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Lawyers, judges expect increase in debt lawsuits
Every Thursday morning, bailiffs in Associate Circuit Judge Peter Statler's courtroom call out the names of people being sued to collect debts. Few people appear to contest the cases, and Statler regularly issues default judgments that can follow people for decades.
Last week, Statler heard 63 cases, which he said was a light load. Because of the delays between a creditor being unable to collect and the decision to pursue a judgment, Statler said he hasn't seen a dramatic increase in filings due to rising unemployment. But he doesn't doubt it is coming.
Neither do the lawyers who handle the cases, most of whom represent direct creditors or debt collection agencies that have purchased the accounts or been assigned to seek payment.
"Where things evolve, as folks lose their jobs and can't pay their bills, is that folks make decisions on survival and deal with the rest," said lawyer Dan Rau, who regularly represents people being sued for debt. "These folks understand that they have the bill. They want to pay it."
Job losses, both here and across the country, are mounting. From July to December, first-time unemployment insurance filings increased 80 percent across Southeast Missouri. Figures for individual counties aren't yet available, but statewide the unemployment rate jumped to 7.3 percent in December from 6.7 percent in November.
The basic unemployment figures mask the magnitude of the problems workers face as they struggle to keep up with their bills. The average workweek fell to 33 hours in December, the federal Bureau of Labor Statistics reported, because many working people were forced to accept part-time employment when they wanted a full-time job. If those workers and people considered "discouraged workers" because they can't find jobs are included, the national unemployment rate is 13.5 percent.
Debbie Frank, general manager of Credit Bureau Services in Cape Girardeau, said her company would prefer not to take people to court for collection. Frank said she is much more willing to work with someone who keeps up regular contact about their debt than someone who ignores attempts to establish a payment plan.
"The obvious thing is, we want to work with the consumer on getting this paid," she said.
Her collectors try to emphasize that consumers should protect their credit rating by establishing a payment plan and sticking to it. And when a recent job loss is part of the equation, Frank said, she tries to be more flexible. "Unemployment would be handled differently than another type of consumer," she said.
The load of debt collection cases is increasing, whether because of rising unemployment or other causes. In the 32nd Judicial Circuit, which covers Cape Girardeau, Perry and Bollinger counties, creditors filed 167 lawsuits seeking to recover debts during July 2006. While the numbers fluctuate month to month, the trend is up. There were 282 debt collection cases filed in the circuit in July 2008 and 302 in December.
When debtors do appear in court, Statler said, they offer a variety of reasons for not paying the debt. Few dispute they owe the money, but they try to give reasons for not paying, he said. In one instance, Statler said, a mother dissatisfied with the treatment her son received during repeated visits to an emergency room claimed she should not have to pay because an accurate diagnosis was never made.
On Thursday, in a case where Church Enterprises was seeking to evict Abigail Johnson from her rented mobile home, no one representing Church was in court, but Johnson did appear. She called the rental unit "a dump" and said that is why she has not paid her rent. "I feel I shouldn't have to pay to live in a dump and pay for his mansion," she told Statler.
The case was rescheduled for trial this week.
Of the 302 cases filed in December, Cape Girardeau's two hospitals, Southeast Missouri Hospital and Saint Francis Medical Center, filed 127. Medical collections and credit card collectors make up most of the docket on any given Thursday.
In written responses to inquiries from the Southeast Missourian, both hospitals defended their collection practices. Southeast Missouri Hospital president and chief executive officer Jim Wente, in the more detailed response, said his institution had written off $7.3 million in charges to low-income patients during 2008, a 58 percent increase over 2007.
Wente also said his hospital accepted payments for services that were $487.3 million less than the amounts billed. The larger amount includes the difference between what is billed and what is received from public and private insurance as well as charity care and bad-debt expense.
The hospital's bill collection policies are set by the board of trustees, he said. The hospital doesn't want to create hardships and tries to work with debtors, he added.
"It is unfortunate that in some cases we have to utilize the legal system," Wente said. "However, in order to be fair to those individuals who pay their bills on time in conformity with the payment options we make available, we have little recourse when those avenues have been exhausted."
In its response, Saint Francis director of health information management Brenda Hanle said the hospital provides options for patients unable to pay the full bill immediately and draws a distinction between inability to pay and unwillingness to pay.
"There are multiple factors involved in the decision to pursue legal action," Hanle said. "Refusing to pay coupled with the ability to pay could result in legal action."
Lawsuits over debt collections can be successfully challenged, especially when the collector has purchased debt from a loan company such as a credit card issuer. J.P. Clubb is a Cape Girardeau lawyer who said such companies often pay little for what he calls "zombie debt" and then aggressively pursue a judgment. Once a judgment is entered, collection can be pursued for 10 years and the judgment can be renewed indefinitely.
Zombie debt, he said, is often so old that a lawsuit filed today is beyond the legal statute of limitations, which is up to 10 years in Missouri. A defendant must assert that the law bars the lawsuit in order to have a judge consider that as a defense, but when successful it can result in the collection company paying the defendant a judgment, Clubb said.
"The saddest thing is that people are scared," Clubb said. "It is a bunch of attorneys in suits sitting in this little bitty courtroom. It is very nervous, especially if you are not an attorney. You are called in front of the judge, and all these people are looking at you and you just don't know what to do."
The best defense other than an expiration of the statute of limitations is to demand the collector's attorney produce supporting documentation for the debt, Clubb said. "They don't have any evidence. They dry up if anyone fights them."
Bill Hopkins, a lawyer from Marble Hill, Mo., who regularly represents credit card companies and their collectors as the local attorney, said that in at least 80 percent of his cases, defendants do not appear in court.
For people juggling rent or a mortgage, utilities, car payments and credit cards, Hopkins has some advice that will help keep them out of court. "If you can't pay your bills, you need to deal with the credit card companies. Do it in writing and get everything in writing. It is amazing that people will stop paying and the bill will be two times or three times as much, way more than if they had paid it off in the first place."
Both Clubb and Hopkins agree seeking legal advice when sued is essential to getting the best outcome. "I don't think anybody should go to court without a lawyer," Hopkins said.
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