Debt and Ingratitude: Nine Lessons I Learned as a Collections Attorney

Like most Americans, I have had my struggles with debt. But did you know I’ve spent some time on the other side of that relationship?

That’s right! The first job I got out of law school was as one of those lovely lawyers who goes around trying to collect on judgments, using all of the frightening mechanisms made available through our wonderful Anglo-American legal system.

Basically, I was a knee-breaker with a JD.

Sounds exciting, right?

Spoiler alert: It sucked.

Not only was the work long and hard and the pay utter garbage (for real; you could make more with an undergrad degree in making coffee), having this blight on my resume made it harder to get a job doing any other kind of law.

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But it was not all for naught. I did get better legal jobs eventually, and as with those, I did learn some things from those debt-collection days. And so, in the grand tradition of my man Neil White from This Dad Does before me, here are Nine Lessons I Learned as a Collections Attorney, with the overarching lesson, of course, being don’t go to law school:

The system is designed to indebt you. Super-cynical, but super-true. Everything you are told you need in life–that car, that house, that education–costs a lot of money, more money than 95% of people have readily available. And so, in order to get what you think you need, you take loans and use credit cards. But this only works because…

Nobody, including me, has any self-control. It’s so easy to into debt to get what you think you need. And as a result, even those of us who understand money and the fact that the good times will not, in fact, continue indefinitely, use debt to get stuff.

This is really stupid. It gets us into all sorts of trouble. Big things, little things, it doesn’t matter. Those purchases add up, and before you know it, the debt monster’s back for more.

The system preys on our lack of impulse control and lack of future-orientation. This is another cultural trap Americans need to snap out of before we’re all speaking Chinese.

What you learn, ultimately, is many people are “poor” through their own actions, and even should they win the lottery would likely soon squander it. 

Once indebted, the legal system makes it tough to get out. At least my jurisdiction, there was pre-judgment and post-judgment interest on any judgment for money damages. Post-judgment interest is intuitive: there is a statutorily defined amount of interest on any amount once judgment enters. Where I practiced, it was 12% per year.

Not bad, right? This concept is based on the theories that 1) Interest will spur you to pay the debt sooner, and 2) 12% per year is far less what most credit card companies charge. Which is true. But if you’re out of work, his doesn’t help you one bit, plus there’s a judgment against you, and there’s all sorts of fun stuff a creditor can do with a judgment.

Oh, and judgments last 20 years. And are renewable upon application.

And then there’s pre-judgment interest, whereupon the court tacks on that 12% per year amount from the date of breach until the date of judgment. As the statute of limitations on contract cases was six years in my jurisdiction, this has the potential to tack on another six years’ worth of interest.

One final indignity: All debt can be discharged through the bankruptcy process…except for student loan debt. Gee, I wonder why that is?

Credit card companies and banks have grossly unfair terms. I mean, it’s crazy. Using the card means you agree to a whole host of awful terms, like those incredibly high annual percentage interest rates. These are variable at any one without notice, and if you do not pay under he contract’s terms, this interest can be jacked up. Again, you agree to this so don’t complain. But personal responsibility aside, these are horrible terms. 

Also awful: Waivers of arbitration rights, and choice of law clauses. You should read those agreements before you start swiping that card.

Almost nobody in America takes responsibility for our situation. When I would speak with debtors, whether before of after judgment, the situation was always somebody else’s fault: an ex-spouse, the bank or credit card company, a spendthrift child, the economy, the government, Bush, Obama…I even had one guy blame Citizens UnitedCitizens United!

The person they rarely blame is themself. Even when they agree to start paying on a judgment, it’s under the assumption that it’s unjust and under duress. At the end of the day, as long as my client was getting paid I really didn’t care why the money was coming in, but on a personal level, this taught me that the victim mindset is a bad look.

People game the system all the time, and are proud of it. Never doubt the human capacity to operate in the margins and find loopholes. For example, Social Security and disability are exempt from judgments. This means that, even if you legally owe money, you cannot be ordered to pay from it, nor can it be garnished. Now, some people to voluntarily pay using these sources of income, mainly to get the debt off of their credit report, but how did they get there?

Basically, you can get put on disability for just about anything. I’ve seen people in their early twenties receiving disability for anxiety. I kid you not. And disability is for life. 

Now, some people will have legitimate disabilities. But a lot of them still rack up debt, go to court, get judgments against them, and happily tell the judge or magistrate that their only source of income is exempt and go on their merry way. The elderly do this too. Remember, it’s the New-Perfect American Way: Everything is someone else’s fault.

Also, when you conduct  a financial examination of most people, not to mention a visual one–designer clothes and cell phones, despite the cries of poverty–you realize that “poor” in America really isn’t poor. People would drive their Audis to court!

People are huge liars. You know how nobody in prison is innocent? The same concept applies to debtors. Nobody in debt did it. It was somebody else. Or they never signed the contract. Or their identity was stolen. If you can think of an excuse, I’ve heard it.

I had one guy claim he did not sign the contract with an oil company. In front of the magistrate, he told me that his ex-wife forged the signature. Ignoring the question of whether he noticed that (1) they were getting oil and (2) he was being charged for it, I asked if he had any proof of this forgery. He said “No, it’s your job to prove she didn’t sign it!” I calmly explained that it was not, in fact, my job to prove a negative. I then asked to see his driver’s license to get a sample of his signature. He asked why. I explained I wanted to compare signatures. “What are you, a handwriting expert?” the guy snapped. Before I could explain, the magistrate said that,actually under the rules of evidence, anybody can compare signatures.

Guess what: The signatures were identical. The guy shrugged and admitted he signed the contract.

Another guy claimed he didn’t get his credit card bills in the mail. I asked if he found this odd. He said he did business overseas and was out of the country many months out of the year. “Do you have your mail forwarded from Massachusetts during this time?” I asked. “Of course,” said the defendant. “So you get all of your mail except this? Isn’t that weird?” The guy shrugged.

He lost the case, but maintained that he never got the bills. So think about this: He never disputed having the cardusing the card, or any of the charges. He just argued he didn’t get the bills, and therefore shouldn’t be obligated to pay.

I could go on, but you get the idea.

The collection industry is pretty evil. Although there are Federal laws on the books against harassing calling, collection agencies make harassing calls all the time. There’s nothing better than representing a client in court who uses companies like this, having allegations of abuse come up, and have to explain to a judge or magistrate, “That’s not my office; we’re just the lawyers, but I agree this is very sleazy.” Not fun, especially when one guy said that the collectors told him that, if he didn’t pay, they would kill his family.

Some collection agencies will file lawsuits against whomever has the same or similar name as a debtor, even if they are not the same person. One time in court, I faced this scenario with a debtor providing pretty solid proof that he was not the actual person named on the judgment. When I called the to ask what the deal was, I was told “We just need a warm body.”

Debt Collection

To be fair, most of the original creditors don’t do this. But in the United States, it is legal for companies to sell debt, usually for pennies on the dollar, to third-party debt collectors who are legally entitled to collect on the full amount. So you end up with situations where a company has a huge portfolio of debts they bought for a pittance sending out dozens of small-claims summonses to grab as much cash as they can. Typically, people don’t show up to small-claims court for a variety of reasons, are defaulted, meaning they lose automatically, and then they get summoned for payment reviews.

If people do not come to court, a type of warrant called a capias issues. This is to haul the person into court for a payment review on on their ability to pay. If a capias-holder wants, they can have a sheriff physically arrest this person. Each warrant has a fee, paid by the judgment holder, and tacked on to the overall debt owed by the debtor. Sheriff’s departments like this, obviously. Nobody else does.

The system does not care about you. Lose your job? Get stricken with cancer? Who cares?! You still owe money. You still must pay. Interest will still accrue. Have a nice day.

Look, I know that the system revolves around people and entities being repaid for money lent out. But it’s really cold-hearted about it. There’s not much in the way of equity in the collection industry.

That said, a lot of judges and magistrates do take the law into their own hands, so to speak, by making rulings contrary to the law. As an attorney, this is maddening, but as a human being it sometimes didn’t bother me too much. Unless, of course, the person was lying to the judge, which happened a lot. As I said, I could go on, but this post is long enough as it is.

Debt collection is grisly. It’s unpleasant and the pay stinks. But you learn about people, see the dangers of debt first-hand, and acquire a huge sense of humility. There but for the grace of God, after all, go I…

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