Debt collection can be a challenging and time-consuming process for creditors. However, with the right strategies in place, creditors can increase their chances of recovering outstanding debts efficiently and effectively. If you represent a bank, finance company, credit union, auto lender, equipment lender, or truck lender, our debt collection lawyers are ready to help you. As legal professionals, your debt collection attorneys will enable you to explore some essential tips to help you improve your debt collection efforts as a creditor.

Establish Clear Communication Channels 

Open and effective communication is key when it comes to debt collection in Illinois. Ensure that you have multiple communication channels available, such as phone or email. Clearly state your preferred methods of contact and make it easy for debtors to reach you. Promptly respond to all inquiries and be proactive in keeping debtors informed about their outstanding debts. 

Implement a Robust Collection Policy

Developing a well-defined collection policy is crucial for creditors. This policy should outline the steps to be taken at each stage of the collection process. It should include clear guidelines on when to send reminders, issue warnings, and more. A comprehensive collection policy will provide structure and consistency to your debt collection efforts. 

When it comes to recovering debt, banks often turn to collection attorneys for their knowledge and guidance. These legal professionals are equipped to navigate the complex world of debt collection, ensuring banks can recover outstanding loans efficiently. Whether you are representing a bank or some other form of lending institution, lawyers are ready to assist you in pursuing your legal goals. 

Experienced in Law

Bank collection attorneys possess a deep understanding of the legal framework surrounding Illinois debt collection. They are well-versed in the intricacies of relevant laws, regulations, and procedures, enabling them to provide accurate advice and representation. If you are a bank or financial institution seeking to recover funds, a collection attorney can guide you through the process, ensuring compliance and maximizing your chances of success.

Efficient Debt Recovery

One of the primary responsibilities of a bank collection attorney is to help financial institutions recover outstanding debts. By leveraging their legal knowledge, collection attorneys can employ various strategies to expedite the debt recovery process. They can negotiate with debtors, send demand letters, file lawsuits, and, if necessary, initiate foreclosure or repossession proceedings. This comprehensive approach ensures that banks can recover their funds swiftly and efficiently, minimizing financial losses. 

When it comes to debt collection, creditors may face a number of challenges. Recovering debts can be a complex and time-consuming process, requiring careful navigation of legal guidelines and effective communication with debtors. However, many creditors make mistakes that can hinder their chances of successful debt recovery. By understanding these pitfalls, creditors can improve their chances of collecting outstanding debts. A skilled debt collection attorney can provide guidance in these matters, ensuring that creditors comply with all legal requirements.

Failing to Send Written Notice

One major mistake creditors often commit is neglecting to send a written notice to the debtor regarding overdue payments or unpaid balances. According to the Fair Debt Collection Practices Act (FDCPA), it is mandatory for lenders or collectors to provide written notice within five days after initial contact with the debtor.

Sending a legally compliant written notice serves several purposes:

Creditors often face challenges when it comes to collecting outstanding debts. As a creditor, you may have experienced difficulties when trying to recover money owed to you from borrowers who default on their payment obligations. When traditional methods such as debt collection agencies or legal action prove ineffective or costly, mediation can provide an alternative approach to resolving debt collection disputes.

The Benefits of Using Mediation to Address Debt-Related Issues

Mediation offers several advantages for creditors when it comes to resolving debt collection disputes, including:

• Cost-effectiveness: Mediating a dispute is often less costly than pursuing litigation through the courts. By reducing legal fees and associated expenses, creditors can make the process of recovering debts more efficient.

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When it comes to collecting debts, creditors have certain rights and responsibilities. However, creditors must understand that debtors also have rights that must be respected. Violating the rights of debtors can lead to legal consequences, as well as damage to the reputation of the creditor. To avoid these issues, creditors should follow these steps:

1. Understand the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is a federal law that sets guidelines that creditors must follow when collecting debts from consumers. Creditors will need to familiarize themselves with the provisions of the FDCPA to ensure compliance. The act prohibits creditors from engaging in harassment of debtors, making false or misleading statements, and or using other unfair practices.

2. Provide Accurate and Clear Information

When communicating with debtors, it is essential for creditors to provide all necessary information about the debts that are owed. This information includes the amount owed, the creditor's identity, and the debtor's rights. Misleading or confusing information can lead to misunderstandings and potential legal issues.

Banks and financial institutions often face scrutiny of their business practices. Since the financial crisis of 2008, multiple banks have been accused of engaging in illegal practices, and government agencies such as the Consumer Financial Protection Bureau (CFPB) may impose fines and other penalties against institutions that have taken actions to cause financial harm to customers. Bank of America, the second-largest bank in the United States, is one of the latest institutions to face these issues, and it was recently ordered to pay $250 million in fines, penalties, and customer refunds after investigators found that it had taken a number of illegal actions. To prevent similar penalties, banks will need to make sure they are following the correct practices when collecting debts or performing other types of transactions.

Penalties for Illegal Overdraft Fees, Garnishments, and Other Issues

The CFPB investigated Bank of America’s practices of charging overdraft fees when customers did not have enough money in their accounts to cover payments. A $35 fee would be charged in these situations, but the CFPB found that the bank would often charge this fee multiple times for the same transaction. This resulted in significant losses for many people, and it also generated substantial revenue for the bank. 

The investigation also found that Bank of America had engaged in other illegal practices, including failing to provide customers with bonuses promised when they signed up for credit cards. The bank’s personnel had also opened accounts in customers’ names without receiving authorization to do so, resulting in some people being charged fees and experiencing lowered credit scores. In response to these findings, Bank of America was ordered to repay more than $100 million to customers that had been affected. The bank was also required to pay the CFPB penalties of $90 million, and a separate $60 million fine was imposed by the Office of the Comptroller of the Currency for violations of the laws related to overdraft fees.

Most auto lenders would prefer it if every buyer simply made their payments on time, every time - or at least were able to catch up with their past-due bills. However, the fact is that some borrowers become so far behind on their payments that repossession becomes a creditor’s best option for recovering what is owed to them. While there are some legal concerns to be addressed before beginning the repossession process, one of the more challenging parts may be locating the car itself. Some borrowers do not give an accurate address, while others move without updating their address. This can make it a bit difficult for repossession workers to carry out their job duties. Before you repossess a car, it is best to speak with an attorney who can ensure that the process is completed according to legal standards in Illinois. 

Tips for Locating Cars You Must Repossess

Most repossession workers begin looking for a car by checking the borrower’s home, often in the evening or on a weekend day. However, even when the car is found there, there is a high risk of the borrower noticing the tow truck and causing problems. If the car is not at the borrower’s home, some strategies for locating the vehicle include: 

1. Check their workplace - If your borrower works outside their home, you may try looking for their vehicle at their workplace during their employer’s normal business hours. 

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Creditors need to be able to recover the money owed to them by debtors. Unfortunately, when a debtor files for bankruptcy, a creditor may not be able to recover the full amount owed. However, creditors may receive some payments during the bankruptcy process, and the amount they can receive will depend on the type of bankruptcy filed. In a Chapter 13 bankruptcy, a debtor will propose a repayment plan in which they will make ongoing payments over a period of three to five years, and these payments will be distributed among their creditors by the bankruptcy trustee. In these situations, creditors will need to understand how to respond to a debtor's proposed repayment plan and the steps they can take to protect their financial interests.

Steps Creditors Should Follow During a Chapter 13 Bankruptcy

1. Read and review the proposed plan thoroughly - It is important for a creditor to examine the proposed Chapter 13 repayment plan carefully. The repayment plan should include detailed information about how much the debtor will pay, how frequently they will do so, and the duration of the plan. A creditor should ensure that the proposed plan complies with the rules and regulations governing Chapter 13 bankruptcy while also ensuring that the plan is accurate and realistic based on the debtor's income and expenses.

2. Evaluate how the plan will affect the creditor's claims - A creditor will need to determine how much of their claim will be paid back under the proposed plan and whether the payments will be enough to satisfy the entire claim.

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When a person or business files for bankruptcy, an automatic stay is imposed to protect their finances and ensure that they will not experience additional losses due to creditors' attempts to collect debts. While the automatic stay is in effect, creditors are not allowed to make any collection efforts, including calling or otherwise contacting a debtor, sending bills or notices, filing lawsuits, collecting judgments, foreclosing on a home or other real estate property, or repossessing a vehicle or equipment. However, there are some situations where creditors may believe that they could experience significant losses due to actions taken by debtors during the bankruptcy process, and they may be able to file a motion to lift the automatic stay, giving them the ability to collect what is owed to them. It is important for creditors to understand how lift-stay motions are handled in bankruptcy cases.

What Is a Lift Stay Motion?

A creditor may request that the court lift the automatic stay after a debtor files for bankruptcy. While the automatic stay is designed to give a debtor a chance to reorganize their finances without interference from creditors, there are some situations where debtors may take inappropriate actions after filing for bankruptcy that would prevent creditors from being able to protect their financial interests. In certain circumstances, creditors can file lift-stay motions to ask the court to allow them to continue their collection efforts against the debtor.

When Can Creditors Use Lift Stay Motions?

In general, lift stay motions may be used when a creditor believes that they need to take action to protect their interests in property held by a debtor. If the debtor has no equity in the property used to secure a debt, the creditor may seek to take possession of the property, and a lift stay motion may allow them to proceed with a foreclosure or repossession. Lift stay motions may also be used if there is a concern that a debtor will damage or destroy collateral. Abuse of the bankruptcy process, such as filing for bankruptcy multiple times within a short period of time, may also be an indication that a debtor is seeking to avoid paying their debts, and a creditor may pursue a lift-stay motion in these situations in order to resume collection actions.

Originally published: April 19, 2017 -- Updated: May 15, 2023

Update: As described below, there are options available for creditors who need to collect debts from debtors who have limited income that may be recovered through wage garnishment. However, it is important to understand what limits may apply to the amounts that can be garnished from a debtor’s wages. This may help creditors determine what avenues to pursue when collecting debts following a legal judgment against a debtor.

Illinois law states that one of the following methods may be used to determine the amount that can be deducted from a debtor’s wages:

There are a variety of situations where creditors may need to deal with borrowers who have defaulted on loans or are struggling to make payments. While there are many debt collection options available to creditors, it can sometimes be beneficial to work with a debtor to find solutions that will allow them to continue making ongoing payments. Loan modifications may involve changes to a lending agreement that will make it easier for the debtor to adhere to the terms of repayment. By understanding the different types of loan modifications that may be available, creditors can take steps to protect their financial interests.

Options for Modifying Loans

To address delinquent loans or defaults, creditors may reach agreements with debtors that may include:

• Forbearance - A creditor may agree to suspend or reduce a debtor's monthly payments for a specific time period. This can be a good option for borrowers who are experiencing temporary financial difficulties due to unexpected changes in their lives, such as health issues, job loss, or divorce. However, forbearance is not a long-term solution, because the debtor will be required to resume payments at some point in the future. The missed payments may be added on to the end of the loan term, or future payments may be temporarily increased, and this may mean that the borrower will owe more in the long run.

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When debtors default on mortgage payments and fail to pay what is owed to a lender, foreclosure proceedings may be necessary. The foreclosure process can be lengthy and confusing, and it is important for mortgage lenders or other creditors to understand their rights and responsibilities. By taking steps to protect these rights and resolve any issues that may arise during a foreclosure, a creditor will be able to minimize their losses and recover as much of what is owed to them as possible.

Issues to Address as a Creditor During a Foreclosure

Creditors, including primary mortgage lenders, mortgage servicers, and second mortgagees, can protect themselves during foreclosures by doing the following:

• Follow the law - It is important for creditors to follow all applicable laws and regulations throughout the foreclosure process. Depending on the type of loan, there may be specific notice and filing requirements, mediation procedures, and other legal requirements under state law. Failure to follow these requirements can result in delays or even dismissal of the foreclosure. An attorney can provide guidance on the laws that apply in a specific situation, and they can help address any legal issues that may arise during a foreclosure.

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Creditors have certain rights when it comes to collecting debts owed by debtors. While there are a variety of debt collection options available, there are some situations where it may be beneficial for both creditors and debtors to negotiate settlements that allow a debtor to pay less than the full amount owed to a creditor. In these situations, it is important for creditors to know how to protect their rights and ensure that any settlements reached with debtors are fair while protecting the creditor's best interests. By understanding the potential strategies that may be used when negotiating settlements with debtors, creditors can take steps to minimize their financial losses and ensure that settlements can be completed successfully.

Staying Up-to-Date on the Law

Creditors must be sure to understand all applicable laws and regulations that apply to debt collection. This includes staying aware of changes in local, state, and federal laws that may affect the way creditors can collect debts owed to them. Creditors should also be sure to understand the legal limits regarding how much a debtor can be required to pay, as well as any regulations that may play a role in the negotiation process. Understanding these laws can give a creditor an advantage during negotiations and help ensure that they are not taken advantage of.

The Fair Credit Reporting Act (FCRA) is a federal law that establishes rules and regulations for the collection, maintenance, and use of consumer credit information. This law was designed to protect the privacy of consumers and their credit information. It requires creditors to treat consumer credit information with care, accuracy, and responsibility. If a creditor fails to abide by these laws when collecting debts or taking other actions, they may face serious legal consequences.

Understanding Creditor Requirements Under the FCRA

The FCRA governs how creditors must handle consumer credit reports, as well as any other information related to a consumer’s creditworthiness. For example, it requires that any creditor who obtains a consumer’s credit report must have a “permissible purpose”—which means they must be able to show that there is a legitimate business reason for obtaining the report. It also restricts creditors from reporting inaccurate or outdated information about consumers and requires them to provide consumers with access to their own files if requested.

Repossession of a vehicle is an effective way for auto lenders to recoup losses in the event that a customer has not been able to meet their contractual payment obligations. However, when a creditor repossesses a vehicle from a borrower, it can be a tricky and uncertain process. Creditors need to be aware of their legal rights and the options available to them in these situations.

Due Process Requirements

The first step for any creditor is to familiarize themselves with the due process requirements in their state. Creditors may have certain duties they are required to fulfill before they can legally repossess a vehicle. In some states, a creditor may be required to provide written notice to the borrower, informing them of their right to cure the default. However, Illinois law does not require a creditor to notify a debtor prior to proceeding with a repossession. If necessary, creditors may still contact debtors to notify them of missed payments and inform them of the consequences of defaulting on a debt.

When repossessing a vehicle, creditors will often work with a licensed repossession agency. This agency must purchase a recovery ticket from the Illinois Commerce Commission for each vehicle that is repossessed. The recovery ticket will specify the date and time the repossession took place, the Vehicle Identification Number (VIN), the name of the repossession agency, and the name of the law enforcement official who was informed about the repossession. The recovery ticket must be kept in the vehicle until it is sold or returned to the debtor, and it must also be kept on file for two years.

Creditors have a right to take all reasonable measures to recover debts owed to them. However, debtors are also afforded with certain protections, and they may take steps to eliminate the requirement to pay certain debts by filing for bankruptcy. When a debtor declares bankruptcy, creditors should take the appropriate steps to protect their rights and determine how they can minimize their losses. The steps creditors can take in these situations include understanding the relevant provisions of the U.S. Bankruptcy Code, determining how different types of bankruptcy will affect creditors’ rights, contacting a bankruptcy trustee to discuss their rights as a creditor, paying close attention to any documents they receive from court officials or trustees, taking full advantage of all available remedies under state and federal law for recovery of their claims, and remaining in contact with their attorney throughout the bankruptcy process.

Understanding the Relevant Bankruptcy Laws

The U.S. Bankruptcy Code is divided into several core sections known as chapters. Each chapter provides guidance on different aspects of bankruptcy, including eligibility requirements, filing procedures, dischargeable debts, and more. In order for creditors to understand their rights when dealing with a bankrupt debtor, it is essential that they become familiar with the relevant provisions within these chapters. For example, creditors should be aware of the ways they can challenge a bankruptcy filing as well as their rights to file a proof of claim with the court.

With the changing laws and regulations surrounding debt collection rights, keeping up with the latest developments can be a challenge for creditors. At Dimand Walinski Law Offices, P.C., we are dedicated to representing creditors in debt collection matters, and we also regularly publish blogs to help keep creditors informed of the relevant issues that may affect them. We wanted to highlight the top 10 blogs that visitors to our site read in 2022:

1. What Are the Statutes of Limitation for Debts in Illinois? - This blog looks at the time limits that apply to creditors who are seeking to collect unpaid debts. We updated this blog in 2022 to provide more information about the procedures that creditors will need to follow to pursue judgments against delinquent debtors.

2. Illinois Suspends Vehicle Repossession by Auto Lenders - In 2020, the state of Illinois took action in response to the COVID-19 pandemic to prevent creditors from repossessing vehicles from delinquent debtors. We provide information about how this order affected creditors, including updates about the options that may be available after the order expired.

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Originally published: July 30, 2020 -- Updated: January 5, 2023

Update: When a debtor is judgment-proof, a creditor may have limited options for collecting debts. If a debtor's assets are exempt, they may not be seized and liquidated if the debtor files for bankruptcy. If a debtor's income is below a certain amount, it may not be possible to garnish the debtor's wages. However, creditors may have other options, including negotiating loan modifications with the debtor. This may be a good solution in situations where a debtor has secured debts and does not want to turn over the property they have used as collateral.

A mechanic's lien is a legal way for creditors to secure payment for work that has been done on a property. It is typically used by construction companies, subcontractors, suppliers, and other professionals whose services are used in the building or improvement of real estate, although finance companies may also need to address mechanic's liens as they take steps to collect debts. If a person or company is not properly paid for work that was performed or materials that were supplied, they may file a claim against the property that will require a lien to be paid before the property can be sold or ownership can be transferred in the future. To ensure that a mechanic’s lien will be valid and enforceable in court, there are certain steps that must be taken.

Filing the Lien

In order for a mechanic’s lien to be valid, it will need to be filed with the appropriate government office within strict timeframes. In Illinois, a claim can be filed with the recorder of deeds in the county where the property in question is located. This claim must be filed within four months after a construction project was completed, the date that materials were delivered, or when work was last performed. A claim must state the balance that is due, provide a description of the property, and include details about the contract to perform work or provide materials.

Providing Notice of a Mechanic's Lien

Notice of a mechanic's lien must also be provided to certain parties in order for it to be valid. Generally speaking, this will include sending notices directly to the property owner and any other parties involved in the underlying transaction (i.e., mortgage lenders). For liens against single-family residences that are occupied by the property owner, notice must be provided to the property owner within 10 days after the lien is recorded.

There are numerous situations where creditors may need to take legal action to collect debts, including by filing a lawsuit against a debtor and obtaining a legal judgment. After receiving a judgment, a creditor will then need to enforce the judgment, and they may be able to collect what is owed by seizing a debtor's assets or garnishing their wages. However, before doing so, a creditor may need to use a citation to discover assets to determine the financial resources available to the debtor that may be used to pay the amount owed. 

While citations can be served on multiple parties, including a financial institution or a debtor's employer, a Citation to Discover Assets to Debtor may be served to the debtor themselves, and it will require them to appear in court and answer questions about their assets and income. By understanding the procedures followed in these types of citations, creditors can ensure that they will be able to uncover the necessary information and compel a debtor to make payments or turn over assets.

Step 1: File the Citation in Court 

A creditor will first need to file a Citation to Discover Assets to Debtor form in the circuit court of the county where the judgment was entered. This form will include the debtor's name and address and information about what is owed. This information may include the date the judgment was entered, the amount of the judgment, and the remaining amount that needs to be paid, including the creditor's court costs and any interest that has been applied after the judgment was entered.