The Dangers of Allowing a Debtor to Play the Creditor Against the Creditor’s Attorney

It is no secret that very few debtors like dealing with collection attorneys. Most attorneys are hard nose individuals with little compassion for the debtor’s plight. Because of this fact, it is extremely common for a debtor to attempt to avert the attorney by calling the creditor once the creditor’s attorney has contacted him regarding collection of the debt. The debtor knows that for the past several months he has been successful at holding off the creditor from pursing debt collection by using one hard luck story after another. Although, the debtor knew that eventually the creditor would lose his patience and turn the matter over to legal counsel, the debtor was merely trying to buy as much time as possible before that happened.

Once the debtor is contacted by the creditor’s attorney, he realizes that time has run out. Some debtors resign themselves to the fact that time has run out and that they must now deal with paying back the debt. However many debtors make a last ditch effort to stall the matter by trying to persuade the creditor for a little more time or a significant discount on the debt.

One of the most disastrous things a creditor can do when he is contacted by the debtor, is to take the call. This is because once the debtor knows that he can bypass the attorney, he will refuse to deal with the attorney any longer, and the attorney will lose power to control the case, which will ultimately jeopardize the creditor’s position.

A common excuse debtors will use to call the creditor, is to complain about the creditor’s attorney. He will state that the attorney is unreasonable and that if the creditor does not “call off” the attorney, he will have no choice but to file bankruptcy. If the creditor accepts the call, the debtor will probably give the creditor a real sob story as to why he needs more time or as to why he needs the debt reduced in order to keep him out of bankruptcy. The longer the creditor remains on the telephone listening to the story, the more damage is being done to the case.

The foundation for successful collection litigation, is the application of legal pressure that forces the debtor to immediately deal with his debt or suffer the consequences of levy. It is always quite amusing to observe the debtor when enough pressure is applied. He seems to always miraculously locate a funding source to pay off the debt or at least initiate a payment plan.

Although the threat of a bankruptcy filing is always a concern, experienced collection attorneys have the ability to sense when the debtor is being pushed too far and to know when to back off before the debtor gives into bankruptcy. This is one of the benefits creditors receive when hiring an experienced debt collection attorney.

Recently, I was handling a case where the debtor played one of our clients against us, and succeeded in getting his debt reduced by $25,000.00.

I was handling a $40,000.00 debt collection for one of my clients against two practicing doctors. Now, when I am dealing with debtors who are practicing doctors with a steady income, and they have no defense to the action, it is highly unlikely that I would discount the debt. This is because they have sufficient assets to pay off the debt, and it is unlikely that they would resort to bankruptcy.

I was proceeding with the litigation and was successful in obtaining the doctors’ default due to their failure to timely file their Answer to our Complaint. Everything was going along beautifully and I had them in a position where I was in control. They already began discussing settlement…then disaster struck!

The doctors hired a debt restructuring firm to attempt to get them a discount on the debt. An individual contacted me from the firm, and very crassly demanded a discount. I informed him that without any defenses to the action, the doctors were not entitled to a discount and one would not be offered. He called me a B_ _ _H and hung the phone up on me. Needless to say, I was extremely impressed by his finesse and professionalism.

About two hours later, I received a telephone call from our client stating that he had just spent an hour on the phone with the individual from the debt restructuring firm. He went on to tell me about how the individual found me to be uncooperative and unreasonable and that he didn’t want to deal with me. My client ended up agreeing to accept a settlement of $25,000.00 less than what was owed.

I explained to our client that the settlement he made was substantially lower than we believed we could have obtained and that he should have consulted us on the matter before he accepted the phone call and negotiated a deal. I went on to inform him of the advantageous position we were in with regard to the litigation and with regard to the income level of the doctors.

Once all of this was explained to our client, he realized that the settlement figure was not terrific. He requested that since nothing had been put in writing, and that there was still time to rescind his settlement offer, I contact the individual and withdraw the client’s offer and proceed with the litigation.

Our client promised to leave the matter in our hands and to have no further involvement in the negotiation of the settlement. I immediately contacted the individual and withdrew the offer prior to it being accepted. Everything was back on track. Then disaster struck again.

The individual went around me and around our client, and managed to contact our client’s supervisor. The individual threatened the supervisor by claiming that he had an audio tape of our client accepting the settlement and that if they didn’t honor the settlement, he was going to sue our client for fraud.

Rather than contact me or our client, the supervisor decided that he didn’t want any trouble and that he would not only honor the settlement offer made, but would allow a term payment plan of the monies rather than a one lump sum payment.

If the supervisor has taken the time to contact me, I could have educated him on the legal aspects of the threat. Not only is an unauthorized audio tape unable to be used as evidence in a court of law, there is no evidence of fraud and the settlement offer was properly withdrawn prior to acceptance making it not binding. All of the threats made by the individual were ludicrous and completely without foundation. I have no doubt that the individual went home and opened up a bottle of champagne to celebrate what a brilliant scam he pulled on our client.

As can be seen from the above scenario, a savvy debtor can play a creditor against an attorney to gain a huge advantage for purposes of settlement. Unfortunately this happens more frequently than not, and it is solely up to the creditor to prevent the debtor from pulling this scam.

Frequently creditors forget that collection attorneys are on their team. I find that some of our clients approach us adversarialy rather than as business partners working together toward a common goal. You must remember why you hired the attorney in the first place, and let us do our thing.

Therefore, the next time a debtor attempts to bypass your attorney and to contact you directly, simply inform the debtor that he must deal with the attorney and that you will not discuss the matter with him. I assure you that if you do this, we will be able to maximize the recovery of your bad debt. Don’t forget!