Plenty of Work Ahead for Lawyers In Debt Cases
Lawyers who collect bad debt from consumers, or defend them, already have plenty of job security.
But things could be getting even better.
One reason is that those failing in current tough times will hit the legal system in a few months. Another is a recent U.S. Supreme Court case that will make suing over bad debt possible for those who don’t even have a financial stake in the debt.
“In the past five years, a secondary market has developed in credit card debt that mirrors the one in the mortgage market. There’s been a growth in brokers, resellers and people getting into the business — including lawyers,” said Anh Regent, a Houston lawyer who specializes in representing creditors trying to collect from debtor businesses and consumers.
Regent said there are groups of lawyers who sue over bad debt and growing groups of lawyers who represent consumers who were sued. He added that there is reason to believe it’ll become an even more crowded field.
The Supreme Court recently ruled that collections lawsuits can be filed by people who don’t even own the debt, which will make it easier for the big national debt collection companies to file even more suits, he said.
The onslaught is already starting, Regent said.
“There are already more lawsuits filed by people who don’t own the debt,” said Regent, who says that when times get really bad, it also gets hard to collect anything from the truly destitute.
“There’s more money in suing businesses over debt than consumers,” he said. With a business, “the sheriff can go out and pick up a bulldozer.”
But with consumers, major possessions — a home, for example — may be protected, and they may have no assets to be taken. He noted consumers are usually far more emotionally involved, too.
Lots of Dallas suits
Craig Jordan, a Dallas-based lawyer who represents consumers, said in Dallas there are about 10 times more lawsuits already being filed on consumer credit card debt than there were three years ago.
“It’s all accelerating,” said Jordan, who keeps a docket of about 100 cases and charges $1,000 per debt minimum but more when legal wrinkles make it harder.
“We’ll have to see what this economy does. There’s a lag time to these things,” he said.
Jordan, who chairs a state-bar consumer-law group, said first the credit card company tries to collect, then a debt collector tries to collect, then the debt may be bundled and resold. By the time a lawyer files a lawsuit, it may be a year into the process, he said.
Dana Karni, a Houston lawyer who represents consumers, said the change in bankruptcy laws a few years back made it harder for individuals to file.
And, she said, since Texas recently raised the ceiling for justice of the peace cases to $10,000, debt collectors can get a speedy and cheaper alternative to sue those squeezed consumers.
Karni said because justice of the peace courts require a quicker 10-day response, there are consumers who don’t find out they were sued or ignore it at their peril. They wind up in default faster than they would have in the county courts, where these cases used to clog those dockets.
“Things go at a fast clip in JP court,” she said.
Worth the effort?
Richard Alderman, a University of Houston Law Center professor who specializes in consumer law, said it can be tough for consumers to find lawyers like Karni or Jordan. The payoff may not be worth it, and they may not have enough to pay.
But, he said, consumers should realize they have rights, and there are plenty of reasons they should fight a lawsuit, even if they owe the money.
Sometimes suits are filed after the time the law allows; sometimes the lawyers who sued don’t have the paperwork to back it up; and sometimes the debt collectors are so aggressive they break the law and could be subject to penalties.
“What companies used to let slide, now more and more debt collectors are buying the permission and ability to go after the money and are getting more aggressive,” Alderman said.
Karni said she has made a habit of suing collection companies that harass people and use illegal tactics, like claiming they can garnish wages when they can’t.
Robin Ziek, a Houston lawyer who handles some business collections, said the most sophisticated debt lawyers, who sometimes serve as appointed receivers, are expecting a flood of business.
Booming business
“In the late ’80s and early ’90s when there were regional and small state banks failing, collection rates skyrocketed, and they were throwing collection work at lawyers,” she said. “We’re getting ready to gear up again. Paper could be flooding the street.”
Ziek said that while some lawyers working on consumer or small-business debt work on contingency, at the high end the pay is hourly, and it can be a bonanza for those with the skills.
Jon Totz, a Houston lawyer who does mostly collection on business debt, said even though there will be more work coming, it could be less lucrative work because it can be harder to collect.
Totz said he knows collections law “isn’t the most glamorous work.”
“Some people look at you like you have horns,” he said. “But if you think about it, without collections, nobody else gets anything done.”
He said you have to have someone watching that bottom line.
Mary Flood, Houston Chronicle
