When Debt Collection for Old Debts Comes as a Shock
At our firm this year, we’ve seen a rise in people experiencing surprise debt in Memphis and Shelby County. In other words, debt collectors come after people for debt they didn’t know they had.
As a result, Memphians are losing their savings, homes, and peace of mind. Here’s what’s happening and what you can do to stop this problem.
Case Example from Our Firm
Let’s look at one of our clients as an example. We recently started working with a man who owed $15,000 in 2006. He couldn’t pay the debt at the time, so it went to collections. However, the creditors eventually decided not to pursue the debt anymore. In our client’s mind, the problem went away.
A few weeks ago, he got some shocking news: A new collections agency holds his debt now, and they’ve decided they want to pursue the debt again. They renewed the judgement against him from all the way back in 2006.
As a result, with late fees and interest, our client now owes $56,000—nearly 4x his debt nearly 20 years ago.
What Causes This Surprise Debt Collection?
When you have a debt you don’t pay for whatever reason, the creditor gets a judgement against you that allows them to pursue the debt. That means you might receive phone calls, letters, etc, and even have your wages garnished.
A judgement in Tennessee stays solid for 10 years, and before it expires you can renew it for 10 more years. This can go on indefinitely. In fact, if a creditor really wanted to, they could chase you down over a debt for your entire life.
Most of the time, your creditor doesn’t want to do this. Instead, they’ll sell 0ff the debt to another collections agency. The agency will buy the debt (and the judgement attached to it), with the hopes they can collect.
However, the debt collection company is out some money when they buy your debt. They intend to get their money back by making you pay your debt—but even better if they can get even more from you.
To make the most money possible, the company might wait to collect and allow interest and fees to accrue. Eventually, you’ll owe far more than your original debt, and they might have a chance to make a lot more money off of you.
Why Is This Happening Now?
The laws haven’t changed at all, and some version of this story has happened for decades. But our firm is seeing an uptick at the moment, in part because of renewed debt collection after Covid.
For a couple of years, collections agencies had to stop pursuing certain debts. The government put limits on repossessions, evictions, and foreclosures. And creditors lost a lot of money as a result.
This means they now want to make back what they lost, and using old judgements to catch people by surprise serves as a good way to make money fast. The interest and fees could help them regain what they lost during the pandemic.
All of that said, if you’re the debtor, it doesn’t really matter why or how they’re doing this. Once they get that judgement renewed and decide to collect on your debt, you have to pay.
Can You Negotiate Over Surprise Debt in Memphis?
We often tell people with debt they can try to negotiate with their creditors. For example, some companies might help you set up a payment plan or accept lower payments for a certain amount of time.
But once you get to this stage, where creditors are punishing you with fees, you have far less negotiating power. These companies usually aren’t the original creditors, and they’re only in it for the money. Otherwise they wouldn’t be penalizing you with so many outrageous, trumped up charges.
There’s some evidence things could improve in the future. In 2021, Congress passed the No Surprises Act, which protects against surprise medical bills. It went into effect Jan. 1, 2022, and helps prevent surprise bills from hospitals and other medical providers.
While this law doesn’t help with old judgements, it does show the public is becoming more aware of how much surprise debt can hurt people.
The Legal Solution
These judgements are a legal battle, and there’s only one legally-binding solution if you can’t pay. Fortunately, Chapter 7 bankruptcy can free you of old and new debts, including these outrageous judgements from years ago.
With Chapter 7, you put together a petition asking the court for bankruptcy protection, which refers to protection from your creditors. In a few months’ time, you’re free of debt and free from the terror of these creditors.
Chapter 7 is one of the best and only ways to get out of surprise debt in Memphis. A lawyer will help make sure you qualify and guide the process.
That said, you should be careful who you work with on your case.
No More Surprises, Including From Your Lawyer
As you’ve probably learned already from your experience with creditors, there’s a lot of people waiting to take advantage of you if you have debt. Some law firms will quote you a really low rate and then charge you for all sorts of little things, until your bill skyrockets past what you can afford.
You don’t need any more surprises. To help you protect yourself, I’ve written a free report called What the Price-Chopping Lawyers Won’t Tell You. Use this guide to understand how pricing works and make sure you get a lawyer who won’t add to your worries.
For over thirty years, our attorneys have put our clients first—especially in the most difficult situations. We want you to have a fresh start and a successful financial future. And we work hard to make that happen. That’s why we’ve received so many amazing reviews and even multiple Martindale-Hubbell awards for client satisfaction.
We can help you, too. Just give us a call today at 901-327-2100 or fill out the form below.