I always thought that *any* payment scheme was preferable to going to court. I guess not! He must have pissed them off in some way.

That said, I don't have much experience in this so I just googled like anybody would. This article is interesting. Bottom line, he needs a lawyer!

http://www.cardhub.com/edu/credit-cards-collections-lawsuits/

Can a debt collection agency put a lien on a property? I thought credit card debt was unsecured?

It is unsecured, but that doesn't stop them from being able to garnish wages and/or attach their debt to any collateral the debtor owns. Of course, they have to get a judgment first. And, usually, they won't bother to go that route unless all other efforts to get paid fail and/or if the amount is relatively small (which this one is).

He didn't piss them off. It's just the way debts are collected in this country (threats and constant harassing phone calls). While collection agencies aren't supposed to be able to threaten a lawsuit, they routinely do even if there's no intention of follow-through.

And, he really doesn't need to add to his debt load by paying an attorney for something he could do himself (negotiate the debt).

If he goes to court, a judgement against him does not make him able to pay, so where are the parties at that point? JN3344, I will read your article.

He did not piss them off... he is a very soft spoken guy and keeps telling them that he wants to pay it off, but not in the amount of installments that they are requesting.

Hey, there's a first time for everything (i.e., posting). :-)

He shouldn't freak out at the court thing. It'll be pretty routine, and 99% chance the creditor will obtain a judgement against him. If he legitimately owes the money, then a lawyer is an unnecessary expense, and IMO it's pointless to try and fight it on loopholes and technicalities. Once there's a judgement on him, they may do nothing. Or they can file an additional claim for garnishment, if allowed in your state (and I think NC doesn't allow). So a judgement has zero impact on his immediate financial state. They can lien his house once they have a judgement (NC rules on liens) but again, that doesn't force him to sell the house, it just codifies the debt more officially and will make it hard for him to sell his house until he pays off the debt.

After the judgement, he's back to square one, and will need to negotiate a payment plan. Which he wants. He could negotiate this payment plan now with the lawyer on the court documents (I've heard lawyers are more reasonable about it than collectors). Or he can negotiate in court before going before the judge, or after the judgement to make arrangements to pay. We got a judgement on a former tenant in small claims court, and as a part of the proceedings the judge mandated the payment plan, so that could be an outcome as well.

It would be short-sighted to declare BK, with all those personal and financial consequences, over <$10K. He can dig his way out, but just needs a reasonable payment plan. And no one can force him into a payment plan he's not comfortable with, even with a judgement. Selling his house is a bad idea, because the transaction costs to access that equity are enormous--possibly more than his debt, depending on how much his house is worth.

In the meantime, he should spend the time between now and the court date scrounging up every last penny he can, to try and negotiate a settlement in full. Does he have any non-real-estate assets he can sell? An extra car? Yard sale? Work some OT? jewel has good advice on that above.

And tell him to cut up his credit cards. He needs to not get into any further mess.

It's true that ya can't get blood from a turnip, but they could still get a judgment. If he isn't able to pay the amount they want right now, the judgment assures that they'll get their money if he is able to pay in the future. HOWEVER, as stated above, they'll take a settlement. It's not likely he'll have to go to court. He just has to wait 'em out while they throw their weight around and bluster for a while first.....all while building up an amount to offer them.

He needs to be very careful not to send them any money until he has an acceptable agreement in writing for settlement in full. They'll gladly take those $250 payments while assuring him that they'll take something less than the $9500 just to turn around and demand all $9500 anyway. So, "unless it's in writing, it's not real."

Thanks people. Getting good advice from you all is really helpful. Probably more than I have ever realized over the years. I really want to help this fellow out, as he is really trying to better his life here in America, and helps his family out a lot "back home". (he is not Hispanic nor illegal, so we don't have to go there) There is more good about him that makes me want to help him, but in fairness of confidentiality, that is all I will say.

Weedy, thanks for your response and links. I know quite a bit about the NC lien process, and will advise him on that.

Jewelisfab... thanks for the tip on not sending them money until he has a payment plan in writing.

Please remember to tell him: the key words are "settlement in FULL". Until they provide that statement in writing, he should not send them any money. With the letter stating they have agreed to "X" amount as settlement in full, they can't come back at him after he's paid the $5k (or whatever amount) and demand the balance. Also, he needs to hang on to that letter forever -- just in case they sell the unpaid balance to yet another collection agency in the future.

Sylvia gives good advice. Most likely he will be harassed by a collection company for a very long time. If he has more than once creditor as Sylvia mentions, they likely will not take him to court. The clock starts ticking on his credit score once it has gone to collections. If he does nothing (and he is not sued) then in 7 years the debt will no longer affect his credit score. If he makes even one payment during that time the clock is re-set and the debt becomes fresh.

If the creditor does take him to court they will need to provide the correct documentation regarding his debt. His debt information has changed hands, and any inaccurate or missing data on the part of the collection agency will usually result in the collection agency losing the case. Having a lawyer respond to the case will make it much likelier that the collection agency will settle with your client, versus fighting it in court.

I totally agree with the good advice on here and echo Sylvia in her congratulations to you, ncreg.

I would find an attorney who has knowledge of credit and collections.

Personally I have known a few people who have been in the same position and went to the "Consumer Credit Counseling Service" here in VT. They're a nationwide company affiliated with the United Way, not the card companies.

What they do is negotiate with the credit card company, NOT the collection agency, for a 2% interest rate and THEY pay the monthly installment when you give them the cash each month.

Do a Bing for "Consumer Credit Counseling United Way North Carolina".

Also the Federal Trade Commission has a list of debtor's rights when dealing with collection people. If they violate his rights he can sue them. Here's the link.

FTC- Debtor's rights

Is renting out the house temporarily an option - got out of debt once by taking a live in attendant care job in addition to my regular job. If its not a hot rental market then never mind.

How about him getting a room mate instead to make up the $250 difference that he needs to pay for their proposed payment plan.

If he decides to utilize the consumer credit counseling services, it is imperative that he makes sure he is using the actual consumer credit counseling. My parents used a similar type service and the money was not going towards the debt as it should have been.

While I am generally not a fan of Dave Ramsey (because of politics) his site and organization does have a tremendous amount of information regarding the laws, handling creditors, etc. They may be worth a try on how to navigate the waters. Collection agencies will generally use whatever tactics necessary to get the most money out of people and unfortunately, those who owe money are often the most vulnerable and who do not have the resources to fight back. I agree that it is wonderful of you to help him.

One other thing I thought of, under absolutely no circumstances, should he undergo a payment plan or whatever through direct debit. If they cannot accept a check, then they get no money. Once access to an account has been granted electronically, it can be a mess because then they may go in when they really should not.

Because of the relatively low amount of money at risk, he should research local laws to see whether his case will be handled by a "small claims" court. Here, we call them magistrate or municipal courts. They are courts of limited jurisdictions meaning they handle cases involving $$ amounts. Here, I believe that amount is $10,000 but it is higher and lower in other states.

He needs to be clear whether he's actually been served with a legal pleading or some sort of legal-looking document. Collection agencies aren't known for their ethics, so they may be trying to intimidate him. Also, this type of document would normally come from an attorney and not from the collection agency itself. Here, you must be served not only with the summons, but also with a copy of the complaint - or lawsuit - that's been filed against you. Since he presumably didn't receive a complaint attached to the summons, I think it's unlikely a suit has actually be initiated. (Again, court rules vary from state to state.

All that said, most courts offer some sort of free mediation or settlement conference the parties can or are mandated to participate in. He may be able to use this as an opportunity to seek a lower repayment plan.

One last thought, and I have no idea if this would work, but would be to contact the credit card companies directly to see what sort of payment plan they would put him on, instead of dealing with the collection agency. If the agency has bought the debt, however, this will not work.

CCCS will only deal with cash or bank checks to make the payments. They will not accept any personal checks from the debtor. Why? Checks can bounce.

There are services that truly help people work their way out of situations like this and there are those like Sylvia's former client found who prey upon people who are trying to find a solution. The state bar suggestion is a good one. Most have referrals or pro bono networks. They may work with universities and law schools or the schools may have independent legal clinics. United Way may have referrals for some of these services too, but I would check them out. Make sure he checks out any group or service he is considering, especially if they are not referred by a group that has worked with them and gotten actual results and long term satisfaction.

I am assuming he has not been able to get an equity loan. I hope he is able to work things out, and without going to court. That only adds too the amount of the debt, but they will go that route to preserve the right to collect if they think they will collect -- and perhaps the fact that he owns a home is why they are pressing so hard. Every debt has a period of time in which it must be collected under state law. To preserve the right to collect, they would have to get the court judgment and record it -- get a lien. But that costs them money too, and they aren't likely to go that route on a smaller sum like this unless they think they can collect. No reason to run up the number just to write it off. But they can be real ugly in the meantime, and some collectors have been known to try to collect debts that are past the limitation period. They can always ask and apply guilt, but there is no legal right to collect after that time if there is not a judgement or he doesn't sign something like a payment agreement that creates a new debt.

I could be wrong, but I believe in most states the statute of limitations on debt collection begins ticking when you make your last payment. Thus, making a payment even once per year resets the clock, and preserves the agency's right to sue. Making this a non-issue.

It helps to understand how collection of unsecured debt works. The debt is sold once companies write it off, the collection agencies pay pennies on the dollar for it. Often their collectors are paid on commission and hate their job. They have little to no incentive to offer a long term repayment plan as they really don't want to be working there that long. Sometimes you can solve this by asking to speak with a supervisor. Supervisors often have a long term outlook and are willing to accept longer repayment periods.

If they insist on some form of automatic payment offer a debit card. Set up an account just for this. Request your bank not authorize overages, they will not approve or charge you for debit requests that exceed your balance, they will make you sign that you don't want the"service." Place just the money in the account each month that you agreed on.

There is a good chance that low balance and activity account could wind up costing him more in fees unless it is tied to an auto deposit -- in which case it could be harder to limit the amount drawn to an agreed amount, or he has a minimum balance in another account. I don't know what having an account that sits empty most of the time might do to a credit rating, but if it does get overdrawn, it could be a nightmare.

I don't see NC saying the guy has been making payments. He made an offer that was refused.

There are many banks that offer no fee debit accounts. Both of my children have debit accounts through CapitalOne360 that sit empty most of the time. There are tons of online banks that have similar debit accounts. There will not be a penalty for a low bank account on your credit report as your bank account doesn't appear on your credit report unless you have tied it to a line of credit such as overdraft protection.

There is no way to overdraft the account if they only have your credit card number and not your bank account number. Federal law requires all banks to allow consumers to opt out of overdraft coverage for debit cards and do so without any additional fees. Banks usually sell this coverage as a convenience, such as, "think how bad it will be if you eat dinner, then try to charge it and your card is declined, we will do you a great service of approving that overdraft for a small $25 fee!" You don't have to do it. You can opt out and they will decline all charges that exceed your available balance at no charge.

Since he offered to send a payment I doubt they are suing to protect their rights, more than likely it is exactly what I said.

Ncrealestateguy

I just reread your original post. Bankruptcy is available in the US for all US debt, regardless of any citizenship status. I am pretty positive that your guy can declare bankruptcy just fine.

Concerning bankruptcy, every state has different laws concerning the home. Some states require the home to be sold and all equity goes to the creditors while other states allow you to keep your home if you have less than $125,000 in equity.

Here's what you can keep in North Carolina.

North Carolina Bankruptcy Exemptions

Chapter 13 is also available to him which erases a lot of the issues with bankruptcy. But he doesn't really want to file bankruptcy. He wants leverage, the option of filing bankruptcy gives him some leverage.

Your, hopefully not client, has offered a fair repayment plan, actually more than would be owed had he kept current on the credit card payments. It is also significantly better than they will get through chapter 13, and 100% more than they would get if he filed chapter 7. He doesn't need to file bankruptcy over $9500, he needs a reasonable person at the collection agency. Offering $250 per month will pay the debt in 38 months, most unsecured defaults don't get collected and the ones that do often take a lot longer than 38 months.

If I were him, I would ask to speak to a supervisor, and explain I prefer to pay the debt, but $250 per month is all I can do. Any more than that will simply force me to declare bankruptcy. I assume at this point you have advised him not to sell the house. That is absolutely the right thing to do as far as I am concerned. I would point out that he can declare bankruptcy if he wants and he should do some internet research to learn all he can.

Your children probably have no fee debit accounts because they are students and because you have an account at the bank. My sons have student accounts with no fees but they wouldn't if it were not for our account and the fact that they are students.

In the time it took you to write that you could have just googled Capitalone360 (which oddly enough, is not my bank) and realized you were incorrect. But since Google isn't working for you, here...

CapitalOne360

Also:

Ally bank

Lets not forget that any no fee preloaded card would also work.

I stand by what I said. I never claimed to be an authority on every account available and I will freely admit that I am not that I am not an exert on all debit accounts possible because I do not favor them. There may be options out there, but I still wouldn't recommend the approach you suggest.

A collection agency is not likely to simply accept you mailing in a monthly payment, since the reason they are even talking to you is your inability to do so. Empowering them to take out the payment is much more powerful, but exposes you to danger. I am trying to educate someone how to remove that danger.

I want to recommend giving them the finger, however, that is probably a bad idea. What is a good idea is getting them to agree to what you want while making them believe that they are in control.

Thanks for everyone with advice. I am meeting him tonight to discuss his options and to relay some of these tips and advice. (As a Realtor and acquaintance, not as hard legal advice)

I will advise him again to not sell. I will update later. Thanks again.

Lascatx... I would shop around banks if mine charged a fee to have a debit or checking account.

Is there a reason he's not searching for a room mate? If an apartment goes for $900, certainly a room in a house would be easy to fill, and could bring in more than needed.

The only "fee" I have with my debit card is if I use it at another bank's ATM. My personal and business checking accounts are free and the debit cards are associated with them. And I can assure you I am not with a major bank at all. My bank is the type where you walk in and everybody knows you.

Update...

First off, thank you all very much for every single comment, advice and resource! Of course, I did my own research, but getting a varied response of peoples views is what is really helpful. I went through every comment and summarized a point by point list of advice, resources and Do's and Dont's for this person. We met a couple of days ago. he still thought he wanted to sell his home and just be done with it. I was able to show him how spending $7000 to get $8000 is not a smart financial move, on top of the fact that he would no longer own a home, no longer have any equity to his name and on top of it all, be paying more per month in rent. He eventually saw the light, and is not going to sell. He found a room mate yesterday for $500/month, and he is going to call the collection agency's Attorney every week to offer what he thinks he can afford. This way, we thought he could show this effort to any future Judge and the Judge could see that it was them that were saying no to a settlement as opposed to the other way around. I told him to keep track of every correspondence, and to bring this to court if they sue him. (The "summons" he told me about was not a summons at all... it was a certified letter delivered by the Sheriff, just explaining that the agency had now hired an attorney to handle all negotiations. The attorney was the last person he spoke to who refused his offer. There is no court date set.)

Thanks again for your help. He feels much better now.

That's lovely to read.

I think it's a brilliant result. Absolutely brilliant.

Bless you for helping him through this. He sounds like a good guy, who's trying to make good on his commitments, and you are helping him do it in a financially sound manner.

Lots of good advice here. I'd like to just add that your client need not be ashamed or afraid at all. I've listened to Dave Ramsey off and on for several years and situations like your client's are common. He needs to remain calm and continue to offer payment that he can afford beyond the cost of his needs of food, shelter and utilities; I don't think anyone should sell their home to pay off stupid credit card debt.

A family member used some kind of consumer credit counseling and it was a nightmare. She followed their instructions and assumed they were helping her out when it was quite the contrary. It turned a difficult situation into an avoidable, nasty mess. Please don't advise the use of this type of service.