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DON'T BE HAMMERED BY YOUR DEBT

DON'T BE HAMMERED BY YOUR DEBT

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.


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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.