If you are behind in paying some bills and are considering negotiating with someone bugging you for money, what are the factors you need to consider as you prepare for and then talk with them? We have discussed elsewhere the need not to “give away” information carelessly. In this article we discuss the negotiations more from the point of view of the collector. You’ll need to know this as you decide what to do.
As simple as it seems, the first question is whether you are dealing with an original creditor or debt buyer, or debt collector. Their perspective makes a lot of difference. With that in mind, we’ll look at negotiations with the three categories of counter-parties you will encounter: original creditors, debt buyers, and actual debt collectors (firms retained to try to collect money for the original creditor).
Original Creditor
Original creditors are, usually, the businesses that actually made a deal with you in the first place, typically via a consumer transaction. Dealing with original creditors, because they are lots of different businesses in the business of doing whatever they do, is much less predictable than dealing with debt collectors or buyers, who generally have standardized procedures for talking to you.
Original creditors are in business to do business, and not to collect money. Depending on the size of the company and the person to whom you are talking, trying to collect money may be the worst part of the person’s day. He doesn’t want the bother, and spending time collecting money could be taking away from much more important tasks. Also, every business owner is aware that the business’s reputation could be hurt either by being too aggressive or by provoking harmful responses.
Even in larger companies (excluding auto sales, which are designed with collections in mind), the person talking to you will have other considerations than just squeezing the last dollar out of you. Most original creditors – even banks and credit cards – don’t want to sue you, so the chances are good that you won’t get sued without plenty of warning. Companies that are not set up to litigate normally fear and avoid it – with very good reason – and an original creditor must also be concerned about reputation with other customers and clients in general.
As a general rule, original creditors would rather not do things to damage your credit (although the bigger the business the less they care about this in my experience), and most small ones might not even be set up in a practical way to do so. On the other hand, because original creditors are not in the business of suing and do not think of the bills strictly as numbers, it can be difficult to get them to stop thinking that you must pay all the money you owe, although people will have different perspectives on this for lots of reasons.
Depending on how their business is doing, original creditors could be much more or less aggressive in chasing you. For a smaller company, chasing you is difficult and impractical, and at some point the owner will settle for far, far less than you owe just to put the experience behind him or her. If they do sue you, chances are pretty good they’ll have what they need to prove you owe the money, but not necessarily the resources to keep after you to try to collect the judgment.
Debt Buyers
Debt buyers are pretty much the opposite of original creditors. They really have no other business than collecting money other people earned. Whereas the original creditor may have budgeted primarily for production and sale of goods, and been surprised by having to try to collect, debt buyers budget exclusively for collection and have no other significant costs. Nor do they have the same concerns about public opinion – they aren’t vulnerable to market forces. On the other hand, they are further from the original transaction and often have trouble obtaining the records they need to beat you in court if push comes to shove.
Bottom Line
What all that means is that whereas original creditors are somewhat reluctant to negotiate with you but sometimes have to for practical reasons, debt buyers are all about negotiating with you, and have a harder time winning, but are more willing to sue you anyway. They are designed to extract money from you, in other words.
A debt buyer can do you some harm on your credit report by reporting your debt, but in reality the main harm will have already occurred if your original creditor reported the debt. Debt buyers cannot clean your record of credit damage caused by the original creditor, so you can only negotiate to get them to stop reporting you.
Debt buyers purchase debts for widely different amounts, depending primarily on how old the debt is. Exactly how the figure is determined is a closely guarded secret, but the purchase is usually made by auction of large numbers of debts packaged together. Not all debt buyers are willing to sue you under any conditions, incidentally. They will telephone you endlessly and then, eventually, sell the debt to another company. And some debt buyers routinely sue without even any kind of warning. The biggest of the debt buyers seem to call for a while and then sue.
If you are negotiating with a debt buyer, there are a number of things you need to bear in mind. For a full discussion of that, you will want to get the Debt Negotiation Dashboard. Bear in mind that while debt buyers are less equipped to sue you, they are more ready and willing to do so, than most original creditors. But since they are in the business of extracting dollars from people without a lot of money, they can take a more realistic view of how much you can pay if you want to. And remember, you can negotiate to get them to stop hurting your credit report, but you can’t get them to wipe clean the debt from whatever the original creditor did.
Actual Debt Collectors
Actual debt collectors can negotiate with you, but they draw their real authority to do so from the original creditor and will have to take any request for a deep reduction in amount or change of terms back to the original creditors (although they will have some discretion over smaller changes). Debt collectors are more “numbers” oriented, however, so it might be possible to get them to accept an offer that the original creditor previously turned down.
Usually, when the bill is sent to the debt collector, the original creditor will stop negotiating with you – so if you call up and want to talk about the debt, for example, they will refer you to the debt collector. In that situation, the debt collector will keep a significant amount of anything you pay – 25% or more is not unusual. What will frequently happen, however, is that the debts will eventually be returned to the original creditor. If you can time that correctly, you might have an opportunity for a steep discount, because the next step is to sell the debt for a small fraction of its nominal value or to let it go entirely. The advantage of catching the debt before it gets sold, of course, is that you can make cleaning your credit a part of the deal.
Should you Go Pro Se in Debt Defense
If you’re being sued for debt, do you need a lawyer? Or can you defend yourself? Obviously lawyers can be very expensive, but there are times when the expense is well worth it. Here are some pros and cons of going pro se in debt law. We think it can make sense for a lot of people.
Some Pros and Cons of Pro Se when You’re Sued for Debt
Pro Se means “for or by yourself” and refers to representing yourself in a lawsuit. If you are being sued by a debt collector this can be a good choice because lawyers are expensive and often would either cost more than the amount in dispute or are in any event unaffordable for ordinary people. So it may be practically necessary, and it can also be effective because the same thing that makes hiring a lawyer to defend yourself uneconomical also makes hiring a lawyer to sue you uneconomical once your defense requires individual attention by the debt collector’s lawyers. The fact that debt suits are for small amounts of money (considering typical lawsuits) and that people owing money may not (or usually do not) have the money to pay makes it unwise for a company to spend a lot of money trying to obtain the right to try to collect that money from you.
If you are suing the debt collector under the Fair Debt Collection Practices Act (FDCPA) or other statute that includes a right to attorney fees if you win, it may be more practical and possible to find a lawyer to represent you. This is because, if there is a chance the lawyer can force the debt collector to pay, the lawyer can spend more time on the case without worrying so much about not being paid. That is the purpose of “fee-shifting” statutes, and it reduces the pressure to keep attorney fees to an absolute minimum. On the other hand, even where you are suing the debt collector it isn’t always possible to find a lawyer who will represent you for an amount you can afford, and that can make going pro se the practical choice.
Representing Yourself
When debt collectors file cases they usually do so “in bulk,” filing many cases at the same time – this allows them to divide the cost and risks of the cases among all the cases. The first trick to representing yourself pro se, therefore, is to do it in a way which forces the debt collection lawyers to spend time specifically and exclusively on your case. I call this “intelligent” defense because it raises the price of suing you and increases the chance that any money spent will be lost even if the debt collector wins the case. That makes walking away and leaving you alone the best economic choice for the debt collector.
And then the second trick, of course, is to do the things that give you a chance to win the case if it goes to trial.
Debt collection cases tend to be “document-intensive,” meaning that the evidence of the case is much more likely to be documents than anybody’s testimony, provided you do not admit owing the money. This means that the case has a better chance of ending before trial, but that if it goes to trial there will be less emphasis on managing witnesses or testimony, reducing the advantage of having a lawyer.
A Warning
In lawsuits, the only person who can actually speak for any other person is a lawyer, and so this means, for example, that spouses cannot speak for each other (even when they are both parties to the suit), and parents and children cannot speak for each other. Non-lawyers are not allowed to address the court on behalf of any other person, and “person” includes separate business entities.
Law on Pro Se Representation
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Create an Affidavit to use as Evidence
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Beware this Rule of Evidence – You Could Lose Your Right to Object
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Bankruptcy – what it is and how it works
When people are being sued for debts, they often panic and look for the quickest, easiest, or least scary way out. Bankruptcy sometimes seems to be that way. What is bankruptcy? and how does it work? How does it affect some of your other rights?
What Bankruptcy is
Most people have an intuitive idea of what bankruptcy is – legal protection for people who are broke, right?
Sort of.
Bankruptcy is at least equally a protection for creditors. You see, when people are financially troubled, this doesn’t mean that they literally have NOTHING. Rather, they will spend or distribute an inadequate number of resourses in a way to relieve them of the most pressure, or to favor people they want to favor. Bankruptcy exists to help prioritize and organize the ways debtors distribute their money so as to protect the creditors from favoritism or sneaky behavior. It does protect the debtor (person declaring bankruptcy) from all lawsuits or judgments, and this in turn spares the creditors from having to “race to the courthouse” to file suits against the financially weakened.
That makes good sense, right? So shouldn’t anybody with debt troubles dive into bankruptcy?
Price of Bankruptcy
Bankruptcy is not a “free lunch” to debtors. It can be expensive to do, and over the past decade or two has been made much trickier to get in and finish. It is also extremely intrusive and occasionally time-consuming. It also does not protect you from all claims, notably those associated with “secured” debts – debts like home and auto loans.
In my opinion, bankruptcy is RARELY a good first option for people being sued for debts, especially if they’re being sued by debt collectors. On the other hand, if you expect to negotiate with a debt collector or creditor in any way, our position is that you should consult a bankruptcy lawyer. You should know what it costs and requires, and letting a debt collector know you’ve actually talked to a bankruptcy lawyer can have a wonderful effect on their willingness to accept lower amounts of money.
Issues in Bankruptcy
Perhaps surprisingly, bankruptcy and debt law are not closely related, and lawyers who practice one kind of law rarely know much about the other. Unless your lawyer (if you have one) actually practices both types of law, he or she is probably not qualified to give you advice about the area in which he does NOT regularly practice.
Bankruptcy and FDCPA
Another issue comes from the interaction of bankruptcy and debt laws. This isn’t uniform, consistent, or particularly fair. In some jurisdictions, for example, if you declare bankruptcy, creditors will come out of the woodwork to file “claims” against the bankruptcy estate. It would be illegal for them to sue you, but in SOME courts it’s fine for them to litigate against you in bankruptcy. This is plan stupid and bad, but some federal appeals courts allow it while others make it a violation of the Fair Debt Collection Practices Act (FDCPA). The Supreme Court has not addressed the issue yet.
Bankruptcy and Student Debt
The courts are even less consistent or fair when it comes to student debt. If most of your debt problem comes from heavy student loans, bankruptcy may not offer you much help. They are treated differently from almost all other debts, and in many courts they are almost impossible to shake off. Strangely, perhaps, this issue has not been organized or even considered very much by bankruptcy or debt lawyers. I have addressed the issue in Getting Out of the Trap of Student Loans. That book discusses the way bankruptcy law and student loans collide and, on a federal circuit by circuit basis, what your chances of escaping the trap might be.
Against Debt Collectors
Our view on suits brought by debt collectors is that bankruptcy is rarely a good first option – and only sometimes a good last option. However, you should know that, if bankruptcy will work for you at all, it will work for you just about as well even if the debt collector has obtained a judgment. That is, bankruptcy protection applies to state court judgments as much as any other kind of debt, alleged or proven. Thus you could defend yourself pro se and, if you lost (as very few of our members do), you would still be able to declare bankruptcy if it would help.
Threatening Consumers Violates FDCPA
Original Creditor vs Debt Collector – Differences and Similarities
How to Sue a Debt Collector in Eight Steps
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To Sue You or Not to Sue You – What Matters to Debt Collectors
If you are behind in paying some bills and are considering negotiating with someone bugging you for money, what are the factors you need to consider as you prepare for and then talk with them? We have discussed elsewhere the need not to “give away” information carelessly. In this article we discuss the negotiations more from the point of view of the collector. You’ll need to know this as you decide what to do.
As simple as it seems, the first question is whether you are dealing with an original creditor or debt buyer, or debt collector. Their perspective makes a lot of difference. With that in mind, we’ll look at negotiations with the three categories of counter-parties you will encounter: original creditors, debt buyers, and actual debt collectors (firms retained to try to collect money for the original creditor).
Original Creditor
Original creditors are, usually, the businesses that actually made a deal with you in the first place, typically via a consumer transaction. Dealing with original creditors, because they are lots of different businesses in the business of doing whatever they do, is much less predictable than dealing with debt collectors or buyers, who generally have standardized procedures for talking to you.
Original creditors are in business to do business, and not to collect money. Depending on the size of the company and the person to whom you are talking, trying to collect money may be the worst part of the person’s day. He doesn’t want the bother, and spending time collecting money could be taking away from much more important tasks. Also, every business owner is aware that the business’s reputation could be hurt either by being too aggressive or by provoking harmful responses.
Even in larger companies (excluding auto sales, which are designed with collections in mind), the person talking to you will have other considerations than just squeezing the last dollar out of you. Most original creditors – even banks and credit cards – don’t want to sue you, so the chances are good that you won’t get sued without plenty of warning. Companies that are not set up to litigate normally fear and avoid it – with very good reason – and an original creditor must also be concerned about reputation with other customers and clients in general.
As a general rule, original creditors would rather not do things to damage your credit (although the bigger the business the less they care about this in my experience), and most small ones might not even be set up in a practical way to do so. On the other hand, because original creditors are not in the business of suing and do not think of the bills strictly as numbers, it can be difficult to get them to stop thinking that you must pay all the money you owe, although people will have different perspectives on this for lots of reasons.
Depending on how their business is doing, original creditors could be much more or less aggressive in chasing you. For a smaller company, chasing you is difficult and impractical, and at some point the owner will settle for far, far less than you owe just to put the experience behind him or her. If they do sue you, chances are pretty good they’ll have what they need to prove you owe the money, but not necessarily the resources to keep after you to try to collect the judgment.
Debt Buyers
Debt buyers are pretty much the opposite of original creditors. They really have no other business than collecting money other people earned. Whereas the original creditor may have budgeted primarily for production and sale of goods, and been surprised by having to try to collect, debt buyers budget exclusively for collection and have no other significant costs. Nor do they have the same concerns about public opinion – they aren’t vulnerable to market forces. On the other hand, they are further from the original transaction and often have trouble obtaining the records they need to beat you in court if push comes to shove.
Bottom Line
What all that means is that whereas original creditors are somewhat reluctant to negotiate with you but sometimes have to for practical reasons, debt buyers are all about negotiating with you, and have a harder time winning, but are more willing to sue you anyway. They are designed to extract money from you, in other words.
A debt buyer can do you some harm on your credit report by reporting your debt, but in reality the main harm will have already occurred if your original creditor reported the debt. Debt buyers cannot clean your record of credit damage caused by the original creditor, so you can only negotiate to get them to stop reporting you.
Debt buyers purchase debts for widely different amounts, depending primarily on how old the debt is. Exactly how the figure is determined is a closely guarded secret, but the purchase is usually made by auction of large numbers of debts packaged together. Not all debt buyers are willing to sue you under any conditions, incidentally. They will telephone you endlessly and then, eventually, sell the debt to another company. And some debt buyers routinely sue without even any kind of warning. The biggest of the debt buyers seem to call for a while and then sue.
If you are negotiating with a debt buyer, there are a number of things you need to bear in mind. For a full discussion of that, you will want to get the Debt Negotiation Dashboard. Bear in mind that while debt buyers are less equipped to sue you, they are more ready and willing to do so, than most original creditors. But since they are in the business of extracting dollars from people without a lot of money, they can take a more realistic view of how much you can pay if you want to. And remember, you can negotiate to get them to stop hurting your credit report, but you can’t get them to wipe clean the debt from whatever the original creditor did.
Actual Debt Collectors
Actual debt collectors can negotiate with you, but they draw their real authority to do so from the original creditor and will have to take any request for a deep reduction in amount or change of terms back to the original creditors (although they will have some discretion over smaller changes). Debt collectors are more “numbers” oriented, however, so it might be possible to get them to accept an offer that the original creditor previously turned down.
Usually, when the bill is sent to the debt collector, the original creditor will stop negotiating with you – so if you call up and want to talk about the debt, for example, they will refer you to the debt collector. In that situation, the debt collector will keep a significant amount of anything you pay – 25% or more is not unusual. What will frequently happen, however, is that the debts will eventually be returned to the original creditor. If you can time that correctly, you might have an opportunity for a steep discount, because the next step is to sell the debt for a small fraction of its nominal value or to let it go entirely. The advantage of catching the debt before it gets sold, of course, is that you can make cleaning your credit a part of the deal.
Motions to Transfer in Massachusetts
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