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Debt Collectors Lurking in Hospital Waiting Rooms?

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A recent article in The New York Times caught my eye.

The tactics, like embedding debt collectors as employees in emergency rooms and demanding that patients pay before receiving treatment, were outlined in hundreds of company documents released by the attorney general. And they cast a spotlight on the increasingly desperate strategies among hospitals to recoup payments as their unpaid debts mount.

To patients, the debt collectors may look indistinguishable from hospital employees, may demand they pay outstanding bills and may discourage them from seeking emergency care at all, even using scripts like those in collection boiler rooms, according to the documents and employees interviewed by The New York Times.

In some cases, the company’s workers had access to health information while persuading patients to pay overdue bills, possibly in violation of federal privacy laws, the documents indicate.

“Debt Collector is Faulted for Tough Tactics in Hospitals” (Jessica Silver-Greenberg, The New York Times, April 24, 2012.)

With so many creditors and collection agencies turning to hard-core tactics, in hopes of intimidating enough debtors into paying to justify their wages and contracts, it shouldn’t be surprising that hospitals are following suit.

Medical debt is a key contributor to consumer bankruptcy, anecdotal evidence suggests (as well as my personal experience representing clients, a good many of whom were barely holding on financially before a medical crisis hit). With the cost of health care continuing to increase, it’s only to be expected that the percentage of unpaid bills will go up along with it.

Bankruptcy as a “Safety Valve” for the U.S. Economy

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I recently read an academic working paper from three professors that provided quite a bit of support for things I (and my bankruptcy-practicing colleagues) have long suspected. It’s one of those papers that are probably initially of interest only to bankruptcy law practitioners and economists, which is a shame, since it contains some very intriguing research on aspects of bankruptcy that lots of folks would find interesting.

The title of the paper is daunting: “Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates.”

It was authored by Tal Gross (Columbia University), Matthew Notowidigdo (University of Chicago Booth School of Business), and Jialan Wang (Washington University Olin School of Business).

Bankruptcy Filings and Tax Refunds

The premise, despite the daunting title, is relatively simple: bankruptcy filings increase after consumers receive tax refunds, thus supporting the premise that it’s the legal fees associated with bankruptcy that keep many consumers from filing for much-needed protection.

Why Should There be a Social Stigma Against Filing for Bankruptcy?

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Carmen Dellutri, one of my Bankruptcy Law Network colleagues from Florida, featured a post on his blog, the Florida Bankruptcy Lawyer Blog, by associate Joe LoTempio last month that really resonated with me, as it gets to the emotional heart of many of my clients’ fears about filing for bankruptcy:

At some point in our country’s history, a stigma became associated with filing for bankruptcy that has irreversibly tarnished the institution in the minds of many Americans.  Many good, honorable, hard-working people who have become buried in debt for whatever reason are extremely hesitant to even consider the possibility of filing for bankruptcy because of this so-called stigma.

Joe goes on to conclude that the stigma is, to a large degree, creditor-created.

I think he’s right, and it bears further exploration because, like Joe, I have talked with many clients who come to my office seeking relief from the overwhelming crush of consumer debt who, nevertheless, express reluctance to file because of this perception of bankruptcy as a bad thing. And in almost every case, the client has been worked over pretty well by harassing debt collectors before he or she ever sets foot in our office.

Debt Collectors: Consider the Source

When a debt collector tells you “you ought to have some integrity and pay your bills,” that person is not just trying to harass you. He or she has been well-trained in the art of psychological warfare, in a sense.  Collection call agents are taught how to push your buttons from their first day on the job.

And nothing, they are told, pushes a debtor’s button harder or faster than casting doubt on the debtor’s personal integrity.

Consider that innocent sounding sentence: “You ought to have some integrity and pay your bills.” I’ve heard these exact words repeated to me by many clients, by the way, and there are countless variations on the same theme.

Finally – Some Good New for Georgia Bankruptcy Filers

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Within the last few weeks, there have been two favorable developments for Georgia bankruptcy filers.  First, as of May 1, 2012, the median income tables for Georgia families has been adjusted upwards, reversing a longstanding trend.  Second, on May 2, 2012, Georgia Governor Nathan Deal signed Senate Bill 117 which raised the Georgia homestead exemption from $10,000 to $21,500.  Here is why both of these developments are positive for Georgia bankruptcy filers:

Upward Adjustment of Median Income numbers – the median income tables are used in means test calculations to determine whether a bankruptcy filers is eligible for Chapter 7, and, if not, what he has to pay back to unsecured creditors in Chapter 13.  Prior to May 1, 2012, the median income for a family of 4 in Georgia was $64,223.   In cases filed on May 1, 2012 and thereafter the median income for a family of 4 is $66,250.

This means that it is now slightly easier to qualify for Chapter 7 and that the payback to unsecured creditors in Chapter 13 does not have to be quite so high. 

Beware of Zombie debts

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Commentary by Charles Feder, formely of Counsel to Ginsberg Law Offices

Zombie debts are old debts that come back to life.

Maybe when you think that old debt is dead because a creditor has charged it off , or a statute of limitations has passed, or even the debt has been discharged in bankruptcy.  Then you get a call from a debt collector.  Beware!  There are several ways that debt collectors can trick or pressure you into bringing that old debt back to life.

There are a lot of “debt buyers” out there, and their tactics and scruples leave a lot to be desired.  Debt buyers purchase old debts for pennies on the dollar from companies (such as credit card companies) that have charged off the debts on their books.  The debt buyers then take very aggressive actions to collect, employing intimidating and often illegal tactics, such as falsely claiming that a lawsuit has been filed, or failing to identify themselves, even threatening bodily harm.  A number of these companies have been fined by the Federal Trade Commission, but new ones seem to spring up like mushrooms after a rain, often involving the same people.  It is a very profitable business.

Here are some common traps:

You think the matter is resolved because the credit card company charged off the debt.  But that’s only a matter of the creditor’s bookkeeping.  A debt buyer may still purchase the right to collect the debt.

You think that a statute of limitations has expired when it hasn’t.  For example, here in Georgia actions on an “open account” must be brought within four years.  However, Georgia courts have ruled that credit card agreements are “simple contracts,” subject to a six year statute.

Or perhaps you lived out of state for a couple of years and then came back.  Did you know that under Georgia law the statute of limitations was “tolled,” meaning that it was suspended during your absence?

Even more shocking, if you agree to make any payments on an old debt, the law may treat your agreement as a new promise to pay,  with a new start to the period of limitation.  If you agree in writing, you could even revive debts that were discharged in bankruptcy!

If you are contacted about an old debt, do not make any commitments or give out any information.  Make a record of all contacts and consult with an attorney.

Even the Rich and Famous Sometimes file Bankruptcy

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Just about everyone acknowledges that the economy has been rough for the last couple of years. Bankruptcies are being filed more than ever, and nearly everyone knows someone going through the process. It may surprise you to learn that filing for bankruptcy is something that even happens among the rich and famous. Money troubles with the wealthy tend to be much more extravagant, and if the individual is famous enough, it’s likely that their bankruptcy story is headline news. In fact, quite recently two major players in the sports world have had to file bankruptcy – that’s right, even millionaires run into money troubles.

A former football player by the name of Warren Sapp ran into one of the most common problems of bankruptcy – he made too many unwise purchases. Warren Sapp’s bankruptcy case is a great example to study because his mistake is very obvious. Sapp was an avid collector of paintings, a luxury that, in combination with a series of poor real-estate choices, led to his downfall.

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