Give No Free Information – Beware the Hardship Application

Sometimes debt collectors pretend to care whether you can afford to pay them, or whether they should “give you a break.” And it is even possible some of them may mean it. But if they send you a “hardship application,” you should consider very carefully whether or not to send it back. It could possibly have some value to you, but the stories we hear are not encouraging. And we’re suspicious of anything that would give the debt collector information about you.

Inability to Pay is not a Defense in Debt Law

The first thing you must remember about “hardship” is that no amount of financial difficulty (for a debtor) is a legal excuse to avoid paying a legitimate debt. And that means that the debt collectors won’t be considering whether you have a RIGHT to a break. They won’t even consider whether you should get one or not in some more esoteric question of fairness or rightness. No.

The question the debt collector will be asking is simply whether you have assets they can get to MAKE you pay. As we have often written, uncertainty is a great concern of the debt collectors and their lawyers. Perhaps THE great concern, thus we have always suggested that you not respond to them in any way or provide them any information at all. If their hardship application process leads them to bank accounts or job information, the net effect will surely be to make it easier and more likely for them to snatch your money rather than to spare you.

Information in Litigation

Debt Collectors never really worry about losing their lawsuit against you, and they sure as heckdon’t worry about whether suing you is compassionate or fair.Their main, and usually exclusive, concern is with getting your money. And this means that the one real thing they’re worried about is whether you have anything to take from you and figuring out how to do that. If you tell them that, you not only make your case far more valuable in their eyes, but you subject yourself to the risk of instant seizure or garnishment if they get a judgment against you. We encourage people not to talk to debt collectors at all.

If You Really Have Nothing

If you really have nothing – no assets beyond a monthly payment from Social Security or welfare, and no equity in your home, and no other identifiable assets or expectations – it might make sense to share that information with the debt collector. And even then I would be reluctant to identify any specific bank accounts. Even if they contain exclusively Social Security assets, you could find yourself working to keep them and in a bad spot.

I’m not aware of anyone who actually received a “hardship” break. But even this would be a Trojan Horse – more trouble than it’s worth – in all likelihood. When a creditor (including in this case debt collectors) “forgives” a debt (let’s you out of it), it can file a form 1099S, which does extinguish the debt collector’s right to collect, but also informs the I.R.S. that the debt is forgiven. The I.R.S. treats that forgiven debt as income and will come after you for tax. If you beat the debt collector in a lawsuit, on the other hand, your chances of owing taxes on the money are much smaller.

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