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Friday, November 16, 2007


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

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

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

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

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

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

Wednesday, November 14, 2007


The explosion of the internet has led to a proliferation of myths regarding the
uncollectibility of debts and defenses to debt collection. These myths have spread like wildfire across blogs and websites and they are all false and dangerous.

I haven’t heard anything about this debt for 1, 2 or 3 years and therefore you can’t sue
me for it.

The only time limitation for the collection of a debt is a state’s statute of limitations. A statute of limitation is a deadline established by the Legislature of a given state for the collection of an open account debt. The mere fact that no one has contacted you about a debt for 1, 2, or even 3 years does not render it uncollectible. You should also be aware that typically the statute of limitations for the state within which you reside will not govern your credit card debt. Credit card applications contain a choice of law provision. This is an agreement between the parties to be governed by the law of a particular state. The credit card companies typically choose a state with an extremely long statute of limitations. Rhode Island, a typical state chose by credit card companies, has a ten year statute of limitations for open accounts.

You can’t sue me because you don’t have a signed contract.

Most people fail to understand that when they sign a credit card application and send it back in they have actually signed a contract. I now advise all of my personal clients to keep copies of those applications when they sign them and send them back in. However most individuals typically do not. Regardless a credit card company will typically not issue a credit card without a signed application and therefore without a signed contract. However, even if there is no signed application, you still are parties to a contract. The contract may be an implied and equitable contract. In other words, the credit card company has extended you credit and you have taken advantage of it by purchasing things on their credit. You now have a legal obligation to repay that money and the court will construe that to be a contract.

I have never heard of the company that is contacting me or suing me and I have no agreement with them, therefore I don’t have to pay them.

There is an entire industry in this country now devoted to the purchase and collection of debt. Once you default on a credit card debt and the credit card company is unable to collect it, they will package it or bundle it with thousands of other delinquent debts and sell it to a debt buyer. The debt buyer will pay pennies on the dollar for the debt and then will attempt to collect it. This is perfectly legal. All contracts are assignable, unless there is a written provision in them barring assignment. What this means is that a credit card company can assign (sell) your debt to another company and they do not have to get your permission or even give you notice. That new company simply steps into the shoes of the original creditor.

You can’t sue me I am making payments.

Perhaps the most prevalent myth circulating on the internet is that if you are making minimal regular payments you cannot be sued. The truth is that once you default on a debt you can then be sued for the full balance at any time. Even if you recommence making the full payment, your default has rendered the full balance due and payable at any time. The mere fact that you are making minimal or nominal payments on a regular weekly, monthly or bi-monthly basis does not prevent a creditor from suing you.

There are hundreds of other myths and I will address them in future articles.

Monday, November 12, 2007


I reopened the poll and set it to run for an entire year. Let me know what you think.

How to Stop Harassing Collection Phone Calls and Profit From Them

If you are receiving calls from a debt collector who is harassing you and violating the FDCPA,
you can take action to put an end to that illegal activity. This article is not directed toward legally compliant FDCPA calls. However, if a collector is violating the Federal Fair Debt Collection Practices Act by making improper threats or allegations such as that he is going to have you arrested if you don’t pay the debt or he is going to tell your employer that you are a deadbeat, you can take action. The simplest, cheapest and quickest action you can take to stop harassing, illegal collection calls is to purchase a voice recorder. For a minimal amount of money at Radio Shack or other similar stores you can purchase a easy to plugin device which will allow you to record your own telephone conversations. At this point, I must give you a legal warning, however. The laws regarding the legality of taping telephone conversations vary from state to state. Some states are one party states and some states are two party states. That simply means that in a one party state only one party to a telephone conversation must be aware that it is being recorded for it to legally be recorded. In a two party state, both parties to the telephone conversation must be given notice that it is being recorded for it to be recorded legally. Of course, in no state is it legal for a third party nonparticipant in the telephone conversation to record the telephone conversation without a court order. Regardless of whether you live in a one or two party state, I would highly recommend that you give the collector notice that you are recording the telephone conversation. This should have an immediate impact on the nature of the call. At the very outset of the telephone conversation, you should inform the collector that you are recording all of your telephone conversations and in a two party state, ask their permission to record the call. If a collector is prone to use illegal or harassing tactics, they will typically simply hang up rather than be recorded. If a collector is only occasionally prone to cross the line and use improper collection techniques, they will, once they know they are being recorded, mind their manners and be on their best behavior with regard to complying with the FDCPA. Therefore in the majority of cases, you will have eliminated the harassing nature of the collection calls, simply by placing the collector on notice that the call is being recorded. However, if a collector did violate FDCPA by harassing you or making illegal assertions or threats, you know have tape recorded evidence of that violation. You now need to do two things with that tape. First, you need to file a written complaint with the government authority or agency which regulates and governs debt collection agencies in your state. They typically will have a form online that you can print off, fill out and mail in. These forms typically do not carry much weight with the government agencies. However, if you make a copy of your tape and attach it to your complaint, your complaint now has instant credibility and will be given special attention. You should also copy the collection agency with the complaint and a copy of the recording. Secondly, you should file a complaint alleging violations of the Federal Fair Debt Collection Practices Act with your local small claims court. FDCPA violation claims can be brought in any state or federal court. On the day of trial, you can give testimony that the call was received on a given date and at a given time and that you personally recorded it and then present the tape as evidence to the court. The tape should be sufficient evidence for you to recover the statutory fine or penalty of $1,000.00 as set forth in the FDCPA. In this way, you have not only put a stop to the harassing phone calls, but you can even profit from them giving yourself $1,000.00 per violation to pay your debts

Thursday, November 08, 2007

Fix It or Forget It

The biggest mistake a debtor makes is failing to plan a course of action. The majority of debtors I encounter are merely floating through life allowing their circumstances to drive their life choices. They pay the debts owed to my clients because I am actually taking the time and effort to sue them and make their lives miserable while they ignore other debts which are not being as forcefully collected. These same debtors attempt to make low monthly payments thus preserving their debts for inordinate periods of time and ultimately failing to pay off their debt and only managing to accomplish the ruination of their credit. A debtor who is facing significant amounts of debt needs to make a life choice and implement a plan based upon that life choice. That choice is as fundamental as fix it or forget it. In other words, a debtor needs to decide are they going to create and implement a plan which allows them to pay off all of their debt, avoid the creation of new debt, preserve and if necessary repair their credit or is the debtor going to make a conscious decision to not pay any of their debt and allow the passage of time to clear up their debt problem. Both of these courses of action have merit and pros and cons. Both also are extremely difficult. The easier course of action is to simply float down the debt river paying what you can, when you can but in the long run that is both devastating and permanent.

In the first course of action, the debtor should find a program that they can embrace and make their own and totally commit to. I highly recommend the Dave Ramsey Christian based program, but that is simply my opinion. If the debtor makes this life choice they will have to implement a strict budget and pay down the smallest debts first, eliminating debt as they go. The debtor will have to deny themselves the luxury of living like everyone else and will actually have to buckle down and do without. How long it will take to accomplish this program depends on the number of debts and the amount of debt the debtor has incurred. A key to this life choice is a change in life style and pattern of thought. This change is absolutely essential in order to keep the debtor of incurring new debts while you are paying off the old ones. The end result of this life choice will be the end of debt collection harassment and good credit.

The second life choice option available to the debtor is to forget about their debt. This is an extremely dangerous life choice to make. It is not recommended if you have absolutely any assets whatsoever, such as a retirement fund, savings account, luxury automobile or equity in your house. If you are truly flat broke, you can consider ignoring your unsecured debt. By unsecured debt I am specifically referring to credit card debt. Any debt that is secured with collateral such as your car loan which is secured by your car or your house note which is secured by your house must be paid or the institution to which you owe the debt will simply repossess the collateral. A debtor can under the Federal Fair Debt Collection Practices Act inform a collection agency that he or she has no intention of paying the debt and to cease all contact. At that point the debt collection agency must cease all contact, but can proceed with a lawsuit. At some point your creditors will lose interest in pursuing you if you never make any payments and have no assets. Likewise at some point your debts are simply no longer valid based upon the statute of limitations for open accounts in your state. That time period varies from state to state. If a judgment is taken against you that judgment is good for a certain number of years. For example in my state of Tennessee a judgment is good for ten (10) years however, you should understand that at any time during that ten (10) years that judgment can be renewed by court order for an additional ten years. Using this method you are simply banking on the fact that your creditors will lose interest in attempting to get money out of a dry hole. After seven (7) years the derogatory information will age off of your credit report. The downside to this life choice is that you will have to endure credit collection attempts and the fear that whatever asset you do have will be seized or taken to satisfy the debt. At the end of this process, assuming you do not incur additional new debts, you will have decent credit as all of the derogatory information will have aged off.

I cannot recommend to you either of these life choices nor can I advise you on which would be the best for your circumstances. There are other obvious life choices, such as filing either Chapter 7 or Chapter 13 bankruptcy, which I have not discussed. However I can strongly advise you to avoid simply floating down the river of debt making minimum payments when and where you can.

Thursday, October 18, 2007

I am not your lawyer!

I know the health care insurance world is in crisis. I know that because I teach seminars on debt collection and give speeches on ways to fix the health care system. But how I really know it is the pleas from desperate people I receive as a result of this blog. This blog is here to provide information. It is not a solicitation for clients. I now receive an average of twenty emails a week from people describing their specific situation and asking for legal advice. I also receive an average of three telephone calls a week from the truly brave or the truly desperate. These requests break my heart. But I can't respond to them. I am licensed to practice law in the states of Tennessee and Mississippi. I've passed the bar in Alabama, but due to geographical distance, no longer practice there. I am not licensed to practice law in any other state. The rules of my profession prevent me from giving advice on what to do in New York or California or any where else I am not licensed to practice. Additionally, I'm not your lawyer. You and I don't have an attorney client relationship. You haven't hired me, you haven't paid me and I haven't agreed to be your lawyer. Finally, I have an active practice with clients who are actually my clients. Tending to their needs and problems takes all the time I am willing to sacrifice away from my family. I will continue to update this blog and provide as much information as I can. But please understand, if I don't respond to your email and tell you what to do, it's not because I'm being rude or stuck up. It's because I'm not your lawyer.

Wednesday, September 19, 2007


The Wall Street Journal recently reported that the rate of foreclosures has now equaled that of the Great Depression. Record numbers of Americans now face foreclosure on their homes. Aside from the immediate tragedy of losing their homes, these homeowners face the lasting legacy of severely damaged credit. The record of a foreclosure will stay on your credit report for a minimum of seven (7) years. A year ago this would have meant that when you apply for a home loan you would have been assigned to the sub-prime mortgage market. This would have merely meant a higher interest rate which would translate to a higher monthly house note. However, in today’s world the sub-prime market has simply disappeared. Therefore if you have a foreclosure on your credit report it is highly unlikely that you will be able to obtain a home loan. This will change as the credit market swings back to a more liberal pole, but that will not occur for several years. So what is a homeowner to do if faced with imminent foreclosure? The solution may be in the most desperate of circumstances, the short sale. The collapse of the sub-prime market and the drastically increased number of foreclosures has created an entirely new market place for what is commonly called short sales. A broker or a short-sale specialist will contact the home owner and offer to purchase their home for an extremely discounted price. Typically this price is for less than the outstanding balance of the home mortgage. If the homeowner accepts this offer the short-sale specialist will then contact the mortgage company’s loss prevention department. The loss prevention department is the department whose primary function is to prevent default on loans and when default cannot be prevented to proceed with foreclosure and recover as much of the loan as possible. This branch of the mortgage company will acquire the property through foreclosure, then they will sell the real property and subsequently, file a civil suit against the defaulting home owner for the remaining balance of the home loan not covered by the sale of the property. The short sale specialist will negotiate with the loss prevention officer a satisfaction of the mortgage for a discount. These examples work better if some arbitrary numbers are applied. In our case let us assume that a homeowner has purchased a $200,000.00 house on a no money down, interest only loan. Five years into the loan, the balloon refinancing note has become due or the arm as kicked in and the homeowner’s monthly payment has skyrocketed. Because the homeowner has only been paying interest for the first five years of the loan the principle balance of the mortgage is still $200,000.00. The homeowner may very well have equity in the home due to the home’s appreciation in value or the homeowner may be over-leveraged in the home due to collapse of the local home market and devaluation of properties. The amount of equity the homeowner has is immaterial in the short sale scenario. The short sale specialist will offer the homeowner $150,000.00. If the homeowner accepts, the short sale specialist will then contact the loss prevention officer for the bank and offer payment of $140,000.00 in full satisfaction of the $200,000.00 mortgage. Now you are asking why in the world would the bank accept $140,000.00 on a $200,000.00 loan. The reason is the bank is in the business of loaning money and making money off those loans. The bank is not in the business of taking possession of thousands of pieces of real estate, paying the carrying costs on those pieces of real estate, paying the maintenance and upkeep on those thousands of pieces of real estate, paying the repair and remediation costs in order to make those pieces of property marketable and then paying real estate brokerage fees and closing costs for the sale of that property. Banks have already been glutted with foreclosed property and now are no longer interested in taking on new properties. If the loss prevention officer accepts the $140,000.00 offer, the short sale specialist will then go out and find an investor. An investor is someone who is buying property to convert them into rental property or has enough liquidity to purchase property and hold them until the market recovers and returns to normal, when he can then sell the property at a substantial profit. The short sale specialist will locate an investor who is willing to accept assignment of his contract for sale with the owner at $150,000.00. At the closing of that sale the investor will pay $150,000.00. $140,000.00 of that will be paid to the bank in full and final satisfaction of the $200,000.00 mortgage. The remaining $10,000.00 will be paid to the short-sale specialist essentially as a commission for his work in setting up the deal. At the end of the closing the bank walks away with 70¢ on the dollar on its mortgage. The investor walks away with a $200,000.00 house that he bought for $150,000.00 which will now either generate rental income or when the market returns to normal give him a $50,000.00 profit. The short-sale specialist walks away with $10,000.00 cash for a tremendous amount of legwork and negotiation. Your first impression is that the homeowner has been screwed. That is absolutely not the case. The homeowner walks away from the closing with his credit report reflecting that he paid in full a $200,000.00 mortgage with no record of a foreclosure. The homeowner can now go back into the market place and buy a home that he can actually afford under a realistic thirty (30) year fixed rate mortgage. The only true downside for the homeowner is that if in fact he had equity in the home. If he in fact had equity in the home he has lost that appreciation. However, in truth he lost that equity when he could not sell the house for his asking price and that loss was inevitable once the property was foreclosed. Therefore if you are facing imminent foreclosure, one strategy which may preserve your credit is to seek out the short sale specialist who is willing to make an offer to purchase your house for a substantial discount.

Friday, August 17, 2007

Poll Result

Well the poll closed the results are as clear as a Florida election count. Less than 10% separates the two options. Clearly there was no decisive victor. With this feedback in hand, I will endeavour to tract both courses as equally as possible and thus try to satisfy everyone.

Wednesday, August 15, 2007

Coming Soon

Well, the poll is still churning along, but the current leader is a seed change to information on how to beat your debt. I'll continue to cater to the leader while the poll runs and then make up my mind after I see the final results. With that in mind, I've been thinking of some future offerings. I will shortly be posting a series on how to beat old medical bills and at least one installment on how to save your credit when faced with foreclosure. Check back to see how those turn out.

Tuesday, August 14, 2007

How To Beat An Old Credit Card Debt: Part Three

Read the contract. Almost all debt collection law suits based upon aged credit card debts are breach of contract suits. What that means is that you are being sued for breaking your written promise to repay the debt. Therefore, the key to the suit is the actual written contract. In this case, that means the long, very fine printed, agreement you signed way back when you were first issued the credit card. You need to get a copy of this and read it, every word of it. Getting it may be difficult. If you are being sued in small claims type of court, you may not have the benefit of formal discovery. Formal discovery is used by lawyers to learn about the other sides case. One tool of formal discovery is the Request for Production of Documents. If the court you are being sued in is governed by Rules of Civil Procedure, then you may file a formal Request for Production of Documents before your trial date and obtain a copy of the contract. If the court is an informal or non-rule court, then you need to request a copy of the contract from the collection attorney. You need to make that request politely, in writing and by certified mail. That way if you aren't provided a copy and you see it for the first time at trial, the judge will be sympathetic with you and grant you either a break to review the document or a continuance. So now you have the contract, what are you looking for? You need to examine the maximum amount of interest you are allowed to be charged under the agreement. Has the debt buyer exceeded that amount? Has the debt buyer exceeded that amount by adding on collection fees and costs? Does the amount now sued for exceed your state's usury statute? Next, does the agreement require the suit to be brought in a particular jurisdiction or state? If so, you may be able to have the suit dismissed in your jurisdiction. Does the agreement require either arbitration or mediation? Again, if so you may be able to have the suit dismissed. In the last two examples, particularly with aged debt, the delay in having to either refile in the proper jurisdiction or in the proper forum may run the creditor past the statute of limitations we discussed in part one. So, the bottom line is get a copy of the contract and read it. Read every word of it.

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 

Friday, August 10, 2007

How To Beat An Old Credit Card Debt: Part Two

The second best weapon to defeat a suit based upon an old credit card debt is CROSS EXAMINATION. The majority of collection suits filed by second or third hand debt buyers are based upon a sworn affidavit. That is an affidavit from someone who works for the debt buyer that says they are familiar with the books and records and your account and that you owe x number of dollars. If no one shows up on the day the matter is set in court, that document is sufficient to allow the debt collector to take a judgment. However, in all courts, you as the defendant have a Constitutional right to cross examination of the party testifying against your interests. And you cannot cross examine a piece of paper. What that means is that the company suing you has to produce a real live breathing witness who can truthfully and accurately testify about your account and be subject to being cross examined by you. Most credit card debt purchasers deal in a volume business and have no interest in going to the expense of making such a witness available in your jurisdiction. Many judges, however, will gloss over your right to cross examination unless you clearly assert that right and demand the opportunity. Your ability to actually cross examine is not as important as forcing the debt collector's hand in producing a live witness.

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 

Thursday, August 09, 2007

How To Beat An Old Credit Card Debt: Part One

What is the best weapon to beat an old credit card debt? The answer is time or said in fancy legalese, the Statute of Limitations. The Statute of Limitations is a deadline you have to sue someone. The Statute of Limitations is different for every type of lawsuit and varies from state to state. For example, in the state of Tennessee the Statute of Limitations for an open account or contract is six years. That means that a company has six years to file a lawsuit against from the day you default on your agreement. One day beyond that six years, and their lawsuit is barred by the Statute of Limitations. So the questions are; what Statute of Limitations applies and When did default occur. The most applicable Statute of Limitations will likely either be one for contract (may be for breach of contract) or for open account. An open account is essentially a line of revolving credit. You can find your state's appropriate Statute of Limitation from a link on the right side of this blog entitled "Debt Law for All 50 States". Once you know how long the right Statute of Limitations is for your state, then you need to determine when did default occur. If you are being sued for an old credit card debt that has been sold several times, then it is likely that the current owner has no idea or more importantly, no proof, of when you defaulted. You should argue that your default occur ed the day your first payment was due that you did not pay. Hopefully, you have some written evidence of that; a past due bill, a collection letter, etc. If you do not, then file an affidavit alleging the date and then the burden will shift to the debt purchaser to prove that the suit was not brought in violation of the Statute of Limitations.

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 

Wednesday, August 08, 2007

Change In Course--Poll

I haven't written anything here for six months. That hiatus has been intentional. I have taken a leave from this blog because quite honestly I have been disturbed by the comments and emails it has generated. I have been considering whether to delete the blog completely, continue trudging down the path I have been traveling or concede to the obvious audience this site has garnered. I started this blog as an information sharing site for attorneys and professionals working in the debt collection field. My goal was a frank and honest discussion about our profession and I quite selfishly hoped I would learn some new methods and garner some new ideas on how to productively reach a resolution for all parties in this complex dance. That simply has not happened. The comments and emails this blog generates fall into two clear categories almost without fail. First, there are the obligatory "you suck", "you are scum", "debt collectors are going to hell", "you make me sick" responses. I don't mind those as they are easy enough to ignore and I am not so thin skinned as to let such feeble verbal sticks and stones harm me. The second group is completely different. These are people who for an infinite variety of reasons (some good, some bad, some fraudulent) cannot or do not want to pay their bills and are looking for a way out of the collection process that leaves them relatively unscathed. I began by trying to converse with these responders. My first question was always, "Is the debt yours, did you spend the money?" I was trying to appeal to the person's moral obligation to pay their debts. Very rarely, if ever, did I get a response to that question. Instead, I got chapter and verse on how they couldn't afford to pay the debt and how they were being hounded by terrible people who actually expected them to pay. So the audience this little blog has garnered is person looking to get out of debt the quick and easy way (it's never quick or easy) the new fangled way: don't pay it. And thus, I'm left with the choice, shut it down, ignore my audience and continue writing as if other debt collection attorney's were reading it or change the focus of the content to how to help you beat the collection industry. I haven't answered that question and I thought I would let you all answer it for me through a poll. So vote, your opinion matters.

Tuesday, January 09, 2007


Everyone knows the old saying, nothing is certain but death and taxes. Well, even in the world of debt collection, taxes are a certainty. Unfortunately, taxes are a certainty that many consumers are told to expect and come as a nasty after the fact surprise. Millions of Americans are working with debt consolidation companies to have part of their credit card debt forgiven. It sounds almost too good to be true, the interest and late fees and other penalties and fees are magically wiped out and the debtor is allowed to repay the principal debt on a monthly basis without more interest accruing. Sometimes, if the debtor's situation is extremely dire or the debtor can offer a large lump sum payment, some of the actual principal debt may be wiped out. Compromises of large balances are almost the norm for second and third tier debt purchasers. In other words, if you default on your credit card balance, the credit card company may write off your debt as a bad debt and then sell your account to a debt buyer for pennies on the dollar. Your debt may even be sold multiple times, each time for less money. The company you end up paying may be more than happy to accept a deeply discounted payment as payment in full. But months later, you will receive a nasty surprise. You will receive a 1099 C which is the IRS form the creditor used to report the cancellation of part of your debt. You see when you don't have to repay a debt you have incurred, the IRS says that becomes income and as income, you owe them taxes on it. Under IRS rules and regulations, any debt forgiven which is more than $600.00 must be reported on a form 1099 C Cancellation of Debt and stated as income on your tax return. In other words, if you run up a credit card bill of $10,000 and the credit card company or whoever buys their bad debt accepts $5,000 as payment in full, you have received the benefit of $5,000 dollars you didn't have to repay. In the eyes of the IRS, it is the same as if you earned $5,000 at your job. If you fail to report it, you can be guilty of tax fraud. But don't worry, the IRS will already know about it because they will receive a copy of the 1099 C the creditor sends you and they will recalculate your return, assess taxes and penalties and interest against you. So when you are feeling great about getting your debts cut in half or even better, remember that Uncle Sam will come looking for his and usually with interest and penalties.

Wednesday, January 03, 2007


15 United States Code § 1692, et. seq. is the codification of the Federal Fair Debt Collection Practices Act. It is a law that was passed by Congress in response to the actions of a small minority of disreputable and unethical debt collectors. On its face, it purports to be a law designed to protect the individual consumer. However, as with all things which are birthed from Capital Hill, it is in fact the product of high powered lobbyists. Those lobbyists made sure that the FDCPA was stripped of any and all teeth and what was left is merely an illusion. Unfortunately, most consumers who get into debt trouble are falsely led to believe that the FDCPA is at best a sword to be used against their creditors, and at worst a shield to protect them from their creditors. It is neither; it is an urban legend, an internet myth, a tragic illusion that the FDCPA provides any real substantial protection to a consumer.

15 USC § 1692g(a) sets forth the "validation" requirements in collecting a debt. When any debt collector is attempting to collect a debt, whether a collection agency or an attorney such as myself, begins collection activity, we must validate the debt by providing the information set forth in 1692g(a). The information required by the law is (1) the amount of the debt; (2) the name of the creditor; (3) a statement that the debtor has 30 days to dispute the debt or it will be assumed valid. That is all of the information that is required by 1692g(a). No additional information is required by the law. If a debtor disputes the debt within the 30 day period, 15 USC § 1692g(b) provides for the debt to be verified. This simply means that the debt collector must send a written statement to the debtor with the name and address of the original creditor and the amount of the debt. This is all a verification is. The verification does not require the collector to produce original documents evidencing the debt. In fact, the debt can be verified by a simple sworn affidavit.

The one tiny bit of protection provided by the Act is that once the debtor disputes the debt, the debt collector must cease collection activities until he puts the verification in the mail to the debtor. Again, though, the verification required is extremely simple and extremely easy to prepare or obtain. Therefore, this supposed protection turns out to be an extremely brief pause in the debt collection process.

Unfortunately, just as there are unscrupulous and unethical debt collectors, there are unscrupulous and unethical debt advisers. You can find them at any number of over a thousand websites on the internet. Some of these self-proclaimed gurus will for a small fee teach you how to fend off debt collectors using the FDCPA. There are in fact others who will provide this information for free if you are more diligent in your Google searching. They will provide you with form letters guaranteed (they don't ever tell you what you will get if their guaranteed product does not work like they say it does) to stop debt collectors dead in their tracks. Unfortunately, I have begun to receive evermore of these forms letters obtained off the internet. In my mind, this is an absolutely tragedy because these are desperate people who are being given false hope and who are being led down a path which ends in a worse situation and a larger debt. These form letters tell the debt collector that he must furnish information which is not required by the FDCPA and make hollow and even ludicrous threats, such as reporting to the Federal Trade Commission. Rather than strike fear in the heart of the collector, when I receive one of these form letters hot off the internet, I mark the file for what I call internet attention. This simply means that I know I am dealing with a debtor who has no clue what they are doing or what the law actually is and that this will be an easy debt to collect once I locate assets. Because this person has been given false hope by an internet scam artist, I know I will be wasting my time in attempting to reach a reasonable and amicable solution or settlement of the debt and proceed straight to the quickest possible judgment and collection activity.

What the internet scam artists do not tell consumers is that the FDCPA contains a virtual "get out of jail free" card. 15 USC § 1692(k)(c) provides that in order to punish a debt collector for violation to the FDCPA, you must prove that the violations were intentional and that there will be no punishment whatsoever if the debt collector can show that the violation was unintentional and that the debt collector has in place policies and procedures to provide with compliance with the FDCPA. Therefore, I and the collection agencies I represent maintain meticulously policy and procedural manuals regarding what is and what is not a violation of the FDCPA and I require all of my employees to review and sign off on that manual on a regular basis. I am not saying that my office is perfect and that we do not or have not on occasion unintentionally and purely by mistake violated the FDCPA. I am saying that my staff is well educated on the FDCPA and that we do not engage in an intentional pattern and practice of violation and therefore, no court is going to award a debtor damages for a mistaken violation. Now I know you are saying, "Wait a minute, I have seen recent headlines where debt collection agencies have been slammed by the Federal Government for violations of the FDCPA." You are absolutely correct. Those were cases of completely unscrupulous and unethical agencies which deliberately and intentionally and over a long period of time engaged in actions which are directly prohibited by the Act. What the consumer is not told is that those agencies or collectors are punished by the Federal Government by the imposition of large fines or the revocation or collection licenses and that has absolutely no effect on the validity of the consumer's debt. That debt remains outstanding and will simply be sent to another collection agency for collection.

So, if you are a debtor how should you use the Federal Fair Debt Collection Practices Act? You can take advantage of the anti-harassment provisions and protection provided by the Act. You can tell the collector not to contact you at work if you so desire. You can tell the collector not to contact you at all if you so desire. However, if you refuse all contact with the collector, you should assume that the debt will be forwarded to a collection attorney for suit. You can request a verification which will delay collection of the debt. You can use that time to raise funds to pay off the debt or to contact the collector and attempt to make some arrangement for satisfaction of the debt. If you are being harassed by a collector, repeated phone calls, threats of criminal prosecution, threats of providing information about your debt to your employer or friends or family, etc., you can and should report those violations to your state licensing commission and you can file a lawsuit. However, as with all lawsuits, you will be at a distinct disadvantage since the collection agency will be represented by an attorney. However, if you are not being harassed or if the collector has not intentionally violated the FDCPA, do not threaten to sue them. You will only draw attention to yourself and to your ignorance of the law. The bottom line is that the FDCPA is more myth, than sword or shield.

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Tuesday, January 02, 2007


A large portion of my debt collection practice is made up of the collection of past due medical bills. Unfortunately, the vast majority of the people I end up suing for past due medical bills are not the large numbers of uninsured about which congress is constantly concerned. They are people who actually have health care insurance, but their insurance has denied the claim or failed to pay. Despite any number of modern myths, this is the bottom line everywhere in the United States when you go to the doctor's office, you will be asked to sign a Patient Financial Responsibility document, which in layman's terms says you are responsible for your own bill whether you have insurance or not.

When you go to the doctor, the doctor provides you services and you are responsible for paying for those services. You may have a contract of insurance, but that is a contract between you, as the insured, and the insurance company. It is not a contractual relationship between the doctor and the insurance company. The doctor's office files your insurance claim as a courtesy to you. Even your policy of medical insurance will state that you, and not your doctor's office, are responsible for filing the claim. So the first great truth that every patient must understand in today's modern world is that they are first and foremost responsible for payment of the doctor and hospital bills, even if they have insurance.

The second myth widely held by the public today is that unless you receive a bill from a doctor's office, you don't owe them anything. I cannot tell you the number of times I hear during the day "well, they never sent me a bill." A bill or a dunning letter is not a pre-requisite to establishing or enforcing a contractual debt. The instant the service is performed, the debt is incurred and is owed. The mere fact that you don't have to pay the full bill when you leave the doctor's office or are discharged from hospital is a courtesy to you. That is not a courtesy that you can take advantage of by not paying. This leads me to the second great truth of the modern world of medical bills and insurance. It is entirely the patient's responsibility to keep track of whether or not their insurance company has paid a claim or not. This is a difficult truth for many busy self-absorbed, distracted Americans to take to heart. What it essentially boils down to is that if you go to the doctor and you do not receive an EOB (Explanation of Benefits) from your insurance company showing where they have paid that doctor, you need to pick up the telephone and call your insurance company and find out why they have not. Likewise, if you receive an EOB showing that your insurance company has denied a claim, you need to file a dispute in writing with your insurance company and do everything necessary to appeal that decision and have the claim paid. If you do not, more than likely, you will not receive a bill from the physician's office, but rather you will receive a collection letter from a collection agency stating that your bad debt has been turned over for collection. The doctor's office will not fight with your insurance company to make them pay your bill for you.

The third hard truth of the modern world of medical billing and medical insurance is that if you drop the ball, you have to pay. The reason for this is what is known in legal and insurance circles as "timely filing." All insurance companies have in their policies a requirement that a claim be timely filed, and that phrase is defined in each individual policy as a specific period of time. The standard is ninety (90) days; however, there may be variations. What this means is that if you have services at a physician's office or hospital, and no claim is filed within that 90 days, the insurance company is relieved of their contractual obligation to pay your medical bill. This is a horrible trap for the unaware consumer. If you go to the doctor and the doctor's office fails to file your insurance claim through their own negligence or oversight and 90 days passes, and you receive a letter from a collection agency saying you owe a doctor's bill, then you owe a doctor's bill. I reference you to cold hard truth number 2; it is your responsibility to make sure your insurance company pays your medical bills. If you go to the doctor and you don't receive an EOB within 90 days, you must contact the doctor's office and find out if they have filed the claim and your insurance company and find out why they have not processed the claim. If you fail to do so, then you will be contractually responsible for full payment of that bill, even if you had valid insurance at the time of the treatment.

Now, I know as you read this you are saying to yourself, "that's not fair." Well, I hope by now you have learned as an adult that life simply is not fair and if you intend to stand before a judge in opposition to a suit I filed and plead the "it ain't fair" defense, then be prepared for the Judge to agree with you and summarily rule against you.

The fourth truth of the modern world of medical insurance and medical bills is that your wife's bills are your bills; your children's bills are your bills, regardless of whether you knew about them or authorized them. In most states, a spouse in a marriage is responsible for his or her spouse's medical bills. This normally comes up where the service or treatment was provided before a divorce and the now ex-spouse is being sued for his hated former companion's medical bills. Regardless of divorce, in most states, a mother or father is responsible for the medical bills and debts of their minor children, regardless of the circumstances. This most frequently arises where the ex-wife takes the child to the doctor without telling her ex-husband and runs up a large medical bill and does not pay. Then the ex-husband, who never knew anything about the bill, that has the better job, is sued. I realize this once again falls under the heading of life is not fair. However, it is perfectly legal and if you have a good divorce lawyer when you are divorced, your Marital Dissolution Agreement should allow you to recover those funds or at least one half of those funds from your ex-spouse. Your Marital Dissolution Agreement should also have a provision that requires both parties to notify the other party of any medical treatment and to provide medical bills and records within a certain period of time. Failure to do so may get a former spouse cited for contempt in Divorce Court. All of that, though, has no effect on the collection of the medical bill.

Now having painted a very dismal picture for the common patient, I will provide the one sword the patient can pick up and fight with. In today's modern medical insurance world, the vast majority of insurance policies are in fact not insurance policies, but Preferred Providers Organizations or Health Maintenance Organizations or some other alphabetic variation of a PPO or HMO. In order to be a member of the "network," the healthcare provider (i.e., your doctor) must sign a contract with the insurance company agreeing to provide his or her services at a certain rate for network members. This usually represents a discount from what the man on the street would receive. More importantly, these agreements often contain contractual requirements that the medical services provider submit the claim to the PPO and not take action against the member (i.e. you). If a doctor's office drops the ball and does not file a claim and then files suit against you, that PPO or HMO agreement may be used in your defense.

In conclusion, when and if a medical debt collection attorney sues you, do not expect to pick up the telephone and call his office and tell him "but I had insurance" and have everything be made alright.