I will often hear from my clients stories about how debt collectors are rude to them. It comes as a surprise to many that debt collectors are unswayed when you tell them you don’t have money to pay a bill. You tell them that they can’t squeeze blood out of a turnip, yet they keep harassing you – screaming, threatening, and humiliating. They call you 10… 20… 30… 40 times a day – at all hours. Then they start calling you at work. They start calling your family and friends – anyone whose number they can get their hands on who they think you might be able to convince you to pay the debt. Anyone who they think you’ll be embarrassed to have find out that you’re behind on your bills.
But you’ve told them over and over again that you simply don’t have the money. Why are they being so stubborn?
Why? For two simple reasons: because of money and because it works.
To understand the influence of money, it’s helpful to know a thing or two about debt collectors. There are generally three types. In-house debt collectors – people who, for example, work for the hospital that you just had surgery at and whose job it is to make phone calls to try to collect on the bill. Third party collection agencies – companies who are essentially contracted out to do the collections for a creditor and who are generally paid a percentage of the debt payments that they successfully recover. Junk debt buyers – these are third party companies that purchase the right to a debt (giving the original creditor some immediate funds, though less than what was originally owed).
In each case – the debt collectors are highly motivated to collect the debt. In the case of collection agencies, they usually don’t get paid unless they recover money for the original creditor. In the case of debt junk buyers, they lose out on their investment if they are unsuccessful in recovering money to cover the purchase. Individual employees within these companies might also be given an incentive to collect on the debt as many of them are paid a commission for what they collect.
Money is a strong motivator in all sorts of facets of life, so when a debt collection company’s livelihood hinges on getting you to pay your debt, they are understandably not going to fold just because you told them that you’re broke. They are going to harass and badger you until they’re sure that you really don’t have any money, and then they’re going to keep at it.
In the process of explaining the influence of money, I’ve also covered a great many reasons why these tactics work. They are harassing. People will break open piggy banks to scrounge up some money to make a payment to debt collectors, if it means their telephone will stop ringing off the hook. People will take loans out on their 401(k) or look to a home equity loan if it means that they won’t be outed as delinquents. There is incredible social stigma against defaulting on your debt – with many of our parents instilling this notion in our heads that if we incur a debt, we have a responsibility to pay it.
A surprisingly small percentage of people who are unable to keep up on their bills ever resort to bankruptcy. The majority of people who are suffering from harassing debt collectors will eventually cave in. They’ll find the money, somewhere. Many of them will (please forgive the cliché) rob Peter to pay Paul.
This is unfortunate, because in many cases where someone is struggling to pay debt, they are already past the point where they are capable of ever paying back their debt. But they will spend several months or even years funneling money from one place to another, trying to keep up on bills, before reaching the inevitable conclusion that they must file bankruptcy. By then, they’ve squandered thousands of dollars on debt that could have been discharged if they had sought professional advice sooner.
Although bankruptcy is seen by many as a choice of last resort, if you are struggling with debt, you should at least consider consulting with an experienced bankruptcy attorney to determine what your rights and options are before you end up throwing more good money after bad.
People file for bankruptcy – ultimately – for the benefit of a discharge. Meaning that debts get wiped out, and these debt collection agencies can never again call you to try to collect on them.
But even before you get your discharge, there are benefits. For example, once your bankruptcy case is filed, most debtors receive the benefit of an automatic stay – a temporary injunction that prohibits your creditors and debt collectors from certain collection actions (including harassing phone calls, collection letters, lawsuits, wage garnishments, bank levies, utility shut-offs, repossessions, and foreclosures) while the bankruptcy court sorts through your petition and schedules to determine that bankruptcy relief is appropriate and justified. In most cases, the automatic stay continues uninterrupted until you receive your discharge, offering a seamless transition and offering protection against most collection efforts from the moment your case is filed.
Even before you file for bankruptcy, the mere act of retaining an attorney can provide certain benefits. Under the FDCPA, third party collection agencies cannot continue to call and harass you. Although other legal remedies may still be available to them before your bankruptcy case is filed, most debt collection agencies will back off entirely because it may no longer be worth it to them to pursue you for the debt.
For example, a collection agency could file a lawsuit against you before you file for bankruptcy. But, for all they know, you will file your bankruptcy case the day after they file a lawsuit in court. In that case, they’ve wasted time and money, court filing fees and likely attorney fees, on a lawsuit that isn’t going to go anywhere. (Bankruptcy prevents collection lawsuits from being filed and terminates any that are already in progress.)
For the same reason, original creditors (who are not covered by the FDCPA) are also likely to leave you alone once they confirm that you have retained an attorney to file for bankruptcy.
If paying back your debt is still very important to you, there are other options that we can help you with, including Chapter 13, Chapter 128, and budget counseling.