The Victors

Very early in my career I represented a lawyer who was in a fee dispute with her client who was a collection agency. The dispute was over the amount the collection agency owed to my client. The question turned on contract language over the percentage of the collections the lawyer could “keep” as a fee.

A few things I learned about collections law. Vendors like a hospital or a medical practice or a health club, or an apartment complex typically don’t do the collection. They “sell” the account receivable to a collection agency who then sends out a series of letters threatening to ding credit scores. If payment or a payment plan is not received, the matter goes to court, usually county court where lawyers are allowed, unlike small claims court. Usually by this point the debtor has adopted the strategy to ignore everything and they ignore the fact that a court date has been sent. Rarely the debtor will scrawl a handwritten note to the court asking for relief or more time and those letters go into the court file, with no action taken. Sometimes a judge will treat such a letter as a motion for more time and a new court date will be assigned.

By the time the court date arrives the number of debtors has been filtered down to those who have done literally nothing about the debt, and they default at trial and the collection lawyer will add all the damages the law allows which is interest set by contract if it is within the legally established range, and interest as provided by statute. A judgment is entered for that amount and post judgment interest begins to accrue.

Then there is a hearing ordered usually called an examination of debtor’s assets to determine what can be garnished or what might be exempt from collection, under statute. Frequently a debtor will not show up for that too. Another date is set up and they will ignore that too. Now they are in contempt of court and the judge can and will issue a warrant for arrest. A sheriff can execute on that warrant or more likely the debtor will be arrested incident to some other infraction like a traffic ticket.

A debtor can also seek protection in bankruptcy court, but this is rare as it requires the debtor to do something and pay a lawyer to file the BK.

This is where the NYT article starts, by calling these arrests for “unpaid medical debt” instead of what they are, arrests for contempt of court. This would all make a newsworthy commentary on the state of collections law (at least as of 30 years ago) and the nasty legal business that collection lawyers deploy, but it’s not really about the sins of the creditor.

There are many off ramps for a debtor to avoid the terminus of getting arrested for contempt of court. To paint a legit creditor as a bad guy is an intentional choice.