Ok, by now you’re probably on the third verse of Willie Nelson’s song, “On the Road Again.”  But this is not about making music with your friends – even if it is the life you love.  This is about your debt.  Sorry to bring you down, but this may help you understand what’s going on with your past-due account(s) and why.  This information may help you determine the best possible strategy for dealing with those who are attempting to collect from you.

Most companies like to “stay in their lane”, or to put it another way, do what they do best.  They know where their bread and butter is, and they want to stay focused on it.  For example, hospitals provide healthcare, and credit card companies provide credit.  Collection agencies try to collect delinquent accounts, and lawyers litigate.  There can be exceptions to those statements, but for the most part, it’s accurate. 

Understand that there is a balancing act for a company in determining whether to keep an account or send it to the next stop. 

Keeping accounts too long can clog up their system and the flow of accounts.  It can also diminish the value of the account and the probability of collecting it.  On the other hand, sending the account to the next stop may mean missed revenue for the company.  Let’s start at the top, with the original creditor.

As accounts age, they become statistically less likely to be collected.  People move and may be hard to locate.  People may not have the income they once had when they applied for the credit, etc.  Additionally, although most businesses will have an accounts receivables department, they are not there to function as a collection agency would.  A lot of large companies will have account representatives who will service the account and may even attempt to obtain payment on the account or to set up a payment plan.  But they are usually not as demanding and hardcore about it as a collection agency might be.  Think of them as more of a customer service representative rather than a collector.  They will not be as inclined to get into the specifics of your income, assets, etc. because they will not be the ones suing you.  Most of these large companies will set a time period after which a delinquent account gets transferred out or charged-off so that they can focus on the next wave of accounts to hit their desk.  And some do not want the negative public relations image of aggressively pursuing their own customers for a debt.  So, they may hire a collection agency to attempt to collect the debt.  Or alternatively, they may sell the debt to a collection agency.  For this discussion, we’ll assume the collection agency has purchased the account.

A collection agency that buys delinquent accounts usually buys them in large batches, at a discounted price.  The collection agency has now made an expenditure to purchase the delinquent account.  They need to recoup that money before they can think about making a profit.  If they have to hire an attorney to pursue the account, it costs them money in attorney fees and possibly court costs.  The collection agency will typically be more demanding and aggressive in its collection efforts.  This is a good time to explain to them why suing you would not yield any positive results if that is the case.  That means proving up your case by showing a lack of assets, a lack of income, or maybe even providing social security statements (which can’t typically be garnished) to show that you have nothing they could get by obtaining a judgment against you or pursuing you further on the debt. 

Most collection attorneys work on a contingency fee basis. 

That is, they get a percentage of what they collect.  Most attorneys are not going to spend a lot of effort trying to convince you to pay the debt.  They may contact you a few times, but they usually will proceed to a lawsuit rather quickly if that’s what the client has directed them to do.  If you do get a letter from an attorney, respond and make your case to them before the lawsuit is filed.  The attorney’s client is not going to want to lay out the money for court costs if there’s not much of a chance of ever getting it back. 

So basically, the original creditor may not really want to delve into whether or not a judgment against you could ever be collected.  They will sell the debt for a discounted price and be done with it.  After that, things get more stressful for the debtor, but the debtor’s inability to ever pay the debt will likely be given more weight in determining what steps are taken next.  Because each next step is a financial risk for the collector.  Don’t wait until you’re in the courthouse for trial to show that you can’t pay the debt.  By then, the collection agency has already spent the money, so they might as well obtain a judgment in hopes that your situation will change.  Because then you will have an unpaid judgment on your credit, and it will be that much harder to change your situation.  Now that you know the process, try to put yourself in the other side’s shoes to determine the best move to make to resolve the matter in a manner that’s acceptable to everyone.

If you find yourself in need of legal help due to debt collections, reach out to an attorney of your choice for the best way to move forward. If you choose the free services that the Center for Arkansas Legal Services offers, call 501-376-3423 to see if you qualify.

AUTHOR: GARY VANGILDER, STAFF ATTORNEY FOR THE CENTER FOR ARKANSAS LEGAL SERVICES