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Illinois debt collection attorney foreclosure

While the mortgage, rent, and income protections provided for in last spring’s original Coronavirus Aid, Relief, and Economic Security (CARES) Act have long since been exhausted, many states, including Illinois, have continued to offer their own executive orders and legislation to assist residents during this unprecedented time. In addition, many mortgage companies have developed their own programs for homeowners to help them avoid foreclosure, at least for the time being. However, that is not to say if you are looking to eventually collect on the debts owed from these properties that might be in preforeclosure, you should not be prepared to take action. Foreclosure debt collection will be inevitable post-pandemic, despite the latest COVID relief package being signed into law. In that sense, you, as a mortgage lender or servicer who deals with foreclosures, must remain focused on your job, collecting and documenting everything necessary to make the preforeclosure and foreclosure processes go smoothly whenever the time comes.

Advice to Mortgage Lenders When Prepping for Foreclosure During the Pandemic 

With the vaccines only starting to be administered and with the latest COVID-19 economic relief bill signed into law nine months after the CARES Act, you cannot expect things to get back to normal immediately. Therefore, the negative impact of COVID-19 on the economy, including housing, will persist far into 2021. Due to this, you need to be prepared for continual increases in foreclosures, including from residents of normally good standing with your mortgage lending or servicing company. To better prepare for an influx of foreclosures in the new year, consider the following tips:

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Chicago debt collection attorney

It is common during the holidays, especially during Black Friday, for consumers to purchase more than they can actually afford; in fact, some of these shoppers are already struggling financially but believe the holiday gives them a great opportunity to max out their credit cards and take out loans for exorbitant holiday gift-giving before they eventually file for bankruptcy. There are ways to contest such holiday bankruptcy fraud, but this year might not be the same due to the pandemic. 

How COVID-19 Will Change Black Friday 

Numerous retailers are struggling financially as a result of the pandemic due in large part to early stay-at-home orders for all non-essential workers and businesses as well as the economic recession itself. Fortunately, those companies with strong e-commerce skills have been able to offer their products online. The pandemic will change Black Friday in this way—it will further accelerate the trend of people avoiding the in-store rush and simply shopping online instead. 

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Chicago debt collection attorneyAs the economic repercussions of the COVID-19 pandemic persist across both Illinois and the entire nation, consumers have been looking for new ways to fund their daily expenses from paycheck-to-paycheck. Enter the cash-advance app, clever applications on their smartphones that link to their bank accounts and offer small cash advances each pay period provided the user meets certain requirements. Among them are such apps as Earnin, Dave, Branch, and Brigit, with countless others cropping up every day on your smartphone’s digital marketplaces. With these apps becoming more and more popular, many financiers and finance companies funding such major joint “fintech” ventures might be wondering how they can ensure appropriate debt collection. Overall, though, that might be the least of their worries at this point. Here are a few reasons why.  

Regulatory Issues

While to many consumers, these cash-advance apps might seem like a brave new world of brand-new trending apps that could really save them from some tough times, many financial experts argue that these apps are really payday lenders disguised as newfangled technology. The reason? Because many of them collect “optional” tips on every payday advance, many of which amount to interest rates comparable to standard (and high) payday-loan rates. In many cases, these apps are offered in states where payday loans of certain high interest rates are outlawed, or payday loans are entirely against the law. Such regulations have already taken their toll on the app Earnin, which was forced to disable the “tip” option a year ago in New York.  

How Cash Advance Apps Attract Borrowers and Ensure Repayment

These apps stay afloat for four primary reasons:

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Illinois Mortgage Delinquencies May Rise Due to RecessionLawmakers in the U.S. recognized from the beginning of the COVID-19 crisis that homeowners would need help with mortgage payments in order to avoid a surge in mortgage foreclosures. The Coronavirus Aid, Relief, and Economic Security Act had several provisions for homeowners, including:

  • A moratorium on foreclosure of single-family homes with federally backed mortgages, which the Federal Housing Finance Agency recently extended until at least Aug. 31
  • A mandate that forbearance be provided to homeowners, regardless of their delinquency status
  • The loosening of restrictions on modifying loans

Illinois has issued executive orders that put a moratorium on evictions, though it also said that homeowners are still responsible for making mortgage payments. Housing market analysts are concerned that the downturn in the economy could lead to the state’s worst mortgage delinquency rate since the Great Recession of a decade ago.

Obstacles Facing Mortgage Payments

More than one million Illinois residents lost their jobs due to businesses being forced to close or reduce staff in response to the coronavirus outbreak. Even with unemployment benefits and stimulus payments from the federal government, many homeowners have tighter budgets with which to make mortgage payments. In some cases, homeowners may be forced to choose between staying current on their mortgage payments and paying for other necessary expenses.

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 Four Ways Banks Can Improve Their Debt Collection ProcessCommon creditors such as banks will usually explore various means of collecting debts before they choose litigation. Filing a lawsuit for every debt collection dispute would be costly and hurt their relationship with potentially valuable clients. There are many cases that banks can resolve internally by working with the debtor. However, an inefficient debt collection process may ultimately be a waste of resources because of its low success rate. Adjusting your debt collection strategy may help you more effectively recover outstanding debts and understand when litigation is necessary:

  1. Collect and Verify Client Information: It is difficult to start your debt collection process if you cannot find the client. When entering the debt agreement, you should ask the client for personal information, such as their address, phone number, place of work, driver’s license, social security number, and personal references. If you are unable to reach the client with this information, check with government agencies and other third parties to see if your information is out-of-date.
  2. Be Proactive and Clear in Communication: Do not give your clients a reason to claim that they were unaware that they owed the debt. Send a message after the first time they miss a payment and follow up if they continue to not pay. Try to contact them in multiple ways until you get a response. Be specific about what they owe, when it is due, the consequences of not paying and how they can pay you.
  3. Establish Phases of the Collection Process: Debt collection starts with soft inquiries about the unpaid debt but will become more aggressive the longer that the client does not pay. You need guidelines that will determine when you reach a new phase of the debt collection process, such as sending a final notice or using litigation. You can measure phases by the amount of money owed, the duration of the case, and the client’s response.
  4. Use Different Approaches Depending on the Client: Automated debt collection messages may work fine with basic clients, but your most valuable clients need a more personalized touch. You need someone to contact them directly to figure out why they are late on the payment and to find ways that you can solve the issue while preserving your business relationship.

Contact a Chicago Debt Collection Attorney

Banks lend money to a variety of consumer and business clients, which can make collecting debts more complicated. You need an experienced Illinois debt collection lawyer at Walinski & Associates, P.C., who can advise you on how to approach your most difficult and important cases. To schedule a consultation, call 312-704-0771.

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How Joint Bank Accounts Affect GarnishmentWhen you receive a favorable judgment against a debtor in a lawsuit, you will have a variety of sources from which you can retrieve the debt owed to you. Many people hold a majority of their money in bank accounts, and you can use non-wage garnishment to access that money if the debtor has not been using it to repay you. When you receive a garnishment order from the court, the debtor or other interested parties have an opportunity to contest the order and protect that money. In some cases, a person who shares the account with the debtor may try to block your garnishment order.

Non-Wage Garnishment

First, let us review the rules of non-wage garnishment during debt collection. Non-wage garnishment is a court order to withdraw money from sources other than the debtor’s pay from work. Bank accounts and physical assets are the most common sources for non-wage garnishment and can potentially be more valuable than the debtor’s wages. However, there are restrictions on non-wage garnishment:

  • The debtor has several exemptions to protect assets, including a $4,000 wild card exemption that can be used on any asset.
  • Illinois law exempts money awarded to the debtor through a personal injury or workers’ compensation case.
  • Illinois also exempts money in retirement and life insurance plans, unless the creditor can prove that the debtor created these accounts in bad faith in order to protect the money from garnishment.

Joint Accounts

The co-owner of a debtor’s bank account can stop a creditor from garnishing money from the account if a majority of the money came from them and not the debtor. The creditor bears the initial burden of proving that the account belongs to the debtor and should be eligible for garnishment. After the creditor proves this, the joint account holder is the one who must prove through deposit slips and receipts that they are the source of the majority of the money. Joint accounts are typically held between spouses or business partners, who in some cases may have debts that are not shared between each other.

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Consequences of Violating an Automatic Stay During BankruptcyWhen a debtor files for bankruptcy protection, the court will put an automatic stay on collecting the debt. This means that creditors must stop contacting the debtor with collection notices or attempting to repossess collateral properties until the bankruptcy is completed or the stay is otherwise lifted. Violating the stay is a serious offense that may result in court fines or the debtor filing a lawsuit against you. The severity of the penalty depends on whether you knowingly violated the stay and whether you continued to violate it after being told to stop.

Violation Examples

Once it is confirmed that you received notice of the debtor’s bankruptcy filing, you are expected to comply with the automatic stay. This means you are not allowed to:

  • Send letters to the debtor demanding repayment
  • Call the debtor about the debt
  • Garnish their wages or other monetary assets
  • Repossess properties without the permission of the court

Intentionally ignoring the automatic stay is a violation of the Fair Debt Collection Practices Act and may lead to sanctions that cost you thousands of dollars. The bankruptcy trustee will be your contact during the process.

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Assessing the Risk of Modifying a Commercial LoanLending to a commercial borrower has the potential to be more lucrative to a creditor than lending to a consumer borrower. The average consumer borrower will take out one major loan during their lifetime – a home mortgage. A successful business may continue to take out loans as it expands its operations, creating a long-term business relationship with the lender. There are risks when lending to a commercial borrower if the business struggles. Creditors know they must evaluate the likelihood that a business will be able to repay them before entering a loan agreement. They may need to adjust their evaluation if the commercial debtor falls behind on its loan payments.

Creditor Options

When a commercial debtor misses a payment, the one thing you cannot afford to do as a creditor is to ignore it. You should respond to the first missed payment by contacting the debtor to determine the reason for the missed payment. If the missed payments continue for several months, you have a difficult decision to make. You can:

  • Use debt collection practices;
  • File a lawsuit for lack of payment;
  • Foreclose on a property related to the loan;
  • Restructure the loan agreement to make repayment manageable; or
  • Offer forbearance to give the debtor time to avoid foreclosure.

Risk Evaluation

There can be benefits for both sides when modifying your loan agreement with a commercial debtor, even if you are losing some money on the original agreement. If the business is able to rebound and repay you, they may reward your assistance by continuing to borrow from you in the future. There is also the risk that modifying the loan will not prevent the business from defaulting on the loan, costing you more than if you had sought full repayment earlier. Identifying the differences between a good and bad risk depends on the circumstances, such as:

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What Are a Creditor’s Rights When Collecting from Cosigners?A person looking to create a loan agreement may need a cosigner if the creditor is uncertain whether the borrower will be able to continue making payments until the loan is repaid. As a creditor, a cosigner may allow you to take a chance on a potential client by mitigating some of the risks. If the borrower defaults on their debt, you have another party that you can order to repay the loan. However, the cosigner will want to avoid paying you if they can get out of it. You must understand the rights of creditors and cosigners and the circumstances under which the cosigner is liable for the debt.

When Can You Collect from a Cosigner?

According to Illinois law, creditors are not allowed to take collection action against a cosigner until:

  • The primary debtor has defaulted on or is delinquent on the debt;
  • The creditor has notified the cosigner of this via first-class mail; and
  • The cosigner has had 15 days to repay the debt in full or make arrangements for repayment.

The cosigner may try to delay full repayment by asking for forbearance to catch up on payments or to refinance the loan for the primary debtor. You must assess whether it is worthwhile to delay the collection process or allow the debtor to modify the repayment plan. The debtor may lack the financial resources to continue the loan payments on their own, making collection from the cosigner inevitable.

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Three Limitations of Wage Garnishment for CreditorsWage garnishment is one of the most direct tools that creditors use to collect from noncompliant debtors. A creditor can submit a garnishment order after it has filed a lawsuit against the debtor and received a money judgment from the court. Employers are required to comply with a garnishment order and can be fined if they do not withdraw the exact amount ordered or if they retaliate against the debtor for the garnishment. However, wage garnishment has limitations that can sometimes prevent a creditor from collecting the necessary money from the debtor. Here are three facts about wage garnishment that creditors should know:

  1. Cap on Withdrawals: There are federal and state protections against wage garnishment to prevent creditors from taking all of a debtor’s wages. First, garnishment must come from the debtor’s disposable earnings, which is the debtor’s wage after deducting expenses such as Social Security and pension contributions. Commercial creditors in Illinois are not allowed to garnish a wage unless the debtor makes more than 45 times either the state or federal minimum wage – whichever is higher. With Illinois currently having a higher minimum wage, debtors must earn more than $371.25 per week. If the debtor is eligible, commercial creditors can take the amount that the wage exceeds $371.25 per week or 15 percent of the debtor’s wage – whichever is lower.
  2. Employees Only: Wage garnishment applies only to debtors who are employed and receive a W-2 form from their employer. Freelance workers, independent contractors, and self-employed workers do not qualify for wage garnishment. However, the owner of a corporation does qualify for wage garnishment if they pay themselves through the company. If wage garnishment is not allowed, the creditor can request non-wage garnishment instead. This order allows it to seize the debtor's other assets, such as bank accounts and personal properties.
  3. Order of Priority: A debtor may own several debts other than commercial debts. Some of these debts take priority over commercial debts, such as child support, federal income taxes, state levies, bankruptcy payments, and defaulted student loans. These collectors are allowed to garnish more from wages than the state’s limits on commercial creditors, but there may still be a limited amount of money left after these debts are paid.

Contact a Chicago Debt Collection Lawyer

If wage garnishment is not an efficient means of collecting a debt, there are other tools you can use. A Chicago debt collection attorney at Walinski & Associates, P.C., can explain your options after winning your lawsuit against your debtor. Call 312-704-0771 to schedule an appointment.

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When You Can Foreclose on a Reverse MortgageOlder homeowners can use a reverse mortgage as a source of income or credit. While borrowers qualify for regular mortgages based on their income, a reverse mortgage is based on the borrower’s equity in their home. People age 62 and older are eligible to take out a reverse mortgage on their principal residence as long as they own it outright or have enough equity in it. The mortgage balance is not due until a qualifying event occurs. If the borrower or their heirs do not repay the mortgage, the lender may foreclose on the property.

When Can a Reverse Mortgage Become Due?

According to Illinois’ Reverse Mortgage Act, there are five ways that the balance on a reverse mortgage can become due:

  • The borrower or last remaining tenant dies;
  • The property is sold;
  • The borrowers no longer use the property as their principal residence;
  • The reverse mortgage contract included a maturity date; or
  • The borrowers failed to meet their contractual obligation to maintain the home.

When the borrowers die, their heirs will determine whether to repay the reverse mortgage, sell the home or allow a foreclosure. The borrowers may leave or sell the home if it does not meet their needs in old age. However, a lender may foreclose on a borrower’s home while the borrower still lives there if the borrower cannot pay property taxes and home insurance or maintain the value of the property. Unlike with other foreclosures, lenders often cannot seek deficiency judgments against borrowers of reverse mortgages if the property sells for less than the balance of the mortgage.

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What Voluntary Repossession Means for Auto LendersRepossession is often the last resort for auto lenders when dealing with debtors who are behind on their loan payments. You are more likely to retrieve full value on the loan if the debtor continues to make payments than if you repossess the vehicle and resell it. There is also the hassle of notifying the debtor of your intention to repossess and hiring someone to tow the vehicle for you. However, the process can be simpler if the debtor voluntarily turns the vehicle over for repossession. In most cases, the debtor will be the one to suggest voluntary repossession.

How It Works

The result of voluntary repossession is the same as involuntary repossession. You will regain possession of the vehicle and sell it to recuperate the money owed on the loan. The debtor will be liable for any deficiency between what you receive in the sale and what remains from the loan. The difference is that the debtor agrees to surrender the vehicle and will deliver it to you at a time and place of your choosing. The debtor’s compliance means that you will not be fighting over whether you have the right to repossess the vehicle or using a towing service to retrieve the vehicle.

Why Voluntary Repossession?

The debtor still has much to lose by surrendering the vehicle to you. They are losing possession of the vehicle and defaulting on the loan, which will hurt their credit. However, they may prefer voluntary repossession if they believe repossession will be unavoidable:

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Can You Retrieve Debt From a Retirement Plan?When you receive a court judgment against a debtor, you are looking for any of the debtor’s available money or assets that you can claim. Retirement accounts can be one of the most lucrative assets that a debtor owns if he or she has had time to contribute to it. However, many retirement accounts are protected from creditors, whether after a successful lawsuit or after the debtor has filed for Chapter 7 bankruptcy. Creditors need to understand what type of retirement account the debtor has to know whether they can try to collect from it.

Federal Laws

Both federal and state laws address which types of retirement accounts are exempt from creditors. Federal law protects debtor retirement plans if they are:

  • Qualified retirement plans created under the Employee Retirement Income Security Act; or
  • Social Security benefits.

Common ERISA plans include 401K plans, profit-sharing plans, and deferred compensation plans. An anti-alienation clause prevents creditors from collecting from qualified ERISA plans because the clause states that the participants in the plan cannot give away their benefits and outside parties cannot take them away. This prevents the plan administrator from releasing any funds to a creditor. However, creditors may be able to collect the benefits from an ERISA plan once they are distributed to the debtor.

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Illinois Court Rejects Interest on Charged-Off DebtA creditor will usually charge off a delinquent debt if the debtor has gone six months without paying. By charging off the debt, the creditor is classifying it as a bad debt and will typically:

  • Write off the debt as an asset on its books;
  • Stop sending notices to the debtor; and
  • Stop charging interest on the debt.

Efforts to collect the debt will often continue after it is charged off by either hiring a collection agency or selling it to a debt buyer. Many debt collectors would like to charge interest on a charged-off debt, but courts in Illinois have recently ruled against collectors who do so. If you have purchased a charged-off debt, you risk violating the Fair Debt Collection Practices Act if you charge interest on the debt without authorization.

Recent Case

The U.S. District Court for the Northern District of Illinois recently ruled against a debt buyer who added interest on a charged-off debt it had purchased. In Tabiti v. LVNV Funding, LLC, the defendant was the debt buyer who purchased a charged-off debt worth $10,463. The plaintiff was the debtor who claimed that the defendant violated the FDCPA because it did not have the authority to charge interest after it had purchased the charged-off debt. The court found in favor of the plaintiff in a summary judgment, citing two reasons:

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Four Ways to Prevent Excuses for Missed PaymentsAs a finance company, you are familiar with the common excuses that clients give when they miss a payment. They may admit to their mistake and say that they forgot or did not have the money to make the payment that month. Other clients may blame your billing process or circumstances that were beyond their control. Rather than tolerate the excuses, you can create a billing and payment process that prevents them. This way, clients can blame only themselves when they miss a payment. Here are four fixes to common excuses for missed payments:

  1. Multiple Ways to View the Bill: Clients may claim that they could not find the bill, whether it was losing a mail copy or accidentally deleting an email. This is a flimsy excuse because the client could have asked you for another copy of the bill. There is even less of an excuse if you allow clients to pay bills through an online account. Encourage clients to register on your site, where they can always view their bills and make easy payments.
  2. Tech Support: Some clients have little experience using a computer to create accounts and pay bills. A process that seems intuitive to you may be confusing to them. If they complain about not understanding your online system, offer to walk them through the set-up process and explain how they can use their account.
  3. Multiple Payment Methods: Allow your clients to pay through your website, by mail, or in person. Some clients may not have a credit card or checking account that they can use for online payments. Other clients may consistently pay on time as long as you do not force them to use one method of payment.
  4. Easy Communication: You want your clients to tell you in advance if they will not be able to make a payment. Good customer service will encourage clients to contact you. Have an efficient phone system that allows them to quickly talk to one of your representatives. Reply to emails within 24 hours. Do not give your clients the excuse that you were too difficult to communicate with.

Contact a Chicago Debt Collection Lawyer

The reason a client missed the payment is not as important as knowing when your client will repay you and whether missed payments will continue to be a problem. You may be forced to take legal action if a client cannot or will not meet its debt obligation. A Chicago debt collection attorney at Walinski & Associates, P.C., can help you negotiate with clients or take them to court. To schedule a consultation, call 312-704-0771.

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Best Practices for Collecting Healthcare DebtsDebt from medical bills is one of the top causes of people filing for bankruptcy in the U.S. Unlike purchasing a home or vehicle, healthcare is often an urgent need, and patients must immediately decide whether they will go forward with medical treatment. As a healthcare provider, you do not want medical bills to add to your patients’ stress but may need to be aggressive if a patient has gone months without paying. Organizations such as the Healthcare Financial Management Association have guidelines on how to best handle debt collection from patients:

  1. Understanding Patients In Advance: A patient may have limited health insurance coverage or no health insurance. You may need to educate patients about the ways that they can obtain health insurance or apply for financial assistance. Be upfront about the cost of the appointment or service and whether you offer a payment plan for patients who cannot pay the bill in a lump sum.
  2. Clear Billing: The medical bill that you send to a patient should be easy to read and understand. Highlight the amount that the patient owes and the deadline by which you expect payment. Remind them of any payment plans that you offer and encourage them to contact you immediately if they have any questions or concerns.
  3. Communicate with Affiliates: You may work with business affiliates that also need payment for the services that they provided. You can confuse your patients if both you and an affiliate are sending separate bills with different guidelines and expectations. Coordinate with your affiliates so that you are consistent in your billing and debt collection practices. Make sure that your patients are not being billed twice for the same service.
  4. Early Intervention: Starting formal debt collection efforts may cause that patient to not use your practice in the future. Before you get to that point, reach out to the patient to ask about the overdue payments. Discuss ways that the patient may be able to afford the medical expenses. If the patient seems unwilling to cooperate, mention without threatening that you have the right to pursue legal enforcement of the debt but would rather settle the issue without resorting to that.

Contact a Chicago Debt Collection Lawyer

A patient may force you to use a debt collection agency or litigation if your attempts to work with him or her are unsuccessful. A Chicago debt collection attorney at Walinski & Associates, P.C., can advise you on your options for collecting on unpaid healthcare bills. To schedule a consultation, call 312-704-0771.

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Illinois Considers Raising Homestead Exemption to $150KIllinois lawmakers have once again introduced legislation that would change creditor’s debt collection practices. A similar bill from last year failed to make it out of committee, but lawmakers have outlined several goals that they believe will protect debtors:

  • Requiring all court summons for a debt collection lawsuit to include a debtor’s “bill of rights”;
  • Reducing the time in which a creditor can revive a judgment against a debtor to five years;
  • Lowering the annual interest rate on debt judgments less than $25,000 to two percent; and
  • Raising the value of the exemptions that debtors can use to protect their assets from creditors.

The proposed change to the homestead exemption stands out because of the sizeable jump. The exemption would increase from $15,000 to $150,000 for an individual homeowner and $30,000 to $200,000 for a couple.

Homestead Exemption

A home is often the most valuable property that a person owns, which makes it important to debtors and creditors. Creditors could recover a large portion of the debt by forcing the debtor to sell the property, but the debtor wants to protect the equity he or she has in the property. Illinois’ homestead exemption allows a debtor to prevent creditors from selling a property as long as the debtor’s equity interest is below $15,000. The equity interest is calculated by subtracting what the debtor owes on the mortgage from the value of the property. Raising the homestead exemption would make it more difficult for creditors to sell a debtor’s home after a judgment lien.

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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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Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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