The Motion To Set Payments--How To Overcome A Huge Court Judgment

You have a debt you can’t pay. It’s ballooned into a huge debt with unreal interest charges and now collection costs and attorney’s fees. You offered to pay monthly what you really can pay and the debt collector wouldn’t give you the time of day and offered you some outrageously huge payoff amount. Now you’ve been sued and you are staring at the possibility of or already are saddled with a huge judgment. You are living with the fear that the debt collection lawyer is going to execute (obtain court authority to take and sell your car, your house or some other asset). There is another option besides bankruptcy court and one that allows to retake some control over an out of control situation. Almost every court (jurisdiction) has some form of what we call the Motion To Set Payments here in Tennessee. It is a court remedy that allows you to file paperwork with the court asking the court to set monthly payments on a judgment. The person filing the motion must document to the court all of their income and debts and must justify that they are making the largest monthly payment they are capable of reasonably making. If the court grants their motion and allows them to make the monthly payments (usually directly to the court and not to the judgment creditor), then the judgment creditor cannot take any enforcement action such as executions, wage garnishment or seizures as long as you are current. This is a powerful tool in the hands of the judgment debtor. It essentially allows you to set your repayment schedule at exactly what you can afford. It is a particularly useful tool if you are simply in a bad patch, unemployed and expect your fortunes to improve in time. Contact the court clerk and ask if they have a Motion to Set Payments or a similar motion. Most courts will and even if they don’t, the court will always hear a motion for relief. The key is to be honest with the court and offer a reasonable payment based upon your current financial situation.

Unemployed and Broke--Time for the Cease Communications Letter

You are one of the thousands of now unemployed and you are broke. You would love to pay your credit card bill or other debt, but you just don’t have the money. Your creditor is calling every day and sending you threatening letters every week. It’s affecting your mental health and your family. What do you do? Well, if you truly have no ability to pay anything, you might consider the Cease Communication letter. The Federal Fair Debt Collection Practices Act, 15 USC 1692c(c) provides that a collector must stop communicating with a debtor by both phone and mail once that debtor requests the collector to stop in writing. So, if you can’t pay and are being driven crazy, write you’re creditor a letter saying; “Pursuant to 15 USC 1692c(c), I hereby request that you cease all communication with me.” Once that letter is received, your creditor may only contact you to tell you that further communication is being terminated or to notify you that specific remedies are being invoked (translation you are being sued). The requirement that they stop communicating with you doesn’t take effect until they receive your letter. Make sure you send it certified mail so that you have a record that they received it. The Cease Communication letter isn’t a solution to your debt problem, but it can restore the peace to your home.

How to Control a Debt Collection Call

Getting a call from a debt collector is stressful, embarrassing and unsettling.  Debt collectors are taught and trained, in fact its drilled into them, to stay in control of the call!  What does this mean? It means they want to direct where the call goes, the tone of the call and they want to ask all the questions.  Questions are powerful powerful tools.  Many times a collector will ask a question and then simply pause and leave the debtor to stew in that uncomfortable silence.  If the debtor starts to ask a question, the collector is trained to either ignore it or answer as briefly as possible giving the debtor no information and immediately redirect the conversation in the direction they want to go.  A collector has many different avenues he or she can direct a call down; creation of anxiety based upon threat of litigation or economic ruin, creation of a bond through offers of assistance, creation of humiliation through stark review of the financial situation, etc.  All of this is accomplished by asking the debtor questions.  So what can a debtor do in the face of this well trained question asking machine?  Well, take control of the call by asking questions of course.  You have to be confident and professional (not arrogant, abusive or profane).  Start by immediately interrupting the collector and asking what their name is again.  Of course the collector identified them self at the very beginning of the call, but this allows you to thrown them off of their pre-planned pitch and allows you to start asking questions.  Follow up immediately with, how do you spell that.  And then; "and who do you work for and how do you spell that".  Now you have seized control of the call and are obviously taking notes.  If it is an inexperienced collector, they will be thrown totally off of their game.  If it is an experienced collector, they will begin fighting you for control of the call.  Regardless, the best way to control the call is to end the call.  Ask how much the debt is,  who the original creditor is and most importantly ask for contact information; what is an address I can correspond with you at and what is a phone number I can use to reach you.  Immediately after you receive that information, say something to the effect that I will research this and be back in touch with you and hang up. The collector will note the contact in their database and more than likely move on to easier prey and leave you in peace for at least the time being. 

Problems Debt Collectors Don't Want You To Know About #1

There are lots of problems a typical debt collector has in collecting your debt.  Usually, you as the debtor have no idea the problem even exists and so it never comes to light.  In today's debt market and economy, perhaps the biggest problem a collector has is producing a documentable chain of ownership.  Simply explained; you have a legitimate debt, you ran up a credit card that you now can't pay, you had medical bills you couldn't pay or you borrowed money and can't pay it back.  You didn't pay your debt and the original creditor, rather than hound you or after hounding you with no success, bundled your debt with a batch of other debt and sold it for pennies on the dollar.  That package of debt has now probably been sold and assigned several times since then.  Now, a collection agency has your debt (with tons of interest and collection cost and fees added on) and is calling and writing you demanding payment.  One of the most effective tacks to take as a debtor is to say, "yes, I may have had a debt with XYZ, but I don't know who in the world you are.  If you can send me written documentation that you either own this debt now or are authorized to collect it, then I'll pay it." Immediately follow that verbal request up with a letter (ALWAYS certified mail, return receipt requested) asking for the same documentation.  If the collector can't produce that record of ownership or authorization to collect, then they can't collect the debt.  Often times, the collection agency or debt buyer has actually legally purchased the debt for real money.  But that transaction is part of a complicated and lengthy legal document that they have absolutely no desire to share with you and to which a standard floor collector has no access.  It may be simply easier for the collector to move on to the next more compliant debtor. 

Simplest Advice In Settling A Debt

This is a simple piece of advice that you may not already know.  Debt collectors almost always work on some form of a commission basis.  Those commissions and every facet of a collector's performance are calculated at the end of the month.  Therefore, the absolute best time to settle a debt is at the very end of the month.  The deal you may be able to negotiate at the end of the month can be literally thousands of dollars less than the deal you could negotiate at the first of the month.  

The Present, The Future and The Myth That Your FICO Score Will Not Matter

There is a myth being sold to the American people regarding their FICO credit score.  Millions of Americans now find themselves in a situation where because of job loss or other economic hardship they must prioritize how they pay their bills.  I see an endless stream of financial experts who are telling people to pay for food, shelter and transportation and forget about student loans, credit card bills and any other installment or revolving debt because preserving your credit is a futile exercise. First, let me say that I understand, empathize and agree with the need to prioritize food, shelter and transportation.  But do not lead these poor people down the primrose path to believe that the damage they do to their credit will be harmless. The myth is sold under the guise of don't worry, there are so many Americans in similar situations that credit scores will simply have to be a thing of the past.  The truth is absolutely nothing could be further from the truth.  The truth is that the credit markets (home mortgages, car loans, etc.) will after this economic storm passes be more highly governmently regulated than at any time in our lifetimes.  In plain English, that will mean that before a bank can give you a mortgage, it will have jump through a series of government regulatory hoops.  Government programs and government oversight has never and can never be subjective.  It will always be driven by forms, procedures and benchmarks.  Therefore, if though you may have a wonderfully logical explanation why your credit is ruined, it will not matter.  In order for the bank to make you a loan, you will have to fit neatly into a government designed program.  The only existing benchmark that the government will be able to use to design the regulations they believe are necessary to prevent this disaster from reoccurring is your CREDIT SCORE.  So, bottom line, protect your family, but also make ever effort to protect your credit score.  It may not matter one iota today when virtually no one can borrow money, but it will mean everything in a year or two or three when the world rights itself.  

New Job

Well, I'm sure you noticed the lack of posts here since mid November. I have taken a new job. I am no longer practicing law, but am now working as in house counsel and vice president for a privately held company. I considered shutting this site down, but decided against it. Once I am acclimated to my job, I intend to resume posting. Thanks for your patience.

THE TOUGHEST DEBT TO COLLECT - THE SELF-EMPLOYED DEBTOR

The most difficult debt to collect is the one owed by the self-employed debtor. Typically these are middle-income individuals who own their own small business, for example a general contractor, plumber, or beautician. These individuals tend to consider themselves judgment proof and that mentality is reinforced by the economic nature of their employment. They are well experienced in dealing with cash flow problems and pay all of their bills when they are flush with cash and pay none of their bills when they have no cash. They are typically not intimidated by having past due bills and are for the most part, are immune from typical judgment collection activities. The main reason that they are immune or consider themselves immune is that a standard garnishment on the employer, either themselves or the business that they own and run, results in no cash. They will typically answer the garnishment that the business either makes no money, if it’s a garnishment on the business itself or if it’s a garnishment on the owner, that he takes no salary from the business. However, there are several effective methods for collecting debts from a self-employed debtor.

First, you can garnish the cash draw. This simply means issuing a Writ of Garnishment, which is a court order authorizing the Sheriff or Law Enforcement Official to go to the business and seize any money found at the business. The garnishment may be issued for the cash draw and/or the cash register and/or any money found on the person of the business owner. The Writ of Garnishment for the cash draw will not typically result in the collection of enough cash to satisfy the debt. However, it does not take this occurring more than once or twice before the self-employed debtor will contact you and make arrangements for satisfaction of the debt.

A second effective method of collecting from the self-employed debtor is a Writ of Execution or Attachment on the work vehicle and tools of the business or business owner. Again, this is a court order issued by the court directing the Sheriff to go to the place of business and seize certain physical assets of the business. I typically file Writs of Execution for the vehicles and for the tools of the trade of that business. For example, for a plumber, the Writ of Execution would specify the work truck and all of the plumbing tools found on the premises. Again, auction of these items on the courthouse steps, will not typically generate sufficient cash to satisfy the outstanding judgment. However, before you can proceed to auction, I guarantee you will be contacted by the self-employed debtor seeking arrangements for satisfaction of the debt and return of his vehicle and tools.

A third effective method for collection of a debt from a self-employed debtor is the issuance of a Subpoena in Aid of Execution. A subpoena is a court order requiring a person to appear at a given place and time and give sword testimony. I subpoena the self-employed debtor to my office to give a post-judgment deposition regarding his or her assets, the business assets and include in the subpoena a requirement that they present the tax returns that they have filed for the previous five (5) years, copies of all bank statements, for all checking, savings accounts they and the business have, copy of any retirement account information and copy of any business records they have. The tax returns can be invaluable, especially when you discover that a self-employed debtor has not filed taxes for a given year or years. During the deposition, my primary focus is asking the self-employed debtor about current work they are performing and who those clients are and how much they are owed. I then issue a Writ of Garnishment the same day to those clients. This requires the people who owe the self-employed debtor money for work he has performed to pay that money into the registry of the court. In this case, this leaves the self-employed debtor performing work and not getting paid for it. Again, these Writs of Garnishment typically do not generate enough cash to satisfy the judgment, but get the attention of the debtor to the point that he or she will do practically anything to satisfy the judgment.

Collecting a debt from self-employed debtors is difficult. It requires going the extra mile and thinking creatively and uniquely. However, if a debt collection attorney is willing to go the extra mile, these debts can be collected.