Expert: Jason Barnette, Esq. - 3/17/2010

Question
Hi Jason
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. 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????  Thanks so much. Don

Answer
Don:

American Express is particularly quick to sue.  Moreover, Tennessee is a very pro-business state and not too consumer friendly.  American Express does not sell off bad paper either (bad paper meaning account charged-off to profit and loss) and they will charge the account off at 180 days past the date of last payment.

Therefore, you're looking at a month or two before they charge it off which will result as an R-9 rating per your credit reports. Generally, they retain marginally competant counsel at sue in General Sessions Court within about 6 to 8 months after said charge-off.

If they obtain a judgment, they can garnish wages (not applicable to you insofar as you're self employed), place a lien against real and personal property (not take your home), and levy your bank accounts.  The operative term above is "if."

With that said, they must serve you with a Warrant in Debt which may or may not have an accounting or affidavit attached.  An account statement or original application will prove up the debt.  An affidavit, no, that is hearsay which can be stricken and thus, the case dismissed unless the Affiant is present and subject to cross-examination.

In any event, you're likely looking at being sued in the next year if you cannot "settle" these accounts.  You can retain counsel to settle these for you and/or represent you if you are sued.  There are defenses and offsets under the Tennessee Consumer Protection Act and the Fair Credit Reporting Act that can be utilized if a skilled consumer protection attorney is retained.  Often times, when faced with valid counter-claims coupled with a Motion to Dismiss under Tenn. Civ. R. Proc. 12.02(b)(6), they will fold.  However, you must have an attorney simply to file a counter-claim in General Sessions Court.  Constitutional, I don't think so but, no one has challenged it.

Finally, if you can get the money to pay in full, ask AMEX about their "Oasis" program.  It entails paying the account in full and in return, they issue you a card that matches the old limit, dates back to the date the charged-off account was opened (good for history under FICO credit scoring models) and they remove the derogatory account tradeline.  It's a good deal if you can do it.  Otherwise, retain a Tennessee consumer protection lawyer and fight to leverage dismissal or advantageous settlement terms.

Jason Barnette
Barnette Law Offices, LLC
1800 Hayes Street: Suite 122
Nashville, TN 37203
615-585-2245
http://www.barnettelawoffices.com
info@barnettelawoffices.com