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Automated Debt Collection Lawsuits on the Rise


In this tough economy, it may seem like your creditors are an ever-present part of your life…showing up where and when you least expect, or need, them.  You’re not alone.  It turns out that millions of Americans have fallen behind on paying their bills, and an unfortunate result is that debt collection law firms are now heading to court in record numbers in order to collect.

In addition to this tough economy making past-due debtors out of many Americans, the rise in unprecedented debt collection cases is also being blamed on the wonder of automated debt collection.

According to a new The New York Times article by Andrew Martin, many debt collection law firms are now relying on “computer software to help prepare its cases. While many of the cases represent legitimate claims, critics say the lawsuits are too often based on inaccurate or incomplete information about the debtor or the amount owed.”

In response, state legislators and judges have attempted to rein in collection lawsuits, and on Monday, the Federal Trade Commission issued a formal report on the need for reform in debt collection litigation and arbitration, finding the current system for resolving disputes over consumer debts to be broken and in need of “significant reforms.” With debt collection topping its list of consumer complaints, the commission is proposing that states mandate collection services to provide more transparency in the debts owed, including the current debt balance, interest and fees; and discourage defaults by encouraging debtors to defend themselves in court.

Yet, while much of the FTC’s report appears to put the responsibility of limiting collection litigation on the debtor, Martin reports, “The litigation boom has been propelled by fundamental changes in the way debts are collected, particularly for credit cards. In recent years, credit card companies have increasingly sold off debt they have considered uncollectible to debt buyers, usually for 5 cents or less on the dollar.  The debt buyers, in turn, may try to collect the debt themselves using traditional practices like sending letters or making phone calls to a consumer to try to arrange a payment plan. Increasingly, they are choosing to sue instead.  Collection law firms are able to handle such large volumes of cases because computer software automates much of their work. Typically, a debt buyer sends a law firm an electronic database that contains various data about consumers, including name, home address, the outstanding balance, the date of default and whether interest is still accruing on the account.”

This automation can means more errors, abuses and more litigation; none of which is good for debtors already facing tough economic times and an endless array of economic challenges.

In this environment, it’s important to keep in mind that bankruptcy can be your best weapon against these kinds of debt collections. Bankruptcy can stop secured creditors cold, as well as unsecured creditors, the ones at the bottom of the proverbial food chain, who are more likely to be the ones contacting you via phone, sending you letters, and generally harassing you for cash, any cash, where and when they can.

If you too have been effected by the economy and are wondering how to reduce debt and get back on track, knowing a qualified bankruptcy attorney can also help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future beyond our own “Great Recession.”  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or during the off hours, you can make your own appointment right online at Simply click on the yellow “FREE Consultation Now” button.

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