Saturday, September 23, 2006

Congress Emboldens the Debt Bullies

When Congress adopted the bankruptcy amendments in 2005, it was with the explicit purpose of making it harder to file for bankruptcy. But the supporters of the bill claimed over and over that “honest, but unfortunate” people would still have plenty of access to the bankruptcy courts. They were going after only those who could repay their debts--or so they said.

No one is surprised to discover that bankruptcy filings are down. Filing fees have increased, attorneys’ fees have increased, and people might reasonably be worried about the new counseling and disclosure rules. But the courts are still open, and most people have low enough incomes that many of the changes won’t apply to them. Jim Caher, an Oregon lawyer and the author of a really good book full of advice about bankruptcy (Bankruptcy for Dummies), gives another reason why filings are down: the debt collectors are lying to people. Here’s his story:

A couple of weeks ago, I took several calls from bill collectors for a client who was feeling especially harassed. The were all far more aggressive and offensive than I ever experienced before.. Real bullies and completely full of baloney.

One told me that according to his “investigation” my client was not eligible for bankruptcy under the new law. When I asked him explain why, he said that that was confidential. Another guy told me that I should just believe him “filing bankruptcy for this guy under the new lat would be a big, big mistake.” I asked him to explain why and this guy also refused. Then he assured me that if I file bankruptcy for this client, he’ll report me and the client to the “proper authorities” and then hung up before I could ask him who those authorities might be. The third also said that my client was not eligible to file bankruptcy under the new law. All of this is complete and utter bunk. But they seem to be working from the same script. A fourth asked me if I had bothered to inform my client that he would have to undergo six months of credit counseling and then would be able to wipe out 60% of his debts. When I tried to explain that this was not true, he said “yeah, right all you want is money.” These calls were from four different collection outfits, but they seem to working from the same script.

This might partially explain the drop in filings. Many people would be terrified by the threat of being reported to the “proper authorities” or that they have been “investigated” and were not eligible for bankruptcy under the new law. Also, telling them not to believe the lawyer, who only wants to take their money can’t help either.

If debt collectors have grown bold, then Congress has helped them along. By passing a bankruptcy bill that is deliberately and publicly anti-debtor, these debt collectors have a ready audience when they bully and frighten people into believing that they have all the power.

Jim Caher says he is going to monitor debt collection calls for a while. Caher, the Boston Globe, the Department of Defense—the voices calling for an end to outrageous collection practices are growing louder.

No comments: