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DON'T BE HAMMERED BY YOUR DEBT

DON'T BE HAMMERED BY YOUR DEBT

Friday, August 25, 2006

QUICK INTEREST CALCULATOR

Sometimes the simplest tools can be the most useful. This is a link to a free post-judgment interest calculator: http://www.nationaljudgment.net/intcalc.htm . While designed as a post-judgment interest calculator, it can be utilized to calculate the interest on any debt by merely inserting the date the debt was incurred and the interest rate applicable and hitting the calculate button. I use this tool almost daily to calculate interest on judgments to provide debtors with a complete payoff. Post-judgment interest should never be ignored as an important tool to maximize the value of the debt collected. Post-judgment interest can also be a valuable negotiation tool if you are looking for a bargaining chip to give up to a debtor. A debtor who has to pay the full amount of the principal of the debt, filing fees, service of process fees and attorney's fees will feel vindicated if you can give him an exact dollar and cents figure for the amount of post-judgment interest that you are agreeing to waive in exchange for immediate full payment.

Learn everything you need to know to beat a credit card debt lawsuit, forms included! Order your copy of How to Beat a Credit Card Debt Lawsuit with the Secrets of a Real Debt Collection Lawyer at http://www.lulu.com/product/ebook/how-to-beat-a-credit-card-debt-lawsuit-with-the-secrets-of-a-real-debt-collection-lawyer/11927258 

UNIVERSAL MYTH - SIZE DOES MATTER

There is a myth prevalent in the collection world, both in the minds of creditors and debtors that some debts are simply too small to be worth collecting. This is a myth. A creditor should never make a determination on whether to proceed with legal debt collection based on the size or amount of the debt. This is simply an irrelevant and inaccurate yard stick to determine whether or not a debt should be sent to an attorney for collection activity. The true measure of whether a debt should be sent to a debt collection lawyer is whether or not it is COLLECTIBLE. A $150.00 debt that is owed by an executive who makes $200,000.00 a year and is based upon a written contract for medical services is imminently collectible and worth $150.00. A debt for $100,000.00 that is based on an open account without a signed contract by a waitress who works at Waffle House is worth nothing because it is not collectible.

This is a difficult myth to overcome, both in the minds of creditors and debtors. I have a medical services provider whose average debt is $150.00. I routinely file hundreds of collection suits for that client each year. Prior to filing the suits, creditor and I make an informed and intelligent decision based upon the debtor's employment, home ownership, and other income and asset factors to determine whether the debt is collectible. If the debt is collectible, I file suit and recover the amount of money owed. If the debt is uncollectible based on those factors, it is written off. Using this method, this particular client has now been able to recover literally tens of thousands of dollars which it had previously simply written off as bad debt. I utilize this same system to determine whether high dollar debts are collectible and will not in good conscience file suit on a large debt for a client that I know beforehand is simply uncollectible regardless of what my potential fee may be. If that the result of this system is that I continuously have to convince new clients that some of their smaller accounts are worthy of suit, and I am called by debtors who are amazed that a creditor has not walked away from a $200.00 debt, but has instead hired a collection attorney. That debtor has done himself a tremendous disservice when he ends up having to pay, not only the $200.00 debt, but also additional filing fees, service of process fees and attorney fees.

Debtor Responses And The Myth of The Bankruptcy Threat

Unlike collection agencies, my office does not call debtors. Instead, debtors call my office. They either call once they receive an attorney demand letter or if they don't call then, they call once they are served with a lawsuit, or if they don't call then, they call once a judgment has been taken against them. In most cases, the debtor doesn't even show up in Court and a judgment is taken by default in their absence. The defendant debtor learns of the judgment through a letter they receive from any number of local bankruptcy attorneys who pay college students to go through the court records daily and make a list of everyone who has a judgment taken against them. The debtor would then receive a letter from a bankruptcy attorney saying, "Michael Herrin's client just took a judgment against you. I can help you get out from under that judgment by filing bankruptcy for you." Regardless of when, eventually the debtor calls my office.

When the debtor calls my office, invariably I hear only one of four things.

First and rarest, I want to pay the debt in full. Believe it or not, that is the least often statement heard. It does happen, but not as often as the remaining three.

The second statement I hear when a debtor calls and the most used statement is, "I know I owe the money, but I can't pay it all and I want to make arrangements.'" I then have to explain to the debtor that the time for making "arrangements" (typically the debtor thinks a payment of $20, $50 or $100 per month for the next 72 months is arrangements) may have been available from the original creditor and or from any collection agency the creditor utilized, but that the time for making "arrangements" passed the instant their debt was placed with my office for suit. That is not to say that I don't make arrangements with judgment debtors. I do. I make arrangements for full payment broken into reasonable amounts. I have a schedule based on dollar figures that I break debts down into, typically not running out more than six (6) payments . The only way I will enter into payment arrangements based on that schedule is if I receive payment in full in my office as of that day. By that I mean that the debtor has to make arrangements for either the automatic draft of their checking account with all drafts set up and scheduled that day for the next number of months the payment schedule lasts or the debtor has to set up pre-arranged automatic drafts of the debtor's credit card for the next number of months the payment arrangements last.

The third statement I hear when a debtor calls is, "I know I owe the money, but I simply don't have any money to pay." I have a stern, but reasonable response to that statement. I do not argue with the debtor that they do have the ability to pay a debt once they have told me they don't have that ability. I explain to the debtor that I have a duty to my client, the creditor, to reduce that debt to a judgment and that I will take the steps necessary in Court to accomplish that. Most debtors do not object to a debt being reduced to a judgment after they have acknowledge they owe the money, but simply cannot pay it. I also tell them candidly that once it is reduced to judgment, I will take whatever action is necessary and proper to try to collect the debt. That simply means that once the debt is reduced to a judgment, I will attempt to garnish bank accounts, garnish wages, have the Sheriff take possession of personal property, have the Sheriff take possession of automobiles and put a lien on any real property the debtor owns. That discussion more times than not results in the debtor finding some means to pay the debt.

The final statement I hear when a debtor calls is the one threat that some debtors think they have; the one arrow in their quiver. "If you don't forgive this debt, I am going to have to file bankruptcy." I suppose the debtor makes that statement thinking that the creditor will immediately accept penny on the dollar to satisfy the debt out of fear that the debt is going to be wiped out in bankruptcy. My response is usually surprising to the debtors who call. I keep a Rolodex of the attorneys I consider the very best bankruptcy attorneys in the City of Memphis next to my telephone. When a debtor tells me that they are thinking about, planning on or will have to file bankruptcy, I immediately refer them to at least two (2) reputable and stellar bankruptcy attorneys, complete with names, telephone numbers and addresses. The result is usually a dramatic shift in the conversation as to how payment can be made.

Bankruptcy is simply not a threat to a debt collection attorney.

First, very few of the debtors who threaten bankruptcy will actually file. There are a number of reasons that they will not actually file bankruptcy.

Bankruptcy is expensive. Filing fees are hundreds of dollars and while bankruptcy attorney fees can be spread out over the life of a bankruptcy plan, the filing fees have to be paid up front.

Bankruptcy is complex and time consuming. A good bankruptcy attorney cannot file bankruptcy without reviewing all of a debtor's financial records and documents. This requires the debtor to actually put all of those documents regarding all of his assets and all of his debts together and to actually be able to present a true and accurate picture of his financial position. This requires proactive effort on the part of the debtor and is not easy. Bankruptcy is time consuming. The process of putting everything necessary together to just file bankruptcy is time consuming. Attending the required bankruptcy hearings is time consuming. Meeting with your bankruptcy lawyer is time consuming.

Finally, bankruptcy is like a nuclear bomb on the debtor's credit. Bankruptcy will stay on the debtor's credit report for ten (10) years. This has know become common knowledge among the American consumer.

Therefore, when the debtor threatens bankruptcy, I know that there is a greater likelihood than not that this is an idle threat and that the debtor will not actually proceed to Bankruptcy Court.

The second great myth of the bankruptcy threat is that the creditor will receive nothing in payment of his debt out of the Bankruptcy Court. This myth ignores one of the first rules of the debt collection lawyer; a skilled debt collection lawyer must be a skilled bankruptcy lawyer. A combination of a skilled bankruptcy lawyer and the current creditor friendly bankruptcy laws will not in most cases result in a creditor's debt being zeroed out. The general result of bankruptcy is that a debt will be extended out over a longer period of time than the creditor would normally accept with little or no interest being paid.

A diligent creditor's lawyer will carefully examine a bankruptcy debtor's assets at a 341 First Meeting of Creditors, object to any bankruptcy plan that does not adequately fund repayment of their client's debt and continue to track the bankruptcy with the knowledge based on experience that some full fifty percent (50%) of Chapter 13 bankruptcies will ultimately be dismissed before the debts are discharged based on the debtor's failure to comply with Court rules or failure to make scheduled payments. When that occurs, it is key to be one of the first creditors to be aware that the debtor is no longer protected by the automatic stay of bankruptcy.

Thus, the threat of bankruptcy is not actually a threat, but simply a different arena of debt collection in which any competent debt collection attorney must be skilled and experienced.

Thursday, August 03, 2006

How to Not Pay Your Debt or Beat a Collection Suit

I really shouldn’t tell you this at all. I could get excommunicated from the fraternal order of blood sucking collection attorneys. But in my purpose I told you I would tell both sides of the story and so I will. This article comes with a giant very real DISCLAIMER. This article does not and is not meant to give legal advice. I am not YOUR attorney and we have no attorney client relationship. If you use any of the information imparted by this article, you do so at your own risk and I strongly urge you to consult your own attorney.

This article is written with the assumption that the debt that you are being sued over is a valid debt and it is your debt. If neither of these assumptions is true, then there are other articles here which are more applicable.

Alright, you’ve been sued by a debt collection attorney. What do you do now if you don’t want to or simply can’t pay the debt? The very first thing you do is request a Federal Fair Debt Collection Practices Act debt VERIFICATION. You do this for two reasons. First and most importantly, it buys you some time. Under the FDCPA, all collection activity must cease until the attorney puts that verification in the mail to you. The verification is usually a simple statement signed by the creditor and it will not take the collection attorney long to obtain it. But for that brief period, nothing will happen. Secondly, it sends a signal to the collection attorney that you are not going to be a roll over debtor. He knows you will be active in the defense of the suit. A high percentage of collection suits simply proceed to default judgment without any response from the debtor. This request moves you out of that category. Now, some simple advice. Don’t use a form from the internet to make the FDCPA verification request. I’ve seen a lot of them lately and they ask for information and documentation the FDCPA doesn’t require the collection attorney to give you. That tells the collection attorney you really have no idea what you are doing. The form letters also make threats which simple irritate the collection attorney. And perhaps simplest enough, they are wrong. The FDCPA operates on the least sophisticated debtor standard so you don’t have to be fancy. Just make sure you do it in writing and I’d send it certified mail. Simply ask the attorney to verify the debt in accordance with the FDCPA. Next, don’t be antagonistic or stupid. Don’t threaten the lawyer or lie. Don’t threaten to sue him or report him to the Bar or say you have an attorney if you don’t. These tactics don’t intimidate collection lawyers and simply mark your file for extra special attention. Finally, a certified mail written request for an FDCPA verification may end the collection process. That is true in a very small percentage of cases, but it is worth taking as a first step.

The second step is to file a SWORN DENIAL. This needs to be a statement in WRITING that you FILE with the court where you have been sued. It can be a simple statement, but it needs to be typed, signed, notarized, filed with the clerk of the court and a copy sent to the collection lawyer. It needs to be a graduated denial. In other words, it needs to say, I deny this is my debt and if it is my debt, I deny that it is still a valid debt and if it is a valid debt, I deny the amount sued for is the correct amount. The sworn denial is a powerful tool. It eliminates the Sworn Affidavit of Account. The vast majority of collection suits proceed without a witness for the creditor The collection attorney enters an affidavit signed by the creditor that the debtor owes the debt and that is this amount. With that affidavit in hand, the court gives the creditor a judgment. When a sworn denial is filed, the debt collection attorney can not rely upon a sworn affidavit of account, but must instead produce a live witness to testify about the debt. The requirement of a live witness changes the dynamic of the collection action considerably. The likelihood that the action will go no further now increases again.

The third step is to file DISCOVERY. This is more difficult than simply filing the Sworn Denial. You need to file a written Request for Production of Documents asking for a copy of the contract or agreement upon which the debt is based. If the debt is a credit card debt, it is likely that the debt collection attorney will not be able to secure a copy of the original agreement or if he is, he will not be able to do so timely. Most credit card signature agreements are scanned or if older, microfilmed and stored away in electronic archives. If it is an old debt which has been sold to a debt purchaser the likelihood of retrieving the original signed agreement decreases dramatically. If you are being sued in a small claims type court where discovery is not permissible, ask for the agreement at trial.

The fourth step is TRIAL. SHOW UP! I can’t stress that enough. As I’ve said repeatedly, the vast majority of debt collection suits proceed to default judgment because no one shows up to dispute them. Show up and ask for a trial. And remember, the worst thing that can happen is the same thing that would have happened if you hadn’t appeared at all, a judgment. You can’t make it worse. If the attorney doesn’t have his live witness available, oppose the case being continued. Tell the judge you’ve taken off work to be there and are ready to go forward. If the judge does continue the case to a new trial date, show up again. You will need to educate yourself. You won’t be able to equip yourself to spar with an attorney, but knowing a little is better than knowing nothing. You will need to read the Rules of Procedure that govern the court and the Rules of Evidence for that jurisdiction. Look them up online. The Rules of Civil Procedure will govern how the trial is conducted. The Rules of Evidence will govern what the Judge is allowed to see and hear. If you do have a trial and the creditor produces a live witness, attack the witness first and the debt second. The witness can only testify from personal knowledge. Generally, the witness has no personal knowledge about you or your account, but only knows what’s in the file he got from the collection department. If he is going to testify without personal knowledge, but from the records and documents of the business, then he has to have a basis to do so. He needs to be the regular keeper of those books and records and be familiar with how they are kept and their contents. Don’t simply accept his answer when the debt collection lawyer asks him if he is the regular keeper of those books and records and be familiar with how they are kept and their contents and he says yes. Ask him how long he has been with the company, in that job, what he does on a daily basis, when he first saw your file, if he knows from personal knowledge if it’s a complete file, etc. You must destroy his credibility and ability to testify about the papers he has in front of him. If you can do that, then the debt collection attorney has no case. If the witness is actually a good witness and you can’t prevent him from testifying from your file, then you need to know your defenses to the debt. The best defense is the Statute of Limitations. The Statute of Limitations is the time limit that an aggrieved party has in which to file a lawsuit. It is a drop dead deadline. Find out what your states is and whether the creditor is beyond that date. If they are, ask the court to dismiss the suit.

The last step, should you lose at trial, is to APPEAL. Appeals can take a long time to work through the system, from months to years. That time is valuable and no collection action such as garnishments can occur during the pendency of the appeal (unless you live a jurisdiction that requires you post an appeal bond to stop collection during an appeal).

At each step in the process, you increase your chances that the debt collection attorney will give and simply put your file away. But remember, always be polite, never cuss and don’t hang up on him. You simply don’t want to make your case personal.

Learn everything you need to know to beat a credit card debt lawsuit, forms included! Order your copy of How to Beat a Credit Card Debt Lawsuit with the Secrets of a Real Debt Collection Lawyer at http://www.lulu.com/product/ebook/how-to-beat-a-credit-card-debt-lawsuit-with-the-secrets-of-a-real-debt-collection-lawyer/11927258 

Thursday, July 27, 2006

Coming Soon

The Myth of the Bankruptcy Threat
FDCPA-The Truth about the Federal Fair Debt Collection Practices Act
Medical Debts---My Insurance Was Supposed To Pay That

The Different Ways To Pay Your Attorney To Collect Your Debts

Probably the biggest reason that small businesses chose to write off bad debt rather than pursue legal debt collection is they hear the age old adage of don’t waste good money after bad ringing in their head. Small business owners have a perception that it will cost them more in attorney’s fees to legally collect a debt than the debt is worth in real dollars. This perception was created by and is perpetuated by the legal profession. Too often attorneys have taken a collection matter for an hourly fee and treated it just like any other piece of litigation without regard for the client or for the debtor they are pursuing. The attorney "works" the file running up the bill without focusing on the ultimate goal of getting the debt paid. The end result is that the client pays three times the amount of the debt in attorney’s fees and at the end of the day only has a piece of paper from the court saying the debtor legally owes them money. In that case, the attorney has done a disservice to both the client and the legal profession.

When a debt collection lawyer takes a case, he should make a fundamental determination of whether the debt is collectable. If the debt is not reasonably collectable, the debt collection lawyer should candidly discuss that with the client and let the client make the decision as to whether or not to pursue the debtor. Once the decision is made to sue the debtor, the debt collection lawyer should devise a plan to get the debt paid. Payment of the debt is the goal and the debt collection lawyer must keep that goal foremost in his mind and in his actions. . The goal is not to milk the client out of fees, nor is it to punish the debtor, nor is it to get a judgment, nor is it harass, intimidate or scare the debtor. The only goal is to get the client paid the most money possible in the shortest period of time. Sometimes, that goal doesn’t even require the lawyer to file a lawsuit and sometimes it requires the lawyer to abandon what he thinks is an excellent suit in exchange for a good settlement. All of that said, once a creditor decides to hire an attorney and sue a debtor, the subject of how to pay the attorney must be discussed.

There are essentially two fundamental ways to pay an attorney; by the hour and as a percentage of what he collects. Some attorneys will only work by the hour. Hourly rates can vary greatly depending upon geography, experience and quality. If you hire an attorney by the hour, you will most likely pay him in one of two ways. The first way is for him to bill you each month for the time he spent working on your case. You should receive an itemized bill telling you exactly what he did, how long it took him and how much it cost you. You would then mail your attorney a check paying that invoice. The second method of hourly billing is to have the client deposit a retainer. A retainer is a sum of money deposited with the lawyer that the lawyer bills against. You should still receive a monthly invoice from the lawyer showing you exactly what he did, how long it took him and how much it cost you, but you will not have to mail him a check. The invoice will also tell you the retainer balance. The items that are negotiable with an hourly charge lawyer are: (1) his hourly rate, (2) the smallest increment of time for which he will bill–if he answers the phone and talks a minute is that charge recorded as a tenth of an hour, a quarter of an hour, etc., and (3) the amount of any up front retainer.

The second way to pay your attorney is as a percentage of what he collects. Most people call this a contingency fee, as his fee is contingent upon him actually collecting something. The client will be responsible for paying expenses such as the filing fee, but not an hourly rate for work the attorney performs. When the attorney collects money from the debtor, he will deduct a percentage as his fee. The amount of that percentage may be determined by the volume of cases that client is placing with the attorney, the dollar amount of the debt sought to be collected or the expected difficulty in collecting the debt. The items that can be negotiated with a continency fee lawyer are; (1) the amount of the percentage, (2) what items will be regarded as expenses and (3) at what point will the attorney’s fee be deducted.

A third way to pay your debt collection attorney is by blending the hourly rate and percentage. There are any number of ways to customize a billing method to suit a client’s needs and ability to pay. A simple method provides for an hourly fee to be charged on each account up to a maximum ceiling at which point the attorney begins working on a continency basis. Another way is to utilize a sliding percentage based upon the amount of the debt.

A fourth way to pay your debt collection attorney is to utilize an attorney fee provision in your contract. Make your customer responsible for paying all of the cost of collection, including a reasonable attorney’s fee, if collection becomes necessary. The attorney would then be paid a percentage of the debt (as determined by the court) in addition to recovery of 100% of the balance of the debt. The attorney then keeps that amount as a court awarded attorney’s fee.

A fifth way to pay your debt collection attorney is to exchange services. The act of bartering has experienced a resurgence with the advent of internet web sites like www.craigslist.org. You may be able to pay your attorney by providing the services your business offers in exchange for "free" legal work.

The bottom line is that attorney’s fees should never be an impediment preventing your company from collecting it’s past due debts. If your attorney won’t discuss alternate methods of payment or negotiate fees, find another attorney.

Friday, July 21, 2006

What To Do If You Are Sued By A Debt Collection Lawyer

Yes I sue people every day. So why in the world would I tell you what to do if you are sued? There’s an old adage in the law that says you would rather go up against a good attorney rather than a bad one. Why would you want that? The answer is simple, a good attorney will do everything properly. You will not have to deal with foolish, inane or even stupid tactics, motions or arguments. An inept or even worse, a stupid opponent, be they attorney or lay person, simply creates more work for me. So when I sue someone, I would much rather they know what to do rather than have them act senselessly and ultimately, create more work for me, more headaches for themselves and achieve the same result they would have had they acted sensibly.
So you have been sued. What do you do first? The answer is take it SERIOUSLY. Do not treat it like a call from a collection agency or a nasty letter regarding your past due credit card bill. It is an extremely serious matter and it demands your immediate attention. The consequences of a lawsuit can be devastating and permanent. Time is of the essence now. Deadlines have been established that you may not even be aware of and they are not flexible. You may have to file a written answer within a certain period of time or you may have a limited amount of time to file any counter-claims. The first rule of being sued is therefore, treat it with urgency and importance. If you don’t, you will most likely have to live with the consequences and regret it for a very long time.

Secondly, you need to make a determination, a decision. That decision is essentially is this my debt or not. If it is your debt, then a specific course of action is dictated. If it is not your debt, then a very different course of action is necessary.
If you recognize the debt as legitimately yours, I strongly advise you to pay it. The best thing to do is pay it in full immediately. If you cannot pay it in full immediately, then call the attorney who is suing you. When you talk to him:

Be polite at all costs. Don’t give the attorney a reason to flag your file for special attention or create personal animosity between you and the attorney. It’s just business for the attorney. Don’t change that dynamic.

Explain your situation. Tell the lawyer exactly why you can’t pay the debt in full. Tell him about your employment situation, your assets, your obligations, the more information the better.

Document your situation. If there are any documents which back up your reason for not being able to pay in full immediately, offer to fax them to the attorney.

Talk in terms of solutions. Don’t just say, "I can’t pay." Offer the attorney a method for satisfying the debt. An example would be a very low payment made on a weekly basis instead of a monthly basis (to demonstrate your commitment) coupled with a time line for increased payments as your situation improves. Offer to put the plan in writing. Of course, only offer what you can do and what you intend to actually follow through with.

Give the attorney something to take back to his client. An attorney has a boss–his client. If he goes back to his client empty handed, he looks bad. Give him something he can show the client to prove that he is doing his job. The documentation of your situation, a signed payment plan, etc. are examples of items which allow an attorney to demonstrate to his client that progress is being made.

Stay in communication. If you can’t make a payment on a payment plan, call the lawyer. Don’t just let the date for payment come and go. Periodically ask the lawyer to verify your balance in writing. Update the lawyer on good and bad changes in your circumstances. This type of communication protects both you and the lawyer.

If the debt is not yours, fight the suit. If you can afford it, hire an attorney. This is critical. And don’t make the decision that you can’t afford an attorney until you have at the very least talked to some attorneys. Get some recommendation for an attorney, don’t just pick a name out of the phone book. Talk to your friends who have used attorneys, get attorneys you know or call to make recommendations or search the internet.

If you truly can’t afford an attorney, you will have to represent yourself. Contrary to poplar thought representing yourself practically guarantees your doom. If you do represent yourself;

Know where you stand. You will be operating in a completely foreign environment on the home court of your opponent. The attorney suing has spent years being educated in the law and has years of practical on the job experience. Representing yourself in a lawsuit is akin to operating on yourself. You have the same hope of success.

FDCPA is not a golden shield. Many consumers mistakenly believe the Federal Fair Debt Collection Practices Act is a golden shield that will protect them. A few even more misguided consumers think it is a sword to be used offensively against the debt collection lawyer. The FDCPA has it’s role and place and if the debt collection lawyer is acting outside the law, it is applicable. However, if you are facing a legitimate and ethically debt collection lawyer, the FDCPA is virtually useless as a defense and totally useless as a weapon.

Get help. Get help from wherever you can. Contact your local legal aid society and ask for help. Contact any local law school and see if they have a student assistance program. At the very least, search the internet and educate yourself.

Know dates. Dates and deadlines are crucial in a lawsuit. Once a deadline passes, it is past. A judge will not take pity on you or be more lenient because you are representing yourself. If you aren’t sure about a deadline or a date, ASK.

Learn the rules. Courts operate on the basis of rules, particularly Rules of Civil Procedure (how things are done) and Rules of Evidence (what a judge can see and hear). Get a copy of the rules that apply in the court that you have been sued in and learn them. If you don’t understand them, get help.

Ultimately, you need to understand that being sued is serious and stressful, but is not the end of the world. The absolute best advice I can give you comes in three parts.
Be patient.
Be polite.
Be honest.


Learn everything you need to know to beat a credit card debt lawsuit, forms included! Order your copy of How to Beat a Credit Card Debt Lawsuit with the Secrets of a Real Debt Collection Lawyer at http://www.lulu.com/product/ebook/how-to-beat-a-credit-card-debt-lawsuit-with-the-secrets-of-a-real-debt-collection-lawyer/11927258 

Wednesday, July 19, 2006

Collection Before It Is Even A Debt

In the current business environment, a business owner, a health care provider, a construction services provider or anyone who provides a service expecting to be paid after the fact needs to be aware of what is necessary to legally collect a debt before it even becomes a debt. The key to what makes a debt collectible is good information. The more information, the more accurate information and the more up-to-date information you have, the more likely you are to collect one hundred percent of a debt that is owed. The less information, the older the information is, and thus the less accurate it is, the more likely you are to not be able to collect a debt.

The two items I would like to see every creditor come through my office door with are a complete credit application and a signed contract allowing for the recovery of attorney's fees and the costs of collection. I realize that is not always possible. However, if there is no impediment to you obtaining those two items from a customer, you should, no matter the cost and time involved, do so. A credit application should at the very minimum contain a customer's employer, including the name and telephone number of their immediate supervisor. That information is necessary so we can call to verify their employment prior to garnishing them. The credit application should also list all of the customer's banking accounts, including the name of the bank, the type of account and the account number. This information will be necessary so we can garnish their accounts. Although not commonly seen on most form credit applications, I would like to see information about any and all vehicles the customer owns identified by make, model, year, color, VIN and tag number. This information is priceless when sending the Sheriff out to pick up a debtor's vehicle.

The second item every business owner should obtain is a signature. Under Tennessee, and under most states' laws, a creditor cannot recovery the cost of filing a collection lawsuit, and most importantly attorney's fees, unless they have a written agreement to that effect signed by the debtor. This does not need to be a long document or anything fancy. It can simply say, "I agree to pay all costs of collections and attorney fees if it becomes necessary to file suit on any unpaid balance." This simple language will allow you to recover attorney's fees. While that may sound like the debt collection attorney looking out for himself, in actuality it means that the creditor can recover one hundred percent of the debt owed, and not be out of pocket twenty to fifty percent of the debt for having to collect it through a lawyer's office. A business owner should think of that signature as debt collection insurance.

If you are not utilizing some system to obtain these two basic simple amounts of information, please feel free to contact my office and I will be glad to review your documents and set up a system that allows you and your employees to obtain this information without your increasing your costs, offending your customers or slowing down your business

Tools of the Debt Collection Lawyer

An attorney has a wide variety of tools available to collect a debt. This arsenal of tools extends well beyond what is available to an original creditor or even a collection agency employed to collect the debt prior to the attorney becoming involved. Additionally, these tools offer a step-by-step increase in the ability to involuntarily wrest money away from the debtor.

The first tool employed by an attorney in collecting a debt is the Attorney Demand Letter. I will normally make a decision on whether or not to send the debtor an Attorney Demand Letter based on the debtor's prior history and the creditor's prior attempts to collect the debt. A creditor may question why an attorney is going to send a letter asking for payment when the creditor has done this on a number of occasions or may have even sent the debt to a collection agency who has not only sent demand letters, but made telephone calls to the debtor's home and place of employment.

There are three primary reasons for utilizing the Attorney Demand Letter. First, it has been my experience that somewhere between fifteen and twenty percent of debtors who have been adamant in their refusal to pay will, upon receipt of an Attorney Demand Letter, pay the full amount owed. There is something intimidating about receiving a letter saying you owe the money on an attorney's letterhead. The Attorney Demand Letter ratchets up the seriousness of the matter substantially.

The second reason for sending out the Attorney Demand Letter is to comply with certain state statutes and to allow for the possibility of recovery of attorney's fees in certain circumstances. For example, in the state of Mississippi when a debtor owes money and that debt is not based upon a contract or agreement which allows for attorney's fees, if the attorney sends an Attorney Demand Letter and gives the debtor a reasonable period of time to satisfy the debt prior to filing suit, the attorney may then recover attorney's fees in that suit. This is true regardless of the nature of the debt or how it was created. Therefore, I always utilize an Attorney Demand Letter in attempting to collect debts in the state of Mississippi. The state of Tennessee does not have a corresponding statute and attorney's fees are available only by agreement of the parties.

The third reason for sending out the Attorney Demand Letter is to establish the creditability of the creditor. Many times or the creditor or a collection agency employed by the creditor has told the debtor, "If you don't pay this debt, I am going to send it to an attorney for suit." Many times the debtor sees this merely as a bluff. When the letter arrives on attorney letterhead giving the debtor an exact number of days before a lawsuit is going to be filed, the debtor now realizes that the creditor has not been bluffing, nor making idle threats. That has the two-fold effect of creating increased credibility with that particular debtor and creating a reputation for the creditor that it does not make idle threats or bluff.

The next tool in the collection process is the actual filing of a lawsuit. Filing a lawsuit consists of the drafting of a legal document called a complaint, the filing of that complaint with the Court, and the service of that complaint upon the debtor. In the state of Tennessee, such a lawsuit may either be filed in the Court of General Sessions for debts up to $25,000.00 or in Circuit Court for debts above $25,000.00. In either case, I utilize a complaint on sworn account. This simply means that I prepare an affidavit to be signed by the creditor and sworn to stating that the debtor owes a specific amount of money. That sworn affidavit is attached to the complaint when the lawsuit is filed. The debtor is then served with a copy of the complaint and sworn affidavit and given a certain period of time to respond. In General Sessions Court, no formal written answer is required from the debtor and the matter is first heard before the Court within 10 to 15 days of the debtor being served. At that time, the debtor must then either admit to the debt and allow a judgment to be entered, or deny the debt and a trial will be scheduled. Trials in General Sessions usually take place within 30 days of the initial court date. Circuit Court is much more formal and the debtor is given 30 days from the date of service in which to file a formal written answer. If the debtor does not file a formal written answer, a default judgment can be taken. Most debtors, upwards of eighty five percent, are simply unequipped to deal with the complexities and requirements of the Court system. Those attempting to represent themselves simply do not stand a chance. Therefore, judgments are taken without dispute in approximately eighty five percent of the suits I file. Of the remaining fifteen percent, approximately ten percent result in judgments following a futile attempt by a pro se (no attorney) debtor to fight the system, and only five percent result in true contests where the outcome is not certain.

So now you have a judgment that is simply a piece of paper that says that the debtor legally owes you the amount of money you have been attempting to collect. That piece of paper changes everything. The judgment is a key that unlocks an entirely new chest of tools you can use to recover money from the debtor.

The first and most commonly utilized post judgment tool is the garnishment. A garnishment can be issued attempting to recover money from two separate sources. First, a garnishment can be issued against a debtor's bank account. In order to do this, you need to know where the debtor banks and generally their account number. Therefore, it is vitally important that you save, photocopy, and archive any check payments you receive from any customer or potential future debtor. These checks are invaluable in the collection process. When the bank receives a garnishment on an account, it will freeze all of the funds in that account and report to the Court the amount of money so frozen. Unless the debtor comes forward and objects and has good reason, that money will then the paid into the registry of the Court and ultimately disbursed to my law office to satisfy the debt.

The second pool of money a garnishment can be used to reach is a debtor's wages. A garnishment can be served upon a debtor's employer and then a certain amount of the debtor's paycheck each month (the amount is based on a statutory calculation based upon how much the debtor makes, how many children the debtor has, and what are the state statutory exemptions) will be paid into the registry of the Court and disbursed to my office to satisfy the debt.
The next post judgment tool a debt collection attorney can utilize if garnishments are unsuccessful is a Writ of Execution. A Writ of Execution is a request filed with the Court, instructing the Sheriff to go out and seize certain property owned by the debtor and sell that property at public auction to satisfy the debt. A Writ of Execution can be issued against any personal property of the debtor that you aware of, can be issued for cash that the debtor may have on hand or that a business may have in its cash register. But, the most effective way to collect a debt from an individual debtor on a Writ of Execution is to have the Sheriff seize the debtor's automobile. Regardless of the value of the automobile, this is an extremely effective tool. Typically, a debtor's automobile will be financed by a bank that will have a priority lien on that vehicle. That simply means that if the Sheriff does sell the car at a public auction, any money raised by that sale will first have to go to pay off the bank that financed the car before any money comes to my client. While this does not sound like an effective debt collection tool for my client, in reality once the debtor realizes that the Sheriff and not a repossession company has seized his only mode of transportation, the debtor will almost invariably contact you directly offering to satisfy the debt by any means possible in exchange for a release of the Writ of Execution and the return of the debtor's vehicle. Once the debt is paid, the Writ of Execution is released and the vehicle is returned without the sale ever taking place.

The most patient tool in the debt collection lawyer's arsenal is the real property lien. When a judgment is taken against the debtor, that judgment is enrolled among the land records as a lien against the debtor's house. That means absolutely nothing to the debtor until the moment comes that they want to sell their house. They then cannot sell their house and give clear title to someone else until that judgment is paid. If a debtor claims to have absolutely no ability to satisfy a judgment, sometimes you simply have to wait until you get that call from a closing lawyer saying the debtor simply did not tell them about this judgment and that is have to be paid before the closing at 3 o'clock that afternoon and wanting to know from you how much the judgment is, with interest, to date. The real property lien is not fast, but it is effective.
The final tool available to the debt collection lawyer is a judgment debtor examination. The creditor, now a judgment creditor, can ask the Court to issue a court subpoena requiring the debtor, now a judgment debtor, to appear at the debt collection lawyer's office and to give testimony under oath in response to questions the debt collection lawyer asks. Essentially, the debtor is put under oath in front of a court reporter and then you may ask any question about any of the debtor's potential assets. If you don't know anything about the assets of your debtor, this may be where you start, or if one the tools discussed above has failed to satisfy the debt, you may follow up with a judgment debtor examination to get the information necessary to use one of the other tools.

As you can see, from the methods discussed above, the debt collection lawyer has ways and means available to him to collect the debt that an original creditor or even a debt collection agency can’t dream of utilizing. It is these exclusive tools which make a debt that may be virtually uncollectible by a creditor or even a collection agency easy money for a skilled and experienced debt collection lawyer.

Monday, July 10, 2006

Introduction to a Debt Collection Lawyer

I am an attorney living and practicing in Memphis, Tennessee. I have devoted a substantial amount of my practice to debt collection. While I have clients in virtually every business sector, I have two large blocks of clients in the area of commercial construction and health care providers. I file an average of 250 debt collection lawsuits per month. I utilize up the minute technology to track and monitor a large volume of cases while minimizing required manpower. I utilize an automated case management system which intergrates with a collection accounting software program to allow me immediate access to specific information regarding each and every suit.

I am starting this blog because in an attempt to always gain every advantage possible, I have scoured the internet and have not found a single collection attorney offering up the benefit of his experience. I have found literally thousands of sites either selling or giving away free advice on how to thwart the collection attorney, but no sites offering the other side of the coin. And so, I start this humble blog to aid my fellow collection attorneys, educate creditors and even to provide some unbiased and truthful advice to debtors. I hope you find something of use in the posts to come.