So, you’ve spent more money than you anticipated spending during the holiday season.  You have a couple options if you have spent more money than is coming in.  First, you could let the bills go into default and eventually they will be passed onto a collections agency.  You could refuse to pay the bill once a collection agency receives it hoping that they will violate federal law and you will recover money from my law firm.  However, its likely that the money that you will recover will be much less than the damage that you’ll be doing to your credit health.

Your other option is Bankruptcy.  I have a lot of clients of mine where myself or one of my Attorneys are forced to have a difficult conversation with them.  Just because I’ve been able to win them money for the harassment that they have experienced doesn’t help their debt situation; its only a band-aid.  I often speak with my clients and discuss how they ended up defaulting on a particular account.  The most frequent answers are job loss, divorce, or unexpected medical bills.  If one of their bills have been turned over to a collection agency, its likely that they have other bills that are past due as well.  Many people are psychologically adverse to bankruptcy and tend to tense up when I begin to discuss it with them.  Bankruptcy is an ideal, once and for all, solution to dealing with debt collectors; it forces them to go away.  Although I love repeat clients, I care more about my clients’ financial health.  As such, if you haven’t considered it before; think about Bankruptcy.  Log on to www.legalhelpers.com and learn more about Bankruptcy.  Call one of our bankruptcy specialists and get your questions answered.  There is a saving grace out there; all you need to do is take advantage of it.

Jeffrey Hyslip

We get a lot of telephone calls from clients and potential clients that are being contacted by a company they claim they have never done business with.  These individuals often believe they are the victims of identity theft or that the company that is contacting them is attempting to defraud.  Although identity theft and fraud is a possibility, one of two other situations is more likely.

First, when an account is in default for a certain amount of time, the original creditor will attempt to collect the debt in house.  If these collection efforts fail, then they will likely send the account to a third party debt collector.  At this point, the original creditor still holds (owns) the account they have just hired a third party to attempt to collect the debt.  If this collection agency is able to collect the debt then the collection agency takes its percentage from the proceeds and passes the remainder to the original creditor.  If this collection agency is unable to collect the debt most likely it will terminate collection efforts and “send” the account back to the original creditor.  At this point its likely that the account will get sent to another collection agency in an attempt to collect the debt.  This scenario could happen as many as four times.  This is likely the reason you have been receiving letters from different companies collecting the same debt.

If the collection agencies are all unable to collect the debt, then most likely the debt will be sold to a debt buyer or a debt purchaser.  Debt purchasers purchase debt portfolios, groups of many similar accounts.  The debt purchaser pays pennies on the dollar for the debt.  Most frequently the debts that are purchased are credit card debts.  At this point, the debt purchaser will either try to collect the debt in house or will again refer it to another collection agency for another attempt at collections.

I’ve heard stories from my clients where they will pay a debt collector and some how the account will eventually be sold to a debt purchaser.  This is why it is important to (1) get all settlement proposals in writing and (2) to make sure you know what account you are actually paying off in case that same account pops up in the future.  Finally, when you pay off a certain account, I advise my clients to do so via money order.  Mainly this is because it is generally a bad idea for collection agencies to have your banking information.  Before you send in a payment, keep copies of the money order and the settlement letter to prove that you complied witht he settlement offer.  If you receive a collection letter from another company once you paid off the account, make sure the new company isn’t trying to collect the old debt.

Jeffrey Hyslip

Debt Collectors love to speak in a made up quasi-legal language.  They often use legal terms improperly, make up their own words, and use words that really exist in ways they were never supposed to.  They generally do this to try and confuse the debtor and to make the nonpayment seem a lot more serious than it is.  For example, during one of my recent depositions, we asked a debt collector what several threats that she made meant and not surprisingly, she didn’t know.  In this blog, I will give you a few phrases and let you know what the debt collector is referring to if it actually knew what it was saying.

Refusal to Pay:  When a collection account goes to a debt collector the debt collector is usually told to try soft collection methods on an account at first.  This involves calling the debtor, sending the debtor letters to attempt to get voluntary payment.  Most of the time the owner of the account (the creditor) tells the debt collector to use these methods until there is a Refusal to Pay.  Usually the owner tells its debt collectors that once there is a refusal to pay there are two options on the account; send it back to the owner so they can write off the debt or advise the owner to refer it to an attorney for litigation.  There is no legal significance of “Marking you down refusal to pay”.  Debt Collectors love to throw this term around like its the end all be all of debt collection.  Keep this in mind; if you refuse to or you are not able to pay a debt one of two things will eventually happen; you will get sued or they will write off the debt.  There is nothing special about being marked “refusal to pay” except its a sign that the owner is coming close to having to make a decision on your account.  If you are not refusing to pay a bill and a debt collector threatens to mark you down as “refusal to pay” tell them that just because they mark you down as having nine arms doesn’t make it true.  Tell them you are not refusing to pay and you are just trying to get your finances in order.

Lien on your House: Debt Collectors love to threaten placing liens on debtor’s homes.  This should almost be as frightening to you as your house getting blown over by the big bad wolf.  Debt Collectors try to throw this language around to make it sound like they are going to force the sale of your home to satisfy the debt.  Listen carefully; they won’t!  If you follow the news, not even the Banks that are first in line are interested in taking back your house in these economic times.  Heck, no one even knows what a house is worth these days.  Assuming, hypothetically, that the debt collector was to force the sale of your house, all of your mortgages, home loans, secured creditors, etc. would get paid from the proceeds first.  Trust me, unless your house is completly paid off and the Judgment is very large; debt collectors are not going to take your house from you.  Also, it is very important to note that there cannot be a lien placed on your house until the debt collector has won a lawsuit.  Next time they threaten to place a lien on your house, thank them and tell they should place the lien on the right side.

Sheriff to Serve you:  I’m currently trembling in my boots!  Debt collectors love to mention law enforcement just like a poser loves to name drop.  Listen up; the sheriff department doesn’t care that you are not paying your bills unless its child support, restitution,or spousal support.  As I mentioned earlier if an account goes into collections one of three things will happen and only one of three things: (1) You will pay, (2) you will not pay and the creditor will sue you, or (3) you will not pay and the creditor will write the account off as bad debt.  Any threats from debt collectors that are more descriptive than these three options are most likely being described to scare you.  Under every state’s laws once you are sued, the person that sued you has to give you notice of the law suit.  Most often this is through a summons which simply includes a copy of the document with the allegations against you and instructions on how you can reply to the allegations in this document.  It doesn’t make a difference if this document is mailed to you, handed to you by a Sheriff, or brought to you on a silver platter by President Bush; it means the same thing.  It means a law suit has been filed against you and now you need to either defend it yourself or hire an attorney to defend you.  The next time a debt collector threatens to have a Sheriff serve you, tell the debt collector that you appreciate the gesture but you are able to do your chores yourself!

Pre-litigation Department:  As mentioned above, there are only three options for a creditor to do when you owe money.  They can send it to as many departments as they want but it won’t give them more options.  Most likely they will create really frightening names and tell you if you “refuse to pay” (ding ding ding) they will send it to the “Pre-Litigation Department”.  In all honesty, I have no clue what this is and where it fits into my (1), (2), (3) and most likely neither does the debt collector.  Let them call their departments whatever they want; heck, just because they have a “Pre-kidnap your child and steal your car department” doesn’t mean it is going to happen.  Next time a debt collector threatens to transfer your file to the pre-litigation department ask them if the account is currently in the Pre-Pre-litigation department.  I’d also be interested if there is a Post-Pre-Litigation Department.

Where I come from, people break legs for this:  Okay, to be honest, I’ve only heard this one time.  A debt collector in NH told this to my elderly client.  This sounds to me like the debt collectors parents probably should have given the infant debt collector a better neighborhood to grow up in.

Investigate your Assets:  Debt collectors love to throw this one around.  What they are trying to explain is that they are going to see if there is enough income potential to garnish your wages or if its likely that you have any assets that they can execute on to satisfy the debt.  Fear not; every debt collector will investigate your assets; this is their job.  However, they don’t have any special magnifying glass.  The next time a debt collector threatens to investigate your assets tell them you’re surprised they haven’t already done so; after all, this is why the account went to a collection agency.

File a Judgment against you:  Never in my entire life has a filing cabnet been so frightening!  What the debt collector is trying to threaten (vaguely on purpose) is that if you don’t pay the debt they will do something with a file.  Most likely the debt collector overheard his fellow co-worker threaten this and agreed that it sounded pretty frightening.  What this actually means is that they will file a lien against your property.  Again, before this can be done, a creditor would have to sue you, would have to win in court, and then would have to pay a filing fee to record the judgment (the decree that they won) against your real property (house and land).  The next time a debt collector threatens to file a judgment against you ask them to describe to you what that means.  I can almost guarantee they will stumble around their words and I’d be surprised if they had a clue as to what they were threatening.

Make an involuntary recommendation on your behalf:  I am absolutly serious when I say I have no clue what this means and neither does the debt collector.  Lets take this phrase word by word.  Make - Okay it sounds to me like the debt collector is going to do something.   An involuntary recommendation - Okay, now we’re getting somewhere - The debt collector is going to recommend something that you don’t have control over.  On your behalf- for you.  So, the debt collector is going to recommend something that you don’t have control over for you.  This is as vague as they come!  The next time a debt collector threatens this, tell them you’d prefer a voluntary recommendation on behalf of your sister.  The threat makes no sense, has no legal significance and again is a phrase used by debt collectors to sound threatening.

I welcome your comments!  If you’ve heard any other interesting or down right stupid threats from debt collectors; let me know.  I’ll let you know what they are, most likely, unsuccessfully trying to threaten.

Jeffrey Hyslip

(1) Don’t ignore their calls.  Failing to call them back isn’t going to make your situation improve.  IN fact, your interest will accrue, your account will be passed on/sold, and they will eventually (hopefully legally) begin contacting your friends and family members.

(2) Don’t fail to show up to Court Dates.  If you have been sued and given a date to appear in Court, appear!  Although you might be nervous about appearing in Court, you will gain nothing by not appearing.  The additional stress that appearing will cause will most likely be worth it.  If you have a reason that you shouldn’t be responsible for the bill (it’s not yours, etc.) feel comfortable telling your reasoning to the Judge.  Worst case scenario, the Judge will disagree with you.  This is much better than the alternative (See my posting about being imprisoned for not paying your debts).  Always appear for your court dates.

(3) Don’t Make False Promises.  Most collectors are willing to work with you on developing an mutually agreeable repayment plan.  If you are not going to have money for three months, tell them you are not going to have money for three months.  If you only plan on paying $20 a month, tell them that this is the maximum amount you are able to pay.  If you break under pressure and agree to pay something you can’t afford, this will cause significant future problems.  First and foremost, it will make you seem dishonest.  When I was collecting debts, I always believed that if debtors were able to pay an account they would.  Its hard for me to believe that debtors are intentionally not paying debts; the stress associated with doing so isn’t worth the money saved.  When I was on the other side, if one of my Debtors lied to me, a bond was broken and anything they told me in the future lost value.  Also, let me be clear, I am not using “debtors” in its negative connotation; almost every American is a Debtor; we are a nation that largely lives off of credit.  Be honest with the collection agency you are dealing with.  Do not agree to any repayment plans you can’t afford.  More importantly, don’t agree to a check by phone, etc. if your account can’t handle the withdraw on the scheduled date.  Otherwise, you may not only owe a debt, but you may also have committed a crime (passing a bad check).

If you have questions about what to do or what not to do regarding the collection agencies that are contacting you, please give us a call.  We would be happy to assist you.  1-866-339-1156

Jeffrey Hyslip