On Monday, I mentioned that I had to appear in court for a debt I was already paying. I had intended to write about the experience with tips if you ever found yourself in a similar situation. Well, good news, bad news situation. Bad news: I can’t write that post. Good news: I was able to avoid having to actually appear before a judge.
First: a gentle reminder to always open your mail, even if you think it is junk. A full year after getting married and a bankruptcy that wiped out all of her pre-marital debts, we never would have guessed that mail coming from the hospital with my wife’s maiden name would be a current bill.
Of course, even if we had known it was a bill, we couldn’t have afforded it. Two installment loans attest to the fact that our local hospital only accepts full payment. But other arrangements could have been made. Instead, it went to collections and we promptly added it to our CareOne debt consolidation plan. Considering the issues I’ve had with them since, that was a mistake. $15 was never meant to be the payment plan, but a starting point until one was worked out. But we never heard back. For 6 months, Collection Center, Inc. collected and cashed that monthly payment and made no attempt to reach out and ask for a larger amount.
Until they sued us. All the sudden $15 wasn’t enough. When I finally got a hold of somebody after repeated attempts, their offer was 20% of income: $500/month. If we could have afforded $500/month, we would have paid the hospital off before it ever went to collections!
So I took the day off of work, collected all of my documentation, and headed down to the court-house.
Lesson learned: When you go through the metal detector, make sure your remember to actually remove everything from your pockets!
First step was visiting the county clerk. Since we were answering the claim, we had to file it. But first, it a copy had to be given to the other party. So we were sent upstairs to register our presence and wait for the lawyer for the other side. The idea was to provide a copy to the lawyer and then formally file our answer. From there, the next step would have been actually appearing in court.
Lesson learned: A debt collector’s lawyer is actually the last line of defense before actually going to court.
From the hospital, to the debt collector, to their lawyer; the lawyer was the first reasonable person we met in the process. The hospital only accepts full payment despite the fact that medical debt is the leading cause of bankruptcy in the US. The debt collector treated us like we were trying to get one over on them by not putting 20% of our income towards their collections.
But we weren’t in the conference room at the courthouse for 5 minutes before we were already working out a deal. It turns out that an attorney for a debt collector is more of a debt collector than an attorney. Similar to how a creditor sells a debt to a debt collector, a debt collector can then hire an outside party to actually collect the debt.
This guy saw that we had been making payments for 8 months and were willing to pay a larger amount that would get the thing paid off in under a year. That was enough for him. He agreed that 20% was ridiculous and quickly offered to accept the original deal that Collection Center had rejected.
Lesson Learned: If a debt gets to the lawsuit phase, it is cheaper to resolve it at the courthouse than handle it beforehand.
Does that sound backwards to you? me too. But when a debt collector files a lawsuit, attorney and court fees are automatically added to your account. In this case, it was roughly $200. If we had settled the matter with the debt collector after being served, we would have had to pay that much extra over the principal and interest. If we had gone to court and lost (and possibly if we had won), we would have had to pay that.
But because a settlement was reached at the pre-trial phase, the fees were waived! So it really is cheaper to settle during pre-trial at court than to settle before your court date. Go figure.
Have you ever been in court? Ever dealt with an aggressive debt collector?
P.S. I’m in the 2013 Tour de Personal Finance at My Personal Finance Journey! The winner gets $100 and gets to choose a charity to get $700. Mine would go to the Food Bank of Larimer County. Please do me a favor and vote for my post by leaving the word “wage” in a comment at: http://www.mypersonalfinancejourney.com/2013/07/tour-de-personal-finance-stage-7.html