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Confusion When Collecting from Divorced CouplesA couple going through a divorce must divide their debts as well as their assets. Each spouse takes responsibility for paying off a portion of the marital debt, such as a:

  • Mortgage;
  • Credit card balance;
  • Personal loan; or
  • Medical bill.

Divorcees may mistakenly believe that they are not liable for the debts that their former spouse assumed. As a creditor, you are not bound by the terms of a divorce agreement and have the right to pursue repayment of the debt from either spouse after the divorce.

Loan Contract vs. Divorce Agreement

You can give a clear explanation to a debtor who argues that the debt belongs to his or her former spouse:

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Collecting Debts from Unpaid Federal Employees During Government ShutdownThe federal government shutdown has affected hundreds of thousands of federal government employees who are either being furloughed or forced to work without pay. The employees have already missed paychecks and will continue to miss them as long as the shutdown continues. Without the pay, some employees may not make their regular debt payments. Creditors must decide how aggressive they want to be in collecting debts from federal employees while the shutdown is ongoing.

Working with Debtors

Several federal agencies have asked creditors to be lenient with federal employees who owe debts. Following previous government shutdowns, many federal employees have received back pay for what they should have earned during the shutdown. Assuming that the current shutdown ends soon, the employees could have enough money to make up for missed debt payments. Some creditors may modify their agreements with debtors, extending the length of time that the debtor has to repay the loan in exchange for increased interest or other fees. Though there is risk involved, creditors who show patience towards federal employees may still be able to receive the money owed to them while maintaining a good relationship with the debtors.

Taking Action

The current government shutdown is already the longest on record, and there is no certain sign of it ending soon. Creditors can be patient after one missed payment, but multiple missed payments mean that the debtor may be in default of the debt. When deciding how aggressive to be with a debtor, a creditor should consider whether the debtor:

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Debt Buyers Less Restricted than Collection AgenciesDebt buyers and debt collection agencies may operate similarly, but there is an important difference between them. A creditor hires a debt collection agency to pursue debtors on its behalf. A debt buyer purchases the debt from the creditor, making it the new creditor. Still, governments often put debt buyers in the same category as collection agencies. Illinois law states that debt buyers are subject to the terms, conditions, and requirements of the Collection Agency Act, except in four instances:

  1. Surety Bonds: Debt buyers are not required to purchase and maintain surety bonds. Collection agencies must have surety bonds through an insurance company as guarantors for its clients. The bond will compensate the creditor if the collection agency fails to return the money it has collected. A debt buyer does not have client obligations.
  2. Trust Account: Debt buyers are not required to put the money they collect into a separate bank account, called a trust account. Collection agencies must hold the payments they receive in these accounts because the money is ultimately going to the creditors that hired them. Unlike collection agencies, debt buyers are not holding the debts for another party because they own the debts they are collecting.
  3. Lawsuit Requirements: A collection agency cannot consult an attorney about filing a lawsuit against a debtor without first notifying the creditor it is working for. The creditor has five days after receiving the notice to respond and deny permission to consult an attorney. As both the creditor and debt collector, a debt buyer does not need permission to file a lawsuit against a debtor.
  4. Assignment for Collection: The collection agency and creditor must create an assignment for collection contract, giving the agency the right to collect the debt in its own name. Once again, a debt buyer does not work for a client, meaning that it already has the authority to collect the debt.

Debt Buyer’s Rights

Debt buyers can profit from paying low prices to purchase old debts that creditors may have stopped pursuing. Even if the debtor does not repay the full value of the debt, the debt buyer may still receive several times the value of what it paid for the debt. Debt buyers also have the same right as creditors to take a noncompliant debtor to court. A Chicago debt collection attorney at Walinski & Associates, P.C., can help you legally enforce repayment by debtors. To schedule a consultation, call 312-704-0771.

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Posted on in Debt Collection

Collecting Debt from a Close FriendYou likely will not need to file a lawsuit against a friend who keeps forgetting to pay back the $20 he or she owes you. Refusing to repay $20,000 is a different matter. Some people do not lend money to friends or family because they want to avoid an awkward situation where they have to pressure these people to repay them. However, it can be difficult to say no to a friend who is having a hard time paying for basic living expenses or needs financial assistance to start a business. You will decide whether to hold your friend accountable for the debt, but you should know that you have the same debt collection options as other creditors.

Written vs. Oral Contract

Illinois law enforces both written and verbal contracts, but a written contract is more concrete evidence in court. It is prudent to write down an agreement for a sizeable loan, even if you trust the person. With the written agreement, you can:

  • Prove that your friend agreed to repay the loan;
  • Set a deadline for repayment; and
  • Establish what action you will take if your friend does not repay the loan.

A court will likely uphold an oral loan agreement, as long as you can show that you gave the money and your friend benefited from the money. However, an oral agreement has a five-year statute of limitations in Illinois, as opposed to a 10-year statute of limitations for written agreements.

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Illinois Considering Five Changes to Debt Collection LawsA group of Illinois State Representatives has introduced a package of bills that are meant to increase debtor protection against creditors. The bills are all stalled at the committee level, putting their future in doubt. However, that is unlikely to stop the legislators from continuing to push these bills or from creating similar bills in the future if the current bills die. The laws would reduce a creditor’s ability to collect on outstanding debts by shortening the window of opportunity to enforce a debt judgment, reducing interest rates on debts, and providing greater protections for debtor assets.

Proposed Changes

The legislators have presented five bills that would amend Illinois’ Code of Civil Procedure, including:

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