Overdue: Personal debt on the rise, collection is expected to increase
Lawyer Anthony Wagner sees the benefits of a booming economy when residents come to write off their financial debts.
Based in the city of Bremen, County of Marshall, Wagner, whose practice includes civil collections, said about half of people with overdue obligations pay the amount owed with a check or accept an “amount of aggressive payment “. He cited neighboring Elkhart County and its strong recreational vehicle industry as the reason for the influx of money into the pockets of local consumers.
Unemployment in the region is low, jobs are plentiful and wages are generous due to the high demand for trailers and motorhomes. Additionally, Northern Hoosiers, like many residents of Indiana, have benefited from government stimulus payments, issued to mitigate the negative impact of COVID-19, and child tax credit advances.
Wagner said even debtors whose wages have been garnished don’t always feel pain because their paychecks are high enough to absorb the punch.
However, the lawyer also said he knew unexpected events and changes in circumstances could harm consumers regardless of their financial situation. He said he believed any downturn in employment in the region – one person getting injured and unable to work or production lines slowing down and layoffs starting – will quickly change people’s ability. to pay their bills.
“If the RV industry takes a hit, you will see a surge in bankruptcies and collections,” he said.
Many Hoosiers are probably in the same precarious position of facing debt collection if their paychecks go down or their bills go up.
A July 2021 report from the Indiana Institute for Working Families found that from 2019 to 2020, debt levels in Indiana increased at a rate of 3.6%, surpassing the national increase of 3.0 %. In dollars, Indiana saw its debt level rise by about $ 8 billion to reach $ 226.5 billion in 2020. This equates to $ 40,770 in household debt per Hoosier.
Andy Nielsen, senior policy analyst at the institute, noted growing concern about what might happen in 2022.
In response to the pandemic, the government has put in place moratoria and suspended payment obligations for things like mortgages and student loans. But these obligations should return with the arrival of the new year.
Low- and moderate-income Hoosiers have been hit particularly hard by the economic upheavals brought on by the coronavirus. Nielsen said households have prioritized what they are able to afford, with shelter, utilities and food generally at the top of the list. If other monetary stress, such as a student loan repayment, is added, these households will have to make even more decisions about what they can afford.
“What concerns us is how consumers are going to prioritize these things,” Nielsen said. “So how they prioritize these payments will depend on what’s going on in the debt collection market. “
Banks, healthcare providers, car dealerships, and other creditors have options for collecting debts. They can sue the payment themselves, take the case to a debt collector to get the money for them, or sell the bad paper to a debt buyer.
Plus, unlike evictions, where landlords typically have to file a court petition to revoke a tenant, the process of paying off a debt can go without ever needing to involve the legal system. The debt holder may contact the consumer by mail or telephone to attempt to collect the debt.
Yet debt collections share some commonalities with evictions – in particular, unbalanced legal representation and few options for debtors.
A 2020 study on the impact of debt collectors on civil courts by the Pew Charitable Trusts found that most plaintiffs in debt collection cases could afford legal representation, but consumers had a lawyer in less than 10% of complaints. This may expose recovery defendants to undue hardship, as Pew’s analysis showed that debtors with attorneys were more likely to get a settlement or win the case.
Robert Duff, an attorney with the Indiana Consumer Law Group, estimated that his office receives an average of two to three calls per day from consumers facing debt collection. Often, appellants say that they learned that they had been sued for a debt only when they were notified of the opening of further proceedings to recover a default judgment that had been entered against them.
In cases where a judgment has been rendered, there may be little recourse that a lawyer can offer. But according to Duff, before judgment is rendered, the debtor can push back by asking for proof that the debt is legitimate. Buyers will collect huge amounts of overdue accounts, but not always get the full documentation that shows the consumer has incurred the debt.
Duff said he believed debt buyers were given a hearsay pass. Buyers are granted default judgments, and unless the consumer demands proof, the records are too full to ensure that every claim has supporting evidence.
“As a rule, it is not the court’s job to control hearsay on its own; that’s the job of the other side, ”said Duff, adding that consumers probably wouldn’t know how to object without a lawyer. “But in the case of a default judgment, rule 55 (B) directs the court to assess the evidence to enable it to render a judgment. The sheer volume of defaults filed by debt collectors can make it very difficult to examine their evidence in each case, but debt collectors should be held to the same level as any complainant.
Solo practitioner Matthew Cree has said he is seeing an increase in claims filed either outside the statute of limitations or without proper documentation showing that the claimant actually owns the debt.
Some of the people who come to the Cree for legal help face collections from mortgage foreclosures during the Great Recession. As he explained, the properties were sold to the sheriff’s sales for less than what was owed on the mortgage, so now that these families are more financially stable, they are being billed for the shortcomings of the foreclosures he saw them reach $ 36,000 and $ 50,000. .
To make matters worse, creditors do not always respond to debtors’ requests for proof. This forces consumers to go through the discovery process to show plaintiffs that they have bought the debt.
“Unfortunately, it is not illegal to file a claim” without proof of title or beyond the statute of limitations, Cree said. “It’s really up to the debtor and his lawyer to look at the claim. “
To be represented
Creditors’ rights lawyer Fred Pfenninger of Pfenninger & Associates has welcomed the transition to virtual hearings as more debtors appear in the proceedings and he is able to talk to them about debt relief. It can know where they work, where they do their banking or just assess the potential of a payment plan.
“Often our biggest problem is that we have had no communication with them and we are unable to discuss their finances and what they can pay or what they are willing to pay to pay off the debt.” , said Pfenninger. .
Still, he said creditors generally wish to move forward with obtaining a final court order and wage garnishment, even if the debtor agrees to a payment plan. Creditors, he explained, are trying to reduce the risk of another creditor stepping in with a court order and intercepting the flow of income that would have allowed the consumer to pay off the first creditor.
Nielsen said he saw the risks consumers face when trying to solve their debt collection problems without a lawyer or attorney. He worked as a financial coach to help low income Hoosiers with their budget and debt issues.
Often, consumers had difficulty communicating with creditors. They tried to strike up a conversation, writing three or four times but got no response. Or, if they made contact, the creditor would not mention anything about settling the debt for an amount less than what was due.
That changed, Nielsen said, once he picked up the phone and creditors realized someone else was paying attention. Having just a lawyer, consumers were able to get information about a payment plan and make a “more informed decision.”
Nielsen said he sees the need for attorneys and attorneys to help debtors grow as consumer debt continues to grow and adjournments put in place at the start of the pandemic will soon expire. Some families will get by, but he said he wondered if others had enough time to catch up on their bills and avoid crippling collection action.
“I think logic prevails that if the creditors sue you,” Nielsen said, “they will want full payment.”