Debt Collection

The initial phase of debt collection involves the original creditor attempting to resolve the delinquency in-house. When these efforts fail, the debt is typically "charged off" and sold to a third-party debt buyer or placed with a collection agency on a contingency basis. These entities utilize advanced data analytics to prioritize accounts with the highest recovery potential. During this stage, the risks include:

• The sudden acceleration of the entire balance including all future interest.
• The reporting of the delinquency to major credit bureaus, lowering your credit score by hundreds of points.
• The initiation of a relentless communication schedule designed to induce a payment through psychological pressure.
• The accumulation of administrative fees and late penalties that often exceed the original principal.

Once a debt collection matter reaches the litigation stage, it becomes a formal judicial conflict. The creditor files a summons and complaint, alleging a breach of contract and demanding the full balance plus attorney fees. This is the last opportunity for a debtor to resolve the issue before the state’s enforcement powers are triggered. In many jurisdictions, the debtor has only twenty to thirty days to file a formal answer. Failing to do so results in a "paper victory" for the creditor that remains enforceable for up to twenty years in many states.

The FDCPA prohibits collectors from using abusive language, making false threats of arrest and contacting debtors at unusual hours. Collectors are also barred from calling a debtor at their place of employment if they know the employer prohibits such calls. By documenting every interaction and identifying these violations, a debtor can shift the momentum of the case. Common FDCPA violations include:

• Using profanity or demeaning language during collection calls.
• Threatening legal action that the collector does not actually intend to take.
• Misrepresenting the character, amount or legal status of the debt.
• Contacting third parties like neighbors or co-workers regarding your financial situation.

Under federal law, a debtor has the absolute right to demand that the collector provide proof of the debt's validity within thirty days of the initial contact. This "debt validation notice" must include the name of the original creditor and the exact amount owed. If the collector cannot provide the original contract or a clear chain of title proving they own the debt, they are legally prohibited from continuing their debt collection efforts. This remains one of the most effective tools for defeating junk debt buyers who often lack the necessary documentation to prevail in court.

To sue for a debt, the plaintiff must prove they actually own it. This requires a "chain of assignments" from the original creditor down to the current plaintiff. In many debt collection cases, these assignments are missing or contain clerical errors. We scrutinize these documents to find gaps in the ownership history. If the chain is broken, the plaintiff lacks "standing" to sue, and the court will strike the complaint, effectively ending the creditor's ability to recover the funds.

Every state has a statute of limitations that limits the time a creditor has to sue for a debt. For most written contracts, this period is between three and six years. If a creditor waits too long to file their lawsuit, the debt becomes "time-barred" and legally unenforceable. However, many debt collection agencies will still attempt to sue, hoping the debtor does not know their rights. Raising the statute of limitations as an affirmative defense is a definitive move that results in an immediate dismissal of the case.

A bank levy is a devastating enforcement tool that allows a creditor to freeze every cent in your account without prior notice. The bank is legally obligated to turn the funds over to the creditor until the judgment is satisfied. This can result in:

• The immediate failure of all automated bill payments and mortgage transfers.
• The total loss of access to operating capital for business owners.
• The disclosure of your financial crisis to the bank’s management and lending department.
• A negative mark on your banking record that may prevent you from opening future accounts.

Wage garnishment is a persistent financial tax where the court orders your employer to send up to 25 percent of your net pay directly to the creditor. This remains in place until the entire judgment, including post-judgment interest and court costs, is paid in full. Because the interest rate on judgments is often set by statute at a high level, a debtor may find themselves in a situation where they are paying for years without ever reducing the principal balance.

Creditors value cash today more than the promise of payments tomorrow. A lump-sum settlement offer, backed by a clear explanation of why the creditor might lose the case, is the most effective way to close a debt collection file. We negotiate these buyouts to include a "mutual release of all claims" and a requirement that the creditor report the account as "settled in full" or "paid in full" to the credit bureaus, providing you with a clean slate to rebuild your financial future.

If a lump sum is not an option, a structured payment plan can be used to prevent the entry of a judgment. This is often done through a "Stipulated Judgment" where you agree to pay a specific amount over time. If you make all the payments, the case is dismissed. If you miss a payment, the creditor can immediately enter the judgment without a trial. We structure these agreements with specific "grace periods" and notice requirements to protect our clients from accidental defaults.

A common tactic in commercial debt collection is the "phoenix maneuver," where a business closes one day and reopens the next under a different name to escape its creditors. The law prevents this through the doctrine of successor liability. If the new company has the same owners, employees and customers as the old one, it is legally responsible for the old company’s debts. We litigate these cases to ensure that business owners cannot simply walk away from their obligations by changing the name on the door.

Most commercial lenders secure their debts through UCC-1 financing statements, which create a lien on all business assets, including inventory and equipment. When a business fails to pay, the creditor can move for "replevin" to physically seize the collateral. Understanding the priority of these liens is essential for any business facing debt collection, as the order of filings determines who gets paid first from the remaining assets of the company.

The moment a bankruptcy case is filed, every creditor is legally prohibited from contacting you or seizing your assets. If a creditor continues their debt collection efforts after being notified of the bankruptcy, they can be held in contempt and ordered to pay significant damages. This immediate relief provides the breathing room necessary to reorganize your finances and stop the cycle of predatory interest and fees.

In many cases, even a debt that has already been turned into a judgment can be discharged in bankruptcy. If a creditor has placed a lien on your home, we can often move to "avoid" that lien to the extent it impairs your homestead exemption. This allows you to walk away from the debt while keeping the equity in your home. Bankruptcy is the ultimate "reset button" for those who are overwhelmed by the relentless pressure of the debt collection system.