September 18th, 2013

Question: I am living below the radar, not paying off any debts. I believe that several debt collection lawsuits have been filed against me, which I have ignored. I am not sure if they have gotten judgments against me or not, but there is nothing in my name and all my transactions are in cash, even my income is entirely cash-based. Is there a good time to come out of the shadows and deal with this and, if there is a good time, when and how? Thanks.

My response:
You appear to be following a mish-mash of (a) my “Don’t Pay a Dime Strategy” in which the debtor does not pay the debts in the hope that the creditor or debt buyer will miss the statute of limitations and (b) some other advice you found somewhere commonly referred to as “Judgment Proof.” I am not a fan of your current strategy, because anyone with a house, bank account, or a job that pays more than the minimum wage in California, would not be judgment proof or would be subjected to massive judgments once they get a job, bank account, or real property.

The result is the debtor ends up overpaying to resolve old debts, because the judgment creditor (the person or entity who has a judgment for money) gets a judgment for the full balance, plus accrued interest, court costs, and sometimes attorney’s fees. Defending my clients from debt collection lawsuits has saved my clients so much in most cases. If you’ve ever experienced a small bulb growing into a large flower, you can relate to how these debts blossom and bloom from a simple credit card balance to a default judgment. For the judgment creditor, it’s a sweet smelling, colorful flower. To the judgment debtor, it’s a Venus fly trap!

I have posted several blogs about timely responding when served with a debt collection lawsuit. I have also explained how default judgments are obtained without the debtor knowing about it and what can be done to resolve those old default judgments. I have blogs and legal guides on Avvo.com that explain how to settle and what documentation is essential. Please review my postings, which are organized by several categories.

Great question on when is a good time to settle old debts, including old default judgments. Of course, right now is a great time to settle old debts, especially if the debtor has no assets and very low or no income. When the judgment creditor is unable to collect most or all of the judgment and the debtor could be a candidate for Bankruptcy Chapter 7, that’s when the debtor can propose a “hardship settlement offer,” because they have an actual financial hardship. The offer works best if the debtor has access to additional funds to make an offer that is greater than what their assets and income can provide. For example, since retirement funds are beyond reach of civil judgments, borrowing from a 401-k, a family member, or on an open line of credit, are ways to get the funds for a hardship settlement offer.

How you come out is up to you, but this can be done between the debtor and the debt collection agency directly or the debtor may want to use outside resources. Perhaps there is a family member who is comfortable doing this or hire a debt collection DEFENSE attorney to negotiate. The key is not paying too much for the settlement process, to leave enough to propose an attractive settlement amount. Too little and the debt collector will reject the offer and wait.
Robert Stempler
www.StopCollectionLawsuits.com
Twitter @RStempler
Facebook: www.facebook.com/SoCalConsumerLawyer