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Friday, August 25, 2006


Sometimes the simplest tools can be the most useful. This is a link to a free post-judgment interest calculator: . 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.

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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