Expert: Michelle Dunn - 3/25/2010

Question
QUESTION: Hi Michelle
Am behind on some bills. Am in commercial real estate and business taking a beating.  No income for last 10 months. Been living off of the money I got for a deal I closed in early 2009. Now starting to borrow from family. So far creditors are working with me except for American Express. They have turned over my 2 cards to 2 different collection agencies. One amount $1100, the other $12,000(was a balance transfer for three cards 2 years ago). The Amex cards are about 4-5 months behind; I’ve stayed in contact with Amex monthly to let them know my status but now they’ve decided to turn them over, and I don’t blame them. When I told agency today for the $1100 that I still don’t have any money and that I’m not refusing to pay, I just don’t have the money to pay, but that will change when I get a deal or two closed. Plus my wife is looking for full time work and I am looking for 2nd shift work so I can continue my real estate in the day time. But they said they would have to pursue all means available to collect, but wouldn’t tell me what that means. Generally speaking, in the state of TN, what is the likely collection agency protocol for collecting bad debts? Garnish, come after my home????  And for these amounts I mentioned, how long can I realistically expect them to work with me?  Thanks so much. Don

ANSWER: Don,

American Express is ultimately in "charge" of your balance due, even if they have placed the accounts with an agency, UNLESS they sold the debt completely.  If you are in a position to settle the debt, you can offer them a lump sum settlement payment for less than what is due and they will go back to Am Ex to see if that is okay with them.  If not, you can send payments weekly or monthly towards your bill.  

When they say they will pursue all means available to collect they are trying to "scare" you to pay the bill.  Especially since you have told them your situation.  In this case they may sue you for the debt, but if you tell the courts the same thing, the court will only set up a payment plan anyway.  The only way they can garnish your wages or put a lien against your home is if they get a judgment and then you do not make payments.  

My advice would be to put this in writing just as you explained above to me, and send that to them and keep making payments as you can.  This way they are limited to what they can do, because you have made an effort and kept in touch, and in this economy that is a lot more than most people are or can do.

---------- FOLLOW-UP ----------

QUESTION: The problem is that I can’t make ANY payment; just don’t have the funds. The collection agency for the $12,000 Amex just told me that if I can pay $126/month(usual payment has been about $260), that they will give me 6 mos interest free, waive late fees which sounds like an excellent deal, but I don’t have it. I’m having to ask relatives for grocery money. And today, Capital One re-opened a credit card account without me asking them to, that I closed in 2008; got a credit card in the mail with a limit of $4200 even though I’m about 3 months past due on one Capital One card and 1-2 months behind on another Capital One. Weird huh? I know you can’t speak for the collection agencies or Amex, but if I stay in touch eventhough I don’t pay them anything, but keep them advised on my and wife’s job search, how much longer do you think they might continue to go without a payment….30 days or maybe 90-120??  And if one of us finally gets a job, do you think they might take $10-$20 a month?  Thanks, Michelle

Answer
That all depends on the creditor themselves, they are not under any legal obligation to even accept any type of payment plans or arrangements, so they are trying to work with you but they legally don't have to accept anything and can try to access assets if they don't get paid.  Hopefully they will continue to work with you and discuss different options.