Category Archives: Garnishments

Debt Vultures

If you have unpaid debt on credit cards and loans, a debt vulture could come circling.

What is a debt vulture? A debt vulture is my description for a kind of collection company that may be on your tail.

Image from http://occupywallstreet.net/story/debt-vultures.

Image from http://occupywallstreet.net/story/debt-vultures.

These types of collections companies have taken over a large segment of the collection of delinquent debt from people whom are unable to pay them. That kind of company is called a “debt buyer.”

Their business model is genius. These companies purchase debts that were written off by credit card issuers, store credit like Lowe’s, Home Depot, and Best Buy – along with medical bills and balances remaining after vehicle repossessions. They purchase these debts at a deep discount, in bulk (think hundreds of thousand accounts at a time!) and then the hunt commences!

They look for the unfortunate borrower, who has a job, with wages they need to pay their family’s bills, and look to force payment, usually through a lawsuit or the threat of lawsuit, and garnish wages and bank accounts.

And of late, my office has seen smaller and smaller balances being sued for – less than $500 in one recent case!

This scary industry is huge. The largest debt vulture of them all is Encore Capital, Inc., located in San Diego, California. You likely never heard of them. They don’t use their name to collect. They do it through subsidiaries with names like Asset Acceptance Capital Corporation, Midland Credit Management, and Midland Funding LLC.

If you get threat letters from these, and similar, companies, the debt vultures are after you.

The second largest debt vulture is Portfolio Recovery Associates. As a public corporation, you can buy their stock!

Both corporations make a handsome profit from this aggressive and depressing business model.

And, if you get mail from these companies, keep in mind that you are the ‘asset’ in Asset Acceptance, you are the ‘fund’ in Midland Funding, and the ‘portfolio’ in Portfolio Recovery. I think that these companies see you – their victims – as a body of ore, to be mined.

This is American commerce, and the debt is real. But most consumer debt has built-in contractual mechanisms, mostly default interest rates well over twenty percent – along with late fees – that cause the amount owed to mushroom.

Of special concern are unpaid accounts that are four years or more since payments were defaulted. At least in Arizona, these companies, if lawsuits and garnishments are their aim, must sue with the allotted time under state law, which, in Arizona, is a long six years from default. So, when a debt vulture is running out of time to sue is when this species gets most aggressive, often filing lawsuits before the deadline runs out to preserve their position.

Not all has been roses for debt vultures. In September 2015, the Consumer Financial Protection Bureau announced its findings into the debt collections practices of Encore and Portfolio, and ordered them to in some cases refund monies to consumers, and “overhaul their debt collection and litigation practices and to stop reselling debts to third parties.” You can read more about it here.

I predict that they’ll keep mining the ore body of the working public, because it is just too lucrative. After all, if these companies pay less than five percent of the face value of debt, and average even a paltry ten percent in total recovery, but they own hundreds of millions in debt, their profit margin is pretty beefy.

If you get mail or phone calls from these aggressive vultures, I can help you consider your course of action. Schedule a free and thorough consultation of your options by contacting my office for an appointment at (520) 299-4922.

Saving Pennies, Losing Dollars: Tales of Bankruptcy Filings Without Legal Advice

Mounting bills, calls from creditors and declining funds leads to a maddening level of desperation. People often feel that they are too broke to hire an attorney to file their bankruptcy. You are between a rock and a hard place, you need to get rid of the stress of your debts and it seems like the best thing to do is to file a bankruptcy on your own.

You are not alone in this thought. Between 25% and 33% of all bankruptcies filed in Arizona are filed by people who have either attempted to prepare their own bankruptcy documents or hired a paralegal service to prepare them.

Many of those people end up having an unpleasant and expensive experience with the bankruptcy court. Many will have assets confiscated. Many will lose the only decent sum of money they receive all year – their tax returns. Yes, the bankruptcy court will take your tax returns! This is why you need to plan for a bankruptcy with an attorney.

Here’s an example what can happen if you choose to file a bankruptcy without the assistance of an attorney.

I met with a woman about a year ago who was unaware that her tax refund, which was substantial, would be confiscated by the Bankruptcy Court Trustee. She ending up losing nearly $8,000 in her tax return money that she desperately needed to the bankruptcy system. Because she didn’t have an attorney at her side. That money could have been used to purchase a vehicle, pay for an attorney, and help with utilities. With careful disclosure of that spending, she would have survived her bankruptcy without losing other assets. She thought she had to be in a rush to file the bankruptcy, and didn’t get the advice she needed to plan accordingly.

This can be avoided with experienced representation. 

I stress that this planning must be done appropriately, by competent attorneys with an intimate knowledge of what is allowable in pre-bankruptcy planning and what is not. Pre-bankruptcy planning is intricate and can take time. But it is extremely valuable.

Another classic scenario involves a person who has been sued, and is consequently highly motivated to file a bankruptcy before a wage garnishment starts, but may also have a large tax refund coming, or perhaps a reimbursement for some work expense, or a personal injury claim, or an inheritance.

Again, they rush in with no legal advice, get a paralegal service to type up what they think they need to file, and then lose assets unnecessarily.

Recently, my office assisted a bankruptcy client with pre-bankruptcy planning on how to purchase a home for their family by using a personal injury recovery as a down payment. We were able to help them to keep that home.

Saving pennies can cost significant dollars. The main ally you have is an experienced attorney who can offer sound advice and good knowledge. Document preparers, and, sadly, lawyers who charge cut rates and who will only provide cut-rate legal advice, are not in your best interest.

Don’t be penny-wise and dollar foolish!

If you have questions about your bankruptcy eligibility, or ways to avoid bankruptcy through other means, schedule a free initial consultation with Daniel Rylander by calling (520) 299-4922. Upon hire, we provide sustained support throughout your bankruptcy process.

Garnishments: Paycheck Killers

Garnishments: Stop them before they start! Bankruptcy stops garnishments cold in their tracks and if you are currently being garnished, it will stop future garnishments – once your case is filed.

If you ignore your creditors, or hope that  will go away, know that they won’t. They want their money. So, they might sell the debt or just lie in wait. Even if you “disappear” for awhile, they will keep searching for you. And once they figure out where you are and where you are working, creditors can (and likely will) apply for a garnishment of your wages through your employer once they receive a judgement against you from the court.

Keeping up the creditor dodge is a losing battle. Get solid information, be prepared and take care of the situation before it affects your ability to pay your rent, electricity, food and other bills.

If you have questions about your eligibility for bankruptcy, or ways to avoid bankruptcy through other means, schedule an appointment with Daniel Rylander at (520) 299-4922.