Threats are the tools of the trade of debt collectors.
Why not? Fear is effective to get people to do stupid things.
That’s why debt collectors use it.
Pay up or…
- we’ll send you to collection
- we’ll sue you
- we’ll ruin your credit
- we’ll have you arrested
- we’ll have you deported
- we’ll take your house
- we’ll tell your neighbors
Terror shuts down rational thinking and upends priorities.
No passion so effectually robs the mind of all its powers of acting and reasoning as fear.
Edmund Burke
As a bankruptcy attorney, I meet lots of people because they’ve panicked. A debt collector has threatened them financially, and they are sure their world is coming to an end.
So let’s talk about debt collectors and the collection threats they use. Just which threats are bluster and which are blockbusters.
Here are the questions to ask yourself.
How real are these collection threats ?
Is the threat real?
The classic scam is the one that goes: we’re the police, we’re coming to arrest you for failing to pay, unless you want to send us money not to arrest you.
There are so many things improbable with this pitch that it’s amazing that it works. But it does. In the moment, people forget that we don’t arrest people for owing money.
A variation is the collection call for a debt that isn’t yours. Scammers have invented a debt you don’t owe and hope to frighten you into paying rather than risk non payment.
Threat assessment: it only pays to get worked up about debts that are real and consequences that are real.
How soon?
Debt collector threats depend a lot on a sense of immediacy. They want you to think that horrible consequences will follow immediately if you don’t pay.
This is where a bit of knowledge about due process comes in handy.
The legal system does provide for coercive legal methods to collect real debts. But those coercive methods are available only after a dose of due process: here, due process is a notice and a hearing.
Notice of a law suit filed against you, and a hearing on the merits of the lawsuit. And those things take time and money. What to do if you’ve been sued.
A creditor with a meritorious claim can usually get a judgment, but it will take several months, at best.
So a smart debt collector wants to trade on your ignorance about law suits and to make you believe that he has instant access to the legal levers of collection.
The only creditors who can take money from your bank account without a court judgment are the taxing authorities and the bank where your money is on deposit.
Threat assessment: the threat is real but it’s a long way off.
How damaging?
My favorite debt collection threat is the infamous threat to “send you to collections”.
So?
“Collections” isn’t a real place. You don’t get locked up in “collections”.
Being “in collections” doesn’t change your legal rights, or expose you to collectors with superpowers.
It’s just a management category for a creditor.
In fact, the collections department may be more willing to cut a deal on the debt than the people you’re talking to now.
Another favorite threat is the one to “ruin your credit”.
Even damaged credit heals with time and attention
It pays to know that creditors are limited to reporting the truth. So, threat or not, they should be reporting the actual facts.
Is your credit really the most important piece of this puzzle? Your “credit” mostly measures your ability to borrow more money. The problem at hand is that you can’t pay for the credit you already have.
Threat assessment: pretty weak, in the scheme of things.
How come?
Once you’ve assessed how real the collection threats are, it’s time to think about the big picture: is this debt an isolated problem? Or, are there other debts that will ripen into similar problems?
Are you spending today’s income paying for yesterday’s expenses? Are you shorting your emergency savings and your retirement account?
A sit-down with an accredited credit counseling service (not a debt settlement outfit) or a bankruptcy lawyer can help you identify and act on a plan for a solvent tomorrow.
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