Creditors Sueing Earlier

bah that was my post. got logged out somehow.

Bad suggestion. Most judgments aren't worth the paper they are written on. What lawyer is going to spend $1,000 of time and money to get a judgment for $500 plus attorney fees when he/she knows they are unlikely to get paid even with a judgment. It does not make economic sense.

I say creditors should not be so quick to push credit on college kids and even high schoolers. Credit is a two-way street of responsibility. I say the side with the high priced lawyers, marketing consultants and economists has a much higher duty of responsibility to the individual debtor as well as our society. As such, they should be responsible in offering credit and also mindful of not clogging our courts with suits for $500 or less.

Give to the poor.

Thanks for the follow up FYI, after readind your post I started to write, "why don't you join the forum?" LOL

Both you and Robinhood are right. Companies can sue for any amount, but they must consider which accounts would be the most cost effective. When a company sues, it's almost like an investment, because they really don't know if they'll get anything, there are "pauper laws" and many other things out there for the consumers' benefit. All the while, companies which sue have all those mounting legal costs hanging out there as well.

When I first started as a finance manager 5 years ago, we were keeping defaulted accounts on our books a lot longer than we should have. We had 1-200 accounts that were 400+ days past-due and weren't charged off yet.

As we have an in-house collections department, it was our previous policy to spend about 2 years collecting on our own accounts, then charge it off and send it to a collection agency. What I found is that the collection agency really did not produce a good return. Not that they weren't doing their job, but we had already worked the accounts to death before we sent them to collections -- ie if we made 500 calls to a debtor over a 2-year span and they obviously weren't going to make payment, what is the 501st call from a CA going to do that we hadn't already done yet? And so it became a waste of time sending our accounts out to a collection agency. Not to mention, by the time the CA sends it back and says "We couldn't do anything, either sue them or let it go" -- 5-6 years has elapsed, our addresses and jobs for the customer are out-dated, SOL may be about up (and if not then it's probably about time for the person's next bankruptcy).

When my boss retired about 3 years ago, I took his spot as a Corporate Controller of the company. In analyzing our situation and overall delinquency, my corporate policy has shifted towards what FYI suggests. I tend to give customers less time to be delinquent, and I take action before the account gets too old, without using outside agencies.

In the front end, before we give out a loan I require substantial documentation from the customer to verify their residence and employment situation; we also verify employment directly with the employer before we give out the loan. This makes the back-end collections a bit easier, knowing that we keep good tabs on our customers.

When an account becomes delinquent, my collectors will make phone calls and send out letters; I have policies in place that allow my collectors to make suitable arragements with any customer who is willing but unable to meet their obligations. However, when an account is 200+ days past-due, I will personally review each account for further action.

At that point, if a customer has been co-operating with my staff, maybe by making partial payments, then I will leave it in my collectors' hands for a while longer in hopes the account will eventually get paid.

If there has been no activity on the account and/or the customer has been ignoring our calls, then I will do my best to determine what caused the delinquency -- namely 1) is the customer unable to pay (lack of income), or 2) is the customer simply unwilling/refuses to pay? From there, I can determine the probable collectibility of the account should I file a lawsuit.

In the case of a customer who is unable to pay (unemployed, disability/SSI, excessive debt, etc) a lawsuit does tend to be a waste of resources. I would usually take a look at their credit and see how they are performing overall on all of their credit accounts. If I am the only creditor they're not paying, and the chances are that I can go in and get a judgment with payment plan of $50/month, then I will do it. But if I see they're not paying anybody, and a lawsuit is likely to cause them to file bankruptcy, then I won't do it (unless they have already filed a 7 within the last 5 years, then I would rather force them into a 13 which I can get repaid some or all of my balance, or in the least recoup my legal costs). It all depends what their credit bureau looks like at the time.

On the contrary, 90% of my customers do have the resources available to pay, they just don't want to or are unwilling. In all such cases, I will send the file out to my attorney for suit, even if it is just for $100 balance. I know where they live, I know where they work, I can go in and get a judgment. Court costs and attorney fees become a part of the loan balance, with a statutory 9% interest on top.

This just leaves the skips. For those whose whereabouts are unknown, which may be 1/50 accounts, I keep in a file cabinet behind my desk. Several times a year we pull them all out and do some skip-tracing to find them. Sooner or later, they're bound to resurface. And when they do, refer to above.

Overall, my policy has been very effective in reducing our overall delinquency, and we are keeping bad debt on our books for a lot less time than we used to. My attorney has been very successful in recovering funds through the court process. Out of 200+ files I send to him each year, he may send 10-15 back to me that "aren't worth suing." So in essence, I do agree with FYI -- cut out the middleman, and the accounts that don't want to pay can go right out for lawsuit.

And I know that I will look like "the bad guy" for posting this. All I can say is that the customers who return my phone calls- or make attempts to rectify their delinquency- I have no problem making payment arrangements with. It's the ones who ignore the debt - who have no intention of paying it - that I need to deal with on such a legal basis.

Debtcruncher, thanks for the thoughtful post. Being on the debtor side of the spectrum, I can't agree with all that you say but some of it. I do think most people would really like to settle their debts if they could. Life is just not always that predictable. Yes, there will always be those people who can afford to pay and won't. I once knew a guy like that and he never got sued. I could never figure it out! He had a good job too but was terrible about paying bills. Never ONCE got sued. Also, too many collectors out there do not share your sense of fairness. I say if someone is really trying, help them. Even if all they can scrape together is a few bucks each month. Until I got into problems beyond my control, I always had the attitude that if money got tight, at least send something to demonstrate you are trying. Some of these collectors literally kick you in the teeth for trying. That's a disgrace. I think if more collectors took FEAR and harrassment out of their business practices, they would have more successful collections. Contrary to what so many of them think, fear does not motivate people and most people today have become very astute (and more educated about the law) and won't respond at all to fear tactics. People are "on" to the "game". They will simply shut down and ignore all of it. Those tactics are so "old school". I was at a mediation hearing today and while waiting my turn heard so many remarks from so many others waiting. By and large, people are disgusted. They don't care about judgments anymore because they really don't mean what they once did. These days, judgments are handed out wholesale and I think collectors and their attorneys have diluted the whole process. People KNOW that a judgment guarantees nothing because they are hearing it from other people and even from attorneys. Today I was at a mediation hearing. While I was waiting in a room packed with other debtors, I heard the comments. Some of them are on their 4th and 5th judgments and don't care because nothing has ever happened to them. They have never even been to ONE deposition. Too many attorneys are doing almost a "cost analysis" on each judgment they get. If they see money, they execute. If they don't, the judgment sits for years, ignored. People aren't stupid. I had a clerk down there tell me today that most don't even show up anymore for mediations. They know they will get a judgment anyway so why bother. The sad part of all this is that it's the truth. I'm in Florida (which allows garnishment)and have NEVER heard of a single case of garnishment among people I've known with judgments...except one...and she earned in excess of $100K/year. Attorneys I've talked to say garnishment is costly and often ineffective and sometimes people lose their jobs over it and so you end up with nothing anyway.

I'm not saying people should not take a judgment seriously. You definitely should. I am simply saying that this entire process of collecting, suing and judgments has become so diluted by greed as to be held up to ridicule. It's not enough for some of these collectors to get what is really owed. They want 2, 3 and 4 times what is owed! Rightfully earned interest you say? Offer a lump sum settlement and watch how fast their precious interest vaporizes at the thought of a quick settlement. They drool over it and live for it since most of them paid only pennies on the dollar for the paper in the first place. It's legal extortion. Pure and simple.

This is the 21st century. This country is in dire need of collection REFORM and a re-work of the entire legal process as it applies to collections, judgments and even mediation. Our process is in the dark ages. Even Mediation is almost laughable because there is no judge in mediation, just a mediator who is not a judge. What does it accomplish? Certainly not what it was intended to accomplish. It all boils down to pay the debt or accept the judgment. That's "mediation"?? If people had the money to pay the debt, they would not be sitting in mediation. They all want the judgment only to have the legal ability to see what you have in terms of money and assets. Period. When they see you have nothing, they disappear and the judgment is left sitting there, which is why so many simply file bankruptcy and end the insanity.

There has to be a better way.

Also in some counties they will not do "small debt cases" because (like the woman from our court office told me)it cost the tax payers money and time.Our courts will only do landlord cases on rent ect.The lady at the court office also said debt has to be over $10000 before they will them in a court room here!!!!She told me 90% of them never make it to court because the SOL is out!!!!!