruptcy the remaining debt will be discharged.

      Or fight it. The choice is yours.


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