Let’s face it. The last few years have been a tough time for consumer creditors. With high unemployment, high gas prices, the foreclosure crisis, and a sharp increase in consumer bankruptcy, defaults were at an all time high. These same factors made it more difficult to collect consumer debts through conventional means. As a result, creditors were reluctant to take action on bad debt they were holding for fear of throwing good money after bad.
Consumers Have Gone Back to Work
At the height of the financial crisis, unemployment topped out at just over 10%. Consumers would first default on their debt, then refuse to enter into a repayment plan because they had no income to meet the terms of a plan. Wage and bank garnishment became useless because there was nothing to garnish.
Today, unemployment is below 7%. The White House has touted the figure that more than 5 million new jobs have been created since the bottom of the financial crisis. People have gone back to work. There are wages available, and money in the bank to be garnished. If you’ve been sitting on judgments, now is the time to spring to action and take advantage of all of the legal collection tools available. Also, if a debtor is in default pre-lawsuit, now is the time to make demands and start negotiation. More consumers have the income to meet the obligations of a payment plan.
Tax Season is Upon Us
Approximately half of all taxpayers will receive a tax refund check when they file tax returns this year. Consumers start filing taxes after the first of the new year, but more so beginning in February as W-2s and 1099s are typically submitted by the end of January. Tax refund checks can be garnished once they hit a bank account. And consumers will be more willing to part with a tax refund as part of a negotiation because it is “found” money not counted in their regular budget.
Taking advantage of the improving economy is a two-fold process. Review your old receivable accounts, both those with judgments and those without. Either internally or with the assistance of outside counsel, remind debtors that you’re still here, ready to work with them now that things have improved. If necessary, work with your debt collection attorney at Hiday & Ricke to use legal means, like garnishment, to get the old debts collected. For new debts, reevaluate your company’s policy about sending accounts to collection. More consumers today will have an ability to pay, and your collection policy should reflect the new economic realities. If you are planning to bring your small claims cases in-house, be sure to first consider the risks.
If you have questions about collecting on old judgments or would like Hiday & Ricke to take a look at your outstanding accounts receivable, please give us a call at [phone2].