Todd Murray

Coping with garnishment

Undoubtedly, one of the most frustrating aspects of debt collection for consumers is having their bank accounts garnished (or levied) by creditors. It is a process that is often misunderstood and my goal is to provide general information that I hope is helpful.

A creditor is entitled to garnish a consumers bank account to recover an unpaid debt in most, if not all, states. Most often, the garnishment occurs after the consumer has been sued and the creditor has been awarded judgment, either by default or through litigation. When the bank receives the garnishment papers from the creditor, they usually must freeze all the money in that account on that day. Only after the money is frozen do consumers get notice of the garnishment. By then its too late; checks may have already bounced and large overdraft fees incurred.

Is this legal? Yes. Is it fair to consumers? Not really.

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90% of life (and defending debt buyer lawsuits) is just showing up

Although skeptics argue that Woody Allen’s famous observation over-simplifies the path to success, consumers sued by debt buyers will benefit from following Woody’s advice.

Of course, a debt buyer is a business that purchases debt from the original creditor and then sues consumers to collect the debts. Because the debt buyer did not originate the debt, it is at the mercy of the original creditor to provide it with evidence to prove its case. In some cases, the original creditor doesn’t provide the debt buyer with any evidence of the debt. And when the original creditor does provide evidence, it often is just a single billing statement that was generated long after the account became delinquent.

Although it seems counterintuitive for debt buyers to initiate lawsuits without knowing what, if any, evidence exists to prove their claims, debt buyers nonetheless initiate thousands of lawsuits each month. Why? 95% of collection lawsuits proceed by default and result in judgments being entered against consumers without the debt buyer having to prove its case.  This basic premise is why collecting purchased debt is a thriving sub-industry. Debt buyers know that they can obtain thousands of judgments without having to produce a single piece of evidence.

Which brings me back to Woody. If you are sued by a debt buyer, it is crucial that you show up, or respond to the lawsuit, and engage in the litigation process. This will force the debt buyer to prove its case in court. Often they can’t.

(photo: Wikimedia Commons)

Do’s and don’ts of dealing with debt collectors

There are too many to list, but here are a couple of the most important ones:

Don’t tell a debt collector where you bank or where you work

Debt collectors are always in hot pursuit of bank and employer information because bank and wage garnishments are easy and inexpensive ways to collect a debt. A favorite trick debt collectors use to find out this information is to say “We already know you bank at ABC Bank.” Surprisingly, many people will reply “No I don’t. I bank at XYZ Bank.” Don’t fall for this trick.

Do keep accurate records of all communications with a debt collector

Be sure to keep all letters from debt collectors, including their envelopes. Take detailed notes of every conversation immediately after hanging up the phone. Sign and date these notes. If a debt collector makes a promise, demand that he confirm it in writing. Occasionally, debt collectors will make an agreement that they don’t have authority from the creditor to make. Subsequently, the creditor may try to renege on the deal. Combat this by having the agreement in writing.

Do understand the difference between the dismissal of a lawsuit WITH prejudice and a dismissal WITHOUT prejudice

Dismissing a lawsuit with prejudice means a debt collector can never sue you again for the debt. Conversely, a dismissal without prejudice means you can be sued again for the debt. Often, when a debt collector can’t prove its case, it offers you a dismissal WITHOUT prejudice and sells the debt to another debt collector to try again. Don’t fall for this trap.  Also, if you agree to settle a debt collection lawsuit, make sure you get a dismissal with prejudice and keep it. Occasionally, debts that have been settled get sold and collection activity resumes.

Don’t lose your temper with a debt collector

This is not always easy, particularly with debt collectors that use abusive language. And if you’re being called by debt collectors, you’re probably dealing with significant stress and it can be easy to lose your temper. Resist this temptation and keep your end of the conversation professional. Let the debt collector lose his temper and make mistakes. If the debt collector violates the FDCPA, your claim will be stronger if the debt collector’s abusive language was unprovoked.

(photo: Kevin Steele)

There are no secret programs to get out of debt

Consumer lawyers and collection lawyers agree about as often as Bill O’Reilly and Keith Olbermann. But one thing they do agree on is the dubious value of most for-profit companies that promise to get consumers out of debt.

They go by many different names: credit counseling agencies, debt settlement companies, debt negotiators, etc. They usually charge a hefty up-front fee and require monthly payments. Their ads offer to get you out of debt for pennies on the dollar through “secret programs” that the credit card companies don’t want you to know about.

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