Before bankruptcy: beating a warrant in debt
Bill, not his real name, is filing bankruptcy with me in October. (He needs a couple more months to finish everything to get his bankruptcy approved.)
In the meantime, he received a warrant in debt. Midland Credit Management, a big debt buyer, was suing him on a old Chase card. He didn’t want to get a judgment and a garnishment while we were waiting for the right time to file the bankruptcy.
Bill knew, from my warrant in debt website, that he had to go to court on his return date, and tell the judge he wanted a trial. He had an easy basis for saying he wanted a trial. “I never heard of Midland Credit Management. I don’t know who they are or what this is about.”
He asked for a bill of particulars, and Midland’s lawyer asked for grounds of defense.
When Midland submitted their bill of particulars, they wrote they had bought the debt from Chase, and Bill owed Chase $4822.
For Bill’s grounds of defense, he wrote to the court and Midland’s lawyer that there were no documents showing that Midland really bought the debt from Chase; and that Midland had no evidence of how much he owed Chase–they would need a witness from Chase to prove that.
Bill was nervous on his warrant in debt trial date, but it was easy. When they called his name, the lawyer for Midland said, “Your Honor, this is our first dismissal of the day.” The Judge then turned to Bill and scolded him slightly to be financially responsible. Then he said, you won today, you are free to go.
Bill handled this on his own, but I had given him some tips. One thing I said, if this is still America, you’ll win. Nice to know this still is America.
Under Virginia law, Midland would be able to bring the same warrant in debt a second time. But they won’t be able to move fast enough to beat our October bankruptcy filing. (And they probably couldn’t prove it then, either.)
When we get to October, his bankruptcy will go fine.
PS Here’s an update on March 30, 2011. The Attorney General of Minnesota announced he is going after Midland, and their parent company, Encore. He says they used robo-signed affidavits to sue people on in Minnesota. In other words, Midland claimed they reviewed their records and had proof so-and-so owed them money–but nobody actually looked to see whether they really had that proof. This press release would be something to bring to the attention of the Judge, if you go to court and fight Midland on one of these.
PPS. Washington Post had a good article on beating Midland in May 2014.
In Northern Virginia, Encore’s Midland unit has filed 16,878 lawsuits from 2003 to March of this year in the district courts of five counties. The company won nearly two-thirds of those cases through judgments against consumers who either failed to appear in court or simply agreed to pay the amount.
Almost 20 percent of those people wound up having their wages garnished, according to a review conducted by The Washington Post. Debts range from as little as $53 to as much as $23,786.
The Post article includes a comment from a guy who calls himself “rogerramjetz.” He says he used to work as a collection lawyer on exactly those cases.
A guy gets a credit card with an Account Agreement that charges him $137 to open the account the first time he uses the card, and the card has a $250 credit limit. He then buys a $35 iron and a $45 coat at Walmart with the card. He now owes $217 the next month, and when he doesn’t pay the bill, he accrues an interest charge of $5 at 29% interest. When he doesn’t pay the next month, the card accrues a late charge of $35, $5 in interest, and an overdraft fee of $35 a month, totaling $297. The following month, interest is $6, and the late fee is $35 and the overdraft fee is again $35. A year and a half after the initial $80 purchase, the account shows a $1600 balance to Providian Bank. Totally legal.
Providian then sells the debt to Midland for $0.17 on the dollar, or around $200, and gives the last statement the guy received for $1600 as evidence of the debt. Glasser & Glasser in Norfolk is promptly retained to sue the guy for $1600, with interest at 29%, and accrued interest since the default a year before totaling $500, while the Account Agreement is invoked for a “33.3% reasonable attorney’s fee, totaling $533” and court costs of $63.00. An affidavit from Midland and Providian is generated, and a sheriff delivers the Warrant in Debt to the guy.
Total sued for? $2,693, but we will gladly settle for a lump sum of eighty cents on the dollar, or $2,154. For an iron and a coat at Walmart. Or we will take a judgment and garnish 25% of your wages until paid, and in three years the balance will double again at 29% interest.
How do I know this? I worked for Glasser as local counsel.
“Roger’s” example may be extreme but it shows how small debts can lead to fairly big garnishments, with late fees, over limit fees, later over limit fees, legal fees and the rest are added in–the just 29% interest alone doing it’s magic.
What’s the lesson: Many credit cards in bankruptcy have already been money makers for the credit card companies. And if you are getting sued by people you never heard of, it’s time to talk to a lawyer.