It’s Halloween, which means all sorts of scary creatures are on the prowl — ghosts, goblins, ghouls, and the creepiest of them all… delinquent debt.
Americans currently owe more than $16.5 trillion in consumer debt. While many people were able to pay off debts and keep up with payments during the past two years, a lot of households are starting to fall behind thanks to rising prices.
In the spirit of the season, the Hanson & Payne team has pulled together a few spooky facts about debt collection that we think everyone in the Milwaukee area should be aware of.
1. Debt Can Die
Both debtors and creditors should be aware that Wisconsin law says most debts expire after 6 years on nonpayment. Debtors still owe expired debts, and not paying them will impact the debtor’s credit score. But creditors and debt collectors cannot sue a debtor over expired debt.
2. Zombie Debt
We just mentioned the fact that debt can die, but is it really dead if debt collectors are still hounding you over it? Expired debt that debt collectors continue to try and collect is often referred to as “zombie debt.”
3. Bought & Sold, Disguised, Masked, and Deadly
If a creditor believes it will never be able to collect an outstanding debt, it may sell that debt to a debt buyer for pennies on the dollar. The debt buyer may then try to collect that debt by suing for repayment if the debt is not expired, or incessantly contacting the debtor no matter how old the debt is.
Debts are often bought and sold so many times that it becomes unclear exactly how much is owed to who. This confuses debtors, who may not recognize a debt. Some debtors have made double payments, and others have been sued because they ignored a collection notice from a company they had never heard of.
4. Attorneys Can Make Debt Collectors Disappear
Debtors often try to muddle through on their own when faced with mountains of debt and incessant contact from creditors, but they would often be better off hiring an attorney. An attorney with debt collection experience, like those at Hanson & Payne, can help debtors get their financial lives back on track.
Once a debtor has hired an attorney all contact from creditors and debt collectors must go through the attorney. This gives debtors some peace and quiet, but it also sends a message that the debtor is serious about finding a path forward. Creditors are more likely to cut a deal and cancel debt in exchange for a lower lump sum payment when an attorney is involved because they know the debtor might be persuaded to file for bankruptcy. Creditors often go without payment or get mere pennies on the dollar when a debtor files for bankruptcy.
5. The Tax Man Cometh
There is one major downside debtors must deal with if they successfully negotiate a lower payoff amount with a creditor. The IRS treats any debt that is canceled as income and requires the former debtor to pay taxes on it.
No Tricks, All Treats
Hanson & Payne, LLC is a full-service bankruptcy law firm offering debt negotiation services and bankruptcy representation for clients throughout the Milwaukee area. Whether you are a creditor or debtor, we can help you figure out how to get back on firm financial footing. Please contact us today to schedule a meeting.