Debt 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 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.

After bankruptcy filers discharge their debts, unsecured creditors may lose the ability to seek or enforce repayment. The debtor can voluntarily repay the creditor in order to keep a property but has no contractual obligation to make continued payments. In some cases, the debtor may choose to reaffirm the debt. The debtor signs a new agreement that requires him or her to repay the debt. As an incentive, the creditor may offer to refinance the debt into terms that are more manageable for the debtor. However, courts will not enforce a reaffirmation agreement unless you met the legal requirements in creating it. You could instead be liable for damages to the debtor if the court rules that the agreement violated the bankruptcy discharge injunction.

Deadline

You must meet two deadlines in order to file a reaffirmation agreement with a debtor:

• The agreement must be filed no later than 60 days after the first meeting of creditors unless the bankruptcy court gives you an extension; and
• The agreement must be filed before the debts are discharged as part of a bankruptcy.

The deadlines mean that you must discuss and complete the reaffirmation agreement while the bankruptcy case is ongoing. Once a debt has been discharged, you cannot create a new agreement that requires payment of the same debt from the same party. Even if the debtor agrees to reaffirm the debt, a court will likely rule that the contract is unenforceable. However, a third party who was not involved in the bankruptcy could agree to take on the debt.

A 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:

The 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:

A bank must pause its efforts to collect a debt or foreclose on a property if the debtor files for bankruptcy. The automatic stay is one of the most powerful tools that a debtor has during bankruptcy. The stay expires after 30 days, but the debtor can file for an extension. As a bank, your priority when a client files for bankruptcy is to protect yourself and try to recuperate the debts owed to you. There are several actions you should consider.

Freezing Account

The automatic stay prevents you from withdrawing money from a bankruptcy filer’s account in order to offset debt. However, you can freeze your client's bank account in order to:

• Protect the money from a bankruptcy trustee; or
• Hold onto the money until you are able to offset it.

The trustee may order you to release the portion of the bank account that will be exempt from the bankruptcy. It may take weeks for the trustee to make this determination, which buys you time to pursue legal action.

Junior creditors are at a disadvantage when senior creditors decide to foreclose on a debtor’s mortgage. The senior creditor has priority in the foreclosure sale, and the junior creditor may receive little or no compensation for what the debtor owes it because its debt is often unsecured. A junior creditor can be:

• A lender that gave a second mortgage to the debtor with the property as collateral; or
• A party that received a judgment lien against the debtor’s property as the result of winning a lawsuit against the debtor.

A junior creditor can put itself in a position to receive some compensation from a foreclosure by participating in the foreclosure process. It may also file a lawsuit against the debtor to collect money still owed from its lien.

Sale Surplus

A junior creditor may claim the surplus from a foreclosure sale as long as it establishes its lien on the foreclosed property during the process. This requires the junior creditor to:

A mortgagor can complete a foreclosure and sale of a property, all without hearing a word from the mortgagee who is living at the property. However, the mortgagee may object to the foreclosure sale at the last minute, claiming that he or she never received notice of the foreclosure. This may be a delaying tactic or a desperate attempt to hold onto a property. The mortgagee has the burden of proving that the mortgagor failed to properly serve notice of the foreclosure.

Service Methods

A mortgagor tries to directly serve the foreclosure notice to the mortgagee, who confirms receipt with his or her signature. The mortgagor has alternative methods of service when the mortgagee cannot be found, including:

• Leaving it with someone who lives with the mortgagee at the property;
• Mailing it to the last-known address of the mortgagee; or
• Publishing it in a newspaper that the mortgagee is likely to read.

Leaving a foreclosure notice with another party is called substitute service. The server must record the name of the person being served, a physical description, and his or her relationship to the mortgagee. The mortgagor usually follows up a substitute service by mailing the notice to the mortgagee.

Debt 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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The debt that someone owes you does not disappear when he or she dies. Instead, you can turn your collection efforts towards the deceased debtor’s estate. Creditors have a deadline to file a claim against a debtor’s estate and collect compensation from the estate before the debtor’s beneficiaries inherit the assets. You may lose your ability to collect your debt if you miss the deadline. You must know who you may contact about the debts, who can be liable for the remaining debts, and how quickly you will need to file a probate claim.

Contact

The representative of the debtor’s estate handles all contact with creditors about claims on the estate. Once you know who the representative is, you are not allowed to contact the debtor’s family members. In many cases, the representative will notify you of your debtor’s passing and your right to file a probate claim against the estate. The representative could also send you a letter to cease contact because there are no assets in debtor’s estate to repay you. After receiving this letter, you are not allowed to contact the representative unless you are filing a lawsuit to dispute the claim of no assets.

Liable Parties

In most situations, personal debt does not transfer to another person when the debtor dies. However, there are exceptions that make family members liable for the debts, including:

The Chicago area leads the nation in homeowners who are underwater on their mortgages, according to a recent study. Home values in the area have not recovered as much from the 2008 housing market crash as other metropolitan areas. Underwater homes are problematic for creditors trying to collect from mortgagees because:

• Mortgagees may walk away from their homes and their mortgage payments because they have no home equity; and
• Mortgagers may not recuperate the value of the mortgage in a sale if the home’s value is worth less than what the mortgagee owed.

Your mortgagee may ask for you to accept a short sale if he or she cannot afford payments and is underwater on the home. You should be skeptical about approving a short sale because you are forgiving the mortgagee’s debt after allowing him or her to sell the home for less than the value of what he or she owes. However, foreclosure or the mortgagee abandoning the home can also be costly. When a mortgagee suggests a short sale, you should weigh several factors before making a decision:

1. The Cost of a Foreclosure: Foreclosure often takes longer than a short sale and involves more legal fees. There is also no guarantee how much money you will receive in the foreclosure if the property value is low and the mortgagee is incapable of paying the deficiency.
2. Property Condition: The mortgagee has an incentive to maintain the home during a short sale to make it attractive to potential buyers. A property can fall into disrepair if the mortgagee abandons the home or knows that he or she will lose it to foreclosure. You will need to pay for repairs and upkeep on the home before you sell it again.
3. Asking Price: You should assess the value of the home and determine whether the mortgagee is requesting enough money in the short sale. You can reject the sale if you believe you could receive more money by selling the property after foreclosure.
4. Mortgagee’s Finances: You should accept a short sale only if you are satisfied that the mortgagee cannot afford the mortgage payments. The mortgagee may have multiple debts, limited assets, and a diminished income. However, the mortgagee should not use the short sale to get out of a debt that he or she is capable of paying.

Mortgage Options

In most cases, foreclosure is the best way to recuperate the money owed to you on a mortgage. You can receive a deficiency judgment against the mortgagee if the sale price of the home is less than what was owed to you. A Chicago debt collection attorney at Walinski & Associates, P.C., can advise you on how to use foreclosure in your case. To schedule a consultation, call 312-704-0771.

Obtaining a judgment order against a debtor gives you the authority to enforce your debt collection. However, your debtor may continue to fight your collection efforts, based on legal technicalities and new claims. Thus, the legal battle against your debtor is not finished until you have received the money you are owed.

Recent Case

In MI Management v. Proteus Holdings, the plaintiff is a creditor who appealed multiple Illinois circuit court decisions that:

• Quashed garnishment orders against a debtor;
• Vacated a third-party citation to discover the debtor’s holdings in a bank; and
• Granted a third-party creditor’s adverse claim to the debtor’s holdings.

In 2014, the plaintiff received a favorable judgment against two individual debtors and their company for breach of a $1.25 million promissory note. The plaintiff issued wage and non-wage garnishment summons against the debtors, who did not respond or appear in court. The court granted conditional garnishment judgment orders, which were later confirmed after the debtors continued to not respond. The plaintiff issued citations to discover assets to the debtors and their bank.

You 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.

The Illinois Supreme Court has adopted new rules regarding procedures for credit card companies and debt buyers who file lawsuits against debtors. The rules will go into effect on Oct. 1 and will apply to both new cases and active cases that have not reached a judgment. The new rules do not apply to an original creditor that is not a credit card company. The rules create new requirements that are meant to force creditors to be more timely and thorough in filing specified motions in court. There are three notable rule changes:

1. New Affidavit Requirements: A credit card company or debt buyer must use a new affidavit form when filing a complaint against a debtor. A statement must accompany the affidavit that says that the complaint was filed within the statute of limitations. Applicable creditors can modify their existing affidavit to comply with the new rule, as long as it includes the debt contract, relevant information on both parties, and a history of the debt.
2. Same-Day Motions: Credit card companies and debt buyers will need to give prior notice before requesting a continuance or voluntary dismissal of a trial. This means that the court will no longer accept a plaintiff’s written or oral request to end or continue a trial if it is made on the day of the trial. Courts may require that applicable creditors file a motion to dismiss a trial at least five business days before the trial. As for a continuance, the court may accept a same-day request if both parties agree to it and the continuance would serve the interest of justice.
3. Identity Theft Rules: A defendant may claim that he or she is not liable for a debt because he or she was the victim of identity theft. A new rule requires a debtor to file an identity theft affidavit. Once the affidavit is filed, the creditor will have 90 days to either dismiss the lawsuit or contest the affidavit. To contest the identity theft claim, the creditor must submit its own affidavit that gives factual evidence as to why the identity theft claim is false.

Effect on Creditors

The new rules largely favor debtors because they require creditors to make quicker decisions on how to proceed during their cases. Failing to comply with the rules could delay a judgment or lead to a dismissal. A Chicago creditor’s rights attorney at Walinski & Associates, P.C., can help you remain in compliance with court rules and obtain the judgment you need in your case. Schedule a consultation by calling 312-704-0771.

One of the advantages that debtors gain by filing for bankruptcy is putting a stop on debt collection and property repossession efforts by creditors. By using bankruptcy, debtors often pay less than what they actually owe and discharge their remaining debts afterward. Some debtors abuse the process by being serial bankruptcy filers. Bankruptcy laws require filers to waiting a certain number of years before they can discharge their debt again. Serial filers try to continuously delay creditors’ debt collection actions by repeatedly filing for bankruptcy without ever completing a case. Debtors who attempt to defraud creditors through serial bankruptcy can face criminal charges.

Recent Example

In the case of United States v. Williams, the defendant was convicted on five counts of bankruptcy fraud for using repeated bankruptcy filings to prevent debt collection efforts by her condominium association. The defendant had fallen behind on payments to several creditors, including fees she owed to the condominium association. As part of the scheme to avoid debt collectors, the defendant would:

When repossessing a property from a debtor, having a perfected security interest in the property helps you prevent other interested parties from gaining possession of it. According to the Uniform Commercial Code, a security interest is created when:

• The property has been given value;
• The debtor has a right to the property; and
• The debtor agrees that the creditor shall attach a security interest to the property.

The security interest gives the creditor the right to possess the property if the debtor cannot meet the debt obligation, and perfecting the security interest gives the creditor priority over other parties who may claim ownership of the property. A recorded financing statement is a common means of perfecting a security interest. However, actual possession of the property can be sufficient with properties such as vehicles.

Recent Example

An assignment of rents clause in a mortgage agreement can be helpful when the borrower collects rent from tenants on its property. With the clause, the mortgagee may be able to collect rent payments directly if the borrower defaults on the mortgage. However, it can be difficult to predict how the clause will work in practice because of the vagueness of the law and inconsistencies between different state’s laws. Mortgagees with borrowers in Illinois have used litigation to enforce the clause. U.S. district courts have interpreted Illinois’ law on the assignment of rents to allow the mortgagee to collect rent when it meets certain requirements.

Property Possession

Establishing the possession of a rental property is the clearest way for a mortgagee to assert the assignment of rents clause in a mortgage. The mortgagee can claim actual possession of the property or constructive possession, which means the mortgagee effectively controls the property. In order to take possession of a real property during foreclosure:

A foreclosure case between a bank mortgagee and borrower made its way to the Illinois Supreme Court earlier this year. In Bank of New York Mellon v. Pacific Realty Group, LLC, the courts had been trying to solve two points of contention:

• Whether service by publication was an adequate means of informing the borrower of a pending foreclosure when the borrower does not have an agent in the state; and
• Whether the 60-day deadline for a borrower to file a motion to quash a foreclosure should have included a period during which the case was inactive.

The supreme court answered the second question in favor of the borrower and sent the case back to the appellate court in order for it to rule on the first question.

Background

When a borrower is defaulting or about to default on a loan, the lender can offer to modify the loan agreement to allow the borrower to repay the debt and avoid the consequences of violating the agreement. Loan forbearance is a tool that lenders and borrowers use to temporarily reduce or stop debt payments. The borrower agrees to repay the missed payments at a later date, with interest sometimes added. Forbearance is most often used when a borrower is going through a temporary financial hardship and anticipates being able to catch up on the payments once the hardship has passed. However, forbearance is different from loan modifications, and some of the differences can be advantageous to a lender.

Separate Agreements

With a loan modification, the lender and borrower are changing the original loan agreement to create a new repayment plan that the borrower can adhere to. Loan forbearance is creating a new agreement that temporarily supersedes the original loan agreement. The forbearance agreement should state:

A 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: