BIRK’S BLOG

by Douglas Birk

IMPORTANT DISCLAIMER: This blog does not offer legal advice and the information listed here is for generalized informational purposes only and should not be construed as legal advice or a legal recommendation. Assessing an individual’s legal case involves a careful and complete evaluation of case specific facts and the legal options or possible legal outcomes for individuals will vary significantly. For legal advice, please consult with an attorney.

It is very common for everyday people, even diligent and responsible people, to receive a collection letter. Often, it is hard to know how to respond to these letters, or what your legal options might be in such a situation.

Collection letters can originate from credit cards, overdue medical expenses, or even past due parking tickets you probably thought you paid years ago.

Generally, the original creditor will turn the collection matter over to another firm to collect on the debt. Often, they sell this debt for pennies on the dollar. As a result, it is not uncommon for a debtor to be unable to recognize the creditor or specific debt since the assigned collector usually purchased the debt years ago without the debtor’s knowledge.

Unfortunately, failure to effectively respond to collection letters, or simply avoiding them altogether, is not a solution. Eventually, these creditors will seek a court ordered judgment that will permit them to garnish your wages and other assets such as bank accounts. By the end of the process, past-due debtors become liable for collection fees, court costs, and attorney fees resulting in a final judgment totaling several hundred dollars more than the amount of the original debt.

Meanwhile, the debtor’s credit is significantly damaged impacting the debtor’s future ability to obtain reasonably priced loans for such items as cars or homes.

So what should you do when you receive a collection letter?

Well, every situation is different. However, if the amount of debt is remotely significant, you should definitely consider contacting an attorney in order to explore your legal options. For example, it is not uncommon for creditors, through collection firms, to fail to serve a notice to a current address or upon a responsible person as required by law.

Further, some collection firms will continue to pursue debt collections even after the period for legal action has expired (this is referred to in legal speak as the "Statute of Limitations"). Per the Fair Debt Collection Act, this is a prohibited practice, but not all debts are subject to the FDCA and often the notice is in tiny print on the least visiable portion of the creditor's communication.  In Minnesota, it is incumbent upon the debtor to raise any statute of limitations defense with the Court in a legal Answer served upon the creditor. A debtor only has 20 days to file an Answer in collection proceedings. Other statutory rights, remedies, or defenses may also apply.

In the last ten years, the proliferation of assigned debt actions in Minnesota and throughout the nation has exponentially exploded. Most of these actions proceed by default where the debtor never appears in Court and is often completely unaware of the court-ordered judgment until the creditor has already started seizing wages and assets.

Sometimes these collection actions result in abusive behavior. Within the last decade, the Minnesota legislature has passed legislation, and the Minnesota Attorney General’s Office has sought enforcement of private agreements, that are intended to curb these excesses.  Assigned debt collectors are acutely aware of the technicalities incumbent in existing court rules and processes and use these rules to their maximum advantage as they are permitted to do by law.  Some of the new reforms are designed to at least compel creditors to minimally prove up their case and demonstrate compliance with the law, but still do not offset the inherent advantage afforded to creditors under existing rules.

In many cases, a settlement prior to judgment may benefit all of the parties. An attorney can assist you in contacting the creditor and reaching an equitable agreement. A settlement permits the creditor to recapture some of the debt while allowing the debtor to avoid excessive fees, interest, and attorney fees. Discussing settlement involves a careful assessment of the cost of litigation and other legal factors affecting the value of the case to both sides. Often, any lawyer fees are more than offset by the resulting reduction in debt.

Of course, every debtor’s situation is different and results are never guaranteed. If you can’t afford an attorney, try to learn about your rights by checking with your local county library and asking if there is any free legal assistance or materials outlining debtor rights.

For a free consultation, call Doug Birk at Miller & Stevens law office (651-462-0206).