Debt buyer payment plans: Yay or nay?
Here's why these payment plans are a very bad decision
I don’t advise payment plans with debt buyers for three reasons.
First, just speaking with a bill collector signals that you have money and are willing to pay. That moves you to the top of the list for more annoying phone calls and dunning letters.
Second, making a payment to a debt buyer restarts the statute of limitations. So if you haven’t paid for several years, time is running out for them to collect. If you make even a small payment, that restarts the statute of limitations. Now you’ve given them another five years to collect.
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Third, any payment plan is likely to be a very bad deal. The people you’re dealing with on the other end of the telephone are low-level workers who have no authority to offer any serious discount on the debt they’ve been ordered to collect. Any “savings” you supposedly get by agreeing to a payment plan are often an illusion. If the claim is for $9,000, they might agree to take $8,000 and let you pay that off at $250 per month for several years. But the fine print in the settlement agreement often states that if you miss any of these payments, you agree to be liable for the entire judgment amount (less any credits for what you’ve paid).
What’s more, these agreements also agree that, without any further notice to you, the debt buyer can go back to court and get a judgment against you for that full amount. And you won’t know about it because you’ve agreed that they don’t have to tell you. Now they’re in a position to collect, and suddenly your paychecks are being garnished or your bank account is frozen because of a bank levy.
Fourth, you don’t get out from under the emotional and psychological weight of this debt. You will still be paying hundreds of dollars per month for years to try and make it go away. If you couldn’t keep up on payments before the lawsuit, what’s different now?
Does it ever help to try to explain to a debt buyer the reasons for non-payment?
Debt buyers don’t care why you didn’t pay. By the time they get the debt, it has long been written off by the original creditor. Their only interest is in collecting.
Will you have to actually go to court for a debt buyer lawsuit?
If you hire me as your attorney, you will not have to appear in court except in the rare instance when a case goes to trial.
What’s the process of successfully handling a debt buyer lawsuit?
After the lawsuit has been filed, within a certain amount of time, you must file a written appearance with the court. If you don’t, eventually a default judgment will be entered against you. In Illinois, if the amount claimed in the lawsuit is $10,000 or more, you must also file; have a written answer to the complaint; and include disclosures of facts, witnesses, and theories of defense under Supreme Court Rule 222.
In cases of over $10,000, there is also discovery. “Discovery” is how the defendant (you) can require the plaintiff (the party suing you) to reveal what documents and witnesses it will use at trial. This is a critical process in exposing that the debt buyer can’t prove that it has any legal standing to sue you.
The debt buyer typically responds to my discovery request by sending documents supposedly showing ownership of the debt. Typically, however, they don’t show any such thing. The debt buyer’s discovery response also usually doesn’t identify a witness by name but says that its witness is one of its employees, who will testify to establish a foundation for admitting “business records” into evidence.
Ultimately, this witness will be unable to lay such a foundation because he or she won’t have any personal knowledge about how those documents were created. After all, these documents were created by the original creditor, not the debt buyer for whom the witness works. These professional witnesses are the employees of the debt buyers; they fly around the country and regurgitate the same language in every case.
Most of these cases are dismissed with prejudice, meaning that the case can never be brought again, or voluntarily dismissed (and eventually abandoned), by the other side. Less frequently, we will settle them on extremely good terms for our clients. During the case, there will be several court appearances, but our clients don’t need to attend any of them, except in the rare case when a case goes to trial.
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