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Colorado Debt Collection - debtor
skip tracing, asset trace, overshadowing, co-maker notices, right to cure, Fair Debt
Collection Practices Act, creditor misconduct, validation of debt,
overshadowing, litigation, collection lawsuit, promissory note, written
contract, oral contract, quasi contract, quantum meruit, unjust enrichment,
filing fees & costs, jurisdictional limits, venue, default judgment,
stipulation in lieu of judgment, confession of judgment, trial, judgment,
summary judgment, garnishment & garnishment limitations, levy, execution,
exempt property, foreign judgment registration, insufficient funds checks, NSF
checks, closed account, returned check charge, treble damages, check fraud
criminal charges, replevin, liens & lien foreclosure, repossession, sale
& deficiency balance, lien for labor, garagemen’s lien, tailor’s lien,
laundry lien, dry cleaning shop lien, self service storage facilities lien,
materialmen's lien, mechanic's lien, agistor's lien
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Most debts are collectible, some are not.
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If the debtor is a
skip,
he / she must be located to proceed. Some debtors skip
with frequency, even after process service.
a. Skip would preclude income or bank garnishment.
b. If the debtor remains in
the same county, transcript of judgment filed with the Clerk &
Recorder's Office creates a lien, satisfaction of which would be required by
new potential creditors before making a secured loan upon real property or
motor vehicles.
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If the debtor resides or moves
out of state, under the Uniform Judgment Act, the Colorado judgment may be
registered in the foreign state and enforced in debtor's local area.
Same applies to registering a foreign judgment in Colorado. Years ago
when I lived on the western slope, the Uniform Judgment Act worked quite
well against California hunters who trashed hunting lodges and thought they
were immune due to the distance.
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Some debtors simply have no
verifiable income or non-exempt assets.
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If the debtor files bankruptcy,
an automatic stay enters immediately which stops all collection
activity. The debt is then uncollectible unless the creditor is
secured and receives relief from stay to take possession of the collateral,
or perhaps 1.) the debtor committed a preference or 2.) the bankruptcy
is thrown out on the basis of fraud upon the creditors or prior discharge
within the proscribed time limits. These circumstances are
unlikely. Unsecured creditors should plan on a write-off in the event
of bankruptcy.
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While considering legal action
referral, creditors should review the account receivable probability of
satisfaction.
a. If a creditor can answer
affirmatively to the below four questions, legal referral is probably
worthwhile. If not, the receivable may be a bad debt
charge-off.
1. Is the underlying claim meritorious, rendering judgment likely?
2. Has the creditor avoided unfair debt collection practices, thereby
avoiding a legitimate counter-claim?
3. Is there a probability income or assets can be located to satisfy
judgment?
4. If the amount in controversy sufficient to justify the attorney fee
and litigation cost expense?
b. It is an unwise business
decision to throw good money after bad. That applies whether fees are
billed upon an hourly basis or a contingency basis. Costs will be
incurred either way.
c. Although any individual
case may test an attorney's capabilities, collections are a business - not an
esoteric test of skill. If it appears from the outset that the account
is uncollectible, I will quote hourly fees, not contingency fees.
Refer to subparagraphs (a) and (b) above.
d. Major credit companies
budget bad debt just as they budget office rent, salaries or other
expenses. That doesn't mean they carelessly write-off any individual
account receivable. New businesses may learn the hard way that
improper extension of credit may deplete profit or perhaps cause failure of
the business. It is my intent to educate prospective clients to make
wise decisions regarding legal action referral. Pick your battles and
cut losses with economic acumen.
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There are delays inherent in collection lawsuits.
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The whereabouts of the debtor
must be known before collection effort or lawsuit may be commenced.
Skip
tracing causes delay and expense.
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Prior to collection referral,
each debtor must be provided a notice to cure. Ten (10)
day delay before the notice may be sent + twenty (20) day delay for period
to cure = thirty (30) day minimum delay.
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At commencement of collection
efforts, each debtor must be provided a validation letter. Thirty (30)
day delay. Debtors residing out of state require research into their
homestate fair debt collection practice validation law.
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Once the lawsuit has been filed
and served, a period of time elapses before first appearance - sixty (60)
day delay. If the debtor requests trial, litigation will take some
time. Counsel will move the case to final orders hearing as quickly as
possible, but court dockets are crowded.
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Once judgment has been obtained,
assets must be located against which garnishment, execution or levy may be
made.
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Sometimes the creditor is not in possession
of a promissory note but can obtain debtor's
execution on a note to evidence validity of the debt. If a debtor is willing to execute a
note, I advise clients to delay legal
referral, obtain an executed promissory note upon terms the debtor can
realistically honor, then allow the debtor opportunity to make timely
payments or default on the note. A promissory note will simplify the
creditor's collection litigation.
Clients may refer to the link to obtain a form
Promissory
Note. Co-makers would require additional
documents - consult the attorney.
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I
know creditors may likely be frustrated with a debtor before considering litigation
referral. I am aware money loan, goods or services or were provided to the
debtor and payment is past due. I understand creditors want their money
yesterday.
I am a one horse attorney. Clients receive my personal, professional
attention, and I will not accept a lawsuit if I have insufficient time to timely
pursue the case. It is my standard procedure to open file and commence
collection activity within two weeks of receipt of the case, sooner if
possible. I provide scheduled periodic status reports. If a case
hits a brick wall, either because the debtor can not be located or if, after use
of judicial remedies, assets can not be found to satisfy judgment, the client
will be notified. If the client can not provide assistance or does not
authorize use of an investigator, I close file and refer the case back to
the client. I am tenacious, but this is a business transaction -
particularly if the case was accepted upon a contingency fee. There must
be a reasonable likelihood of judgment satisfaction to justify continued
effort. Also, I request that any prospective client exercise patience
within reasonable time limits, or not retain my office. No attorney can
devote his / her time exclusively to one particular case. These common
sense notions apply to every attorney - client relationship.
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A client may save expense by verification of the debtor's current contact
information before referring the matter to the attorney for debt
collection litigation proceedings. If self help fails or is
insufficient, attorney accessible search databases are available. Skip tracing or asset search may
be conducted by:
1.
attorney skip tracing
/ asset search or
2. commercial (pay) search
order from a service provider or
3. if the debtor is particularly
difficult to locate, a
private
investigator may be required
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A notice to cure
should have been sent by the creditor client to the debtor before referral of the debt to counsel for
litigation.
1. Although the statute simply provides for mailing,
to maximize chance of receipt and to evidence the fact the letter
was indeed sent, I prefer that the client send the notice to cure both regular U.S. mail, and
by certified mail with a notation on the letter to that effect, containing the
certified mail number. I ask that a copy of the notice to cure, letter,
USPS certified mail payment receipt and USPS
green receipt card be included in the collection referral.
2.
Although CRS 5-5-111(5) provides the law does not apply to
consumer credit transactions that are payable in four or fewer installments, if
there is any issue regarding qualification I
prefer a cautious approach and provide notice to avoid
potential defense claim.
3. The
notice of right to cure is required only once every twelve (12) months. CRS
5-5-111(2)
CRS 5-5-110. Notice of right to cure.
(1) With respect to a consumer credit
transaction, after a consumer has been in default for ten days for failure to
make a required payment and has not voluntarily surrendered possession of goods
or the mobile home that are collateral, a creditor may give the consumer the
notice described in this section. A creditor gives notice to the consumer
pursuant to this section when the creditor delivers the notice to the consumer
or mails the notice to the consumer at the consumer's residence, as defined in
CRS 5-1-201(6).
(2) Except as provided in subsection
(3) of this section, the notice shall be in writing and conspicuously state: the
name, address, and telephone number of the creditor to which payment is to be
made, a brief identification of the credit transaction, the right to cure the
default, and the amount of payment and date by which payment must be made to
cure the default. A notice in substantially the following form complies with
this subsection (2):
Name, address, and telephone number of creditor
Account number, if any
Brief identification of credit transaction
Date is the LAST DATE FOR PAYMENT (20 days minimum - see
CRS 5-5-111 below)
Amount is the AMOUNT NOW DUE
You are late in making your payment(s). If you pay the AMOUNT NOW DUE
(above) by the LAST DAY FOR PAYMENT (above), you may continue with the
contract as though you were not late. If you do not pay by this date, we may
exercise our rights under the law.
If you are late again in making your payments, we may exercise our rights
without sending you another notice like this one. If you have questions, write
or telephone the creditor promptly.
(3) If the consumer credit
transaction is a consumer insurance premium loan, the notice shall conform to
the requirements of subsection (2) of this section, and a notice in
substantially the form specified in subsection (2) of this section shall be
deemed compliance with this subsection (3) except for the following:
(a) In lieu of a brief identification of the credit transaction, the notice
shall identify the transaction as a consumer insurance premium loan and shall
identify each policy or contract that may be canceled;
(b) In lieu of the statement in the form of notice specified in subsection (2)
of this section that the creditor may exercise its rights under law, a statement
shall be included that each policy or contract identified in the notice may be
canceled; and
(c) The last paragraph of the form of notice specified in subsection (2) of this
section shall be omitted.
(4) A notice of right to cure
delivered or mailed to a cosigner pursuant to this section shall be modified to
state that the consumer is late in making his or her payment, include the
consumer's name, and that if the amount now due is not paid by the last date for
payment, the creditor may exercise its rights against the consumer, cosigner, or
both.
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CRS 5-5-111. Cure of default.
(1) With respect to a consumer credit
transaction, except as provided in subsection (2) of this section, after a
default consisting only of the consumer's failure to make a required payment, a
creditor, because of that default, may neither accelerate maturity of the unpaid
balance of the obligation nor take possession of or otherwise enforce a security
interest in the goods or the mobile home that are collateral until twenty days
after giving the consumer a notice of right to cure described in CRS
5-5-110. Until the expiration of the minimum applicable period after the notice
is given, all defaults consisting of a failure to make the required payment may
be cured by tendering to the creditor the amount of all unpaid sums due at the
time of the tender, without acceleration, plus any unpaid delinquency or
deferral charges. Cure restores the consumer to his or her rights under the
agreement as though the defaults had not occurred.
(2) With respect to defaults on the
same obligation, other than defaults on an obligation secured by a mobile home,
after a creditor has once given the consumer a notice of right to cure described
in CRS 5-5-110, this section gives no right to cure and imposes no
limitation on the creditor's right to proceed against the consumer or goods that
are collateral with respect to any subsequent default that occurs within twelve
months of such notice. With respect to defaults on the same obligation that is
secured by a mobile home, this section gives no right to cure and imposes no
limitation on the creditor's right to proceed against the consumer or goods that
are collateral with respect to any third default that occurs within twelve
months of such notice. For the purpose of this section, in connection with
revolving credit accounts, the obligation is the consumer's account, and there
is no right to cure and no limitation on the creditor's rights with respect to
any default that occurs within twelve months after an earlier default as to
which a creditor has given the consumer notice of right to cure.
(3) Unless a creditor has provided
the co-signor on a consumer credit transaction with a notice of right to cure
that complies with CRS 5-5-110 and this section, in addition to the notice
of right to cure provided to the consumer, the creditor may neither accelerate
maturity of the unpaid balance of the obligation as to the co-signor nor report
that amount on the co-signor's consumer report with a consumer reporting agency
as defined in CRS 12-14.3-102, and 15 U.S.C. § 1681a.
(4) This section and the provisions
on waiver, agreements to forego rights, and settlement of claims do not prohibit
a consumer from voluntarily surrendering possession of goods that are collateral
and the creditor from thereafter enforcing its security interest in the goods at
any time after default.
(5) This section shall not apply to
consumer credit transactions that are payable in four or fewer installments.
(emphasis added) |
CRS 5-3-105. Notice to cosigners and similar parties.
(1) No natural person, other than the
spouse of the consumer, shall be obligated as a cosigner, co-maker, guarantor,
endorser, surety, or similar party with respect to a consumer credit
transaction, unless before or contemporaneously with signing any agreement of
obligation or any writing setting forth the terms of the consumer's agreement,
the person receives a written notice that contains a completed identification of
the debt he or she may have to pay and reasonably informs such person of his or
her obligation with respect to it. Such written notice may be set forth in the
consumer's agreement of obligation or in a separate writing. For purposes of
this section, the word "co-signer", "co-maker",
"guarantor", "endorser", or "surety" means a
natural person who, by agreement and without compensation, renders himself or
herself liable for the obligation of another in a consumer credit transaction,
and the terms "agreement" and "consumer's agreement" mean
the original underlying agreement.
(2) The notice required by this
section must be clear and conspicuous notice and comply with the disclosure
requirements of 16 C.F.R. § 444.3, 12 C.F.R. § 227.14, or 12 C.F.R. § 535.3.
(3) The notice required by this
section need not be given to a seller, lessor, or lender who is obligated to an
assignee of his or her rights.
(4) A person entitled to notice
pursuant to this section shall also be given a copy of any writing setting forth
the terms of the consumer's agreement and of any separate agreement of
obligation signed by the person entitled to the notice.
(5) A co-signor is entitled to a
notice of right to cure pursuant to sections CRS §§ 5-5-110(4) and 5-5-111(3).
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Debt collection is governed by the Fair
Debt Collection Practices Act 15 USC §§ 1692 - 1692o (FDCPA) and under
the Colorado Fair Debt Collection Practices Act CRS §§ 12-14-101 - 12-14-137 (CFDCPA). |
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Communications will not be made with third
persons other than the debtor, except permitted location inquiries.
Counsel will not harass the debtor by initiation of
unreasonably repetitive communications or communications at inconvenient times,
or other prohibited conduct. Once the matter has been referred for litigation, I ask that my
clients discontinue all further communications with the debtor. Simply
put, in that fashion a client can not open mouth and insert foot. This
closes the door to a claim for actual and punitive damages plus debtor's costs and
attorney's fees. See CRS 5-5-109
Prospective clients must understand that I am an attorney with the
goal of procuring judgment and satisfaction thereof, not pursuit of any
vendetta.
If the client or any employee or agent of the client has engaged in
unconscionable conduct in attempt to collect the debt prior to referral, please
notify the attorney at the time the account receivable is referred. It may
be prudent to charge off and thus possibly avoid penalties. See WARNING.
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When retained, this office will provide each debtor with a notice under the FDCPA and CFDCPA. This notice is known as a validation letter, and will
briefly
delay commencement of any lawsuit. To minimize delay, verification of the
debt (documentary evidence) and creditor identification will be included with
the validation of debt notice. To maximize chance of receipt and to evidence the fact the letter
was indeed sent, the validation letter will be sent both regular U.S. mail, and
by certified mail.
FDCPA 15 USC 1692g (paraphrased)
a. Within five (5) days after the initial communication with a consume in
connection with the collection of any debt, unless the following information is
contained in the initial communication or the consumer has paid the debt, a debt
collector shall send the consume a written notice contain the following
information.
1. The amount of the debt.
2. The name of the creditor to whom the debt is owed.
3. A statement that unless the consume, within thirty (30) days after
receipt of the notice, disputes the validity of the debt, or any portion
thereof, the debt will be assumed to be valid by the debt collector.
4. A statement that if the consumer notifies the debt collector in writing within
the thirty (30) day period that the debt or any portion thereof, is
disputed, the debt collector will obtain verification of the debt or a copy of
a judgment will be mailed to the consumer by the debt collector, and
5. A statement that, upon the consumer’s written request within the
thirty (30) day period, the debt collector will provide the consumer with
the name and address of the original creditor, if different from the current
creditor.
6. If the consumer notifies the debt collector in writing within the
thirty (30) day period described in subsection (a) that the debt, or
any portion thereof, is disputed, or that the consumer requests the name
and address of the original creditor, the debt collector shall cease
collection of the debt, or any disputed portion thereof, until the debt
collectors obtains verification of the debt or a copy of the judgment, or the
name and address of the original creditor, and a copy of such verification or
judgment, or name and address of the original creditor is mailed to the
consumer by the debt collector.
7. The consumer notification is complete upon receipt.
The debtor will be given the mini Miranda warning notice that
This communication is from a debt collector.
This is an attempt to collect a debt.
Any information obtained will be used for that purpose.
The debtor may later be given notice that a returned payment fee of $20 will be charged to
him or her when any check received to
apply on his or her account is not paid upon presentment. CRS 13-21-109(1)(b)(I)
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Overshadowing is the name given to language which blurs the meaning of the
notices required to be given a consumer in the first written communication from
a debt collector. As indicated above, essentially, those rights are:
1. The right to dispute the debt, and
2. The right to validation of the debt if the debt collector desires to
continue further communication (verbal, written or lawsuit) in connection with
connection with collection of the debt.
Because defendants have litigated
whether the notice was sufficiently clear for the least sophisticated debtor to
understand, it is better practice to simply provide the validation letter
without further demand at that time. This eliminates an overshadowing defense.
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A copy of the validation letter, USPS certified mail payment receipt and USPS
green receipt card will be attached as an exhibit to the complaint to establish
compliance with the FDCPA and
the CFDCPA. |
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If there is no agreement or
provision of law for a different rate, the interest on money shall be at the
rate of eight percent per annum, compounded annually.
CRS
5-12-101. |
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Unless a written contract or agreement provides otherwise, a creditor is
entitled to statutory interest at the rate of 8.0% per annum on unpaid debt
compounded annually for all moneys or the value of all property after they are
wrongfully withheld or after they become due to the date of payment or to the
date judgment is entered, whichever first occurs. CRS
5-12-102(1)(b) -
paraphrased.
The inquiry under this section is whether the money or property was
wrongfully withheld from the nonbreaching party, and not whether the nature of
the conduct of the breaching party brings him or her within the ambit of the
statute. Rodgers v. Colorado Dept. of Human Servs., 39 P.3d 1232 (Colo.
App. 2001). CRS 5-12-102 allows interest on money which is due and owing,
regardless of whether the money was wrongfully withheld. In re Tri Systems
Consulting & Design, Inc., 115 Bankr. 279 (Bankr. D. Colo. 1990).
A verdict for the full amount due under a contract of sale is tantamount to a
determination that plaintiffs substantially complied with the terms of the
contract, and that the sums provided therein became due and payable according to
its tenor; this being so, they are entitled to statutory interest after
maturity. Baer Bros. Land & Cattle Co. v. Reed, 197 F.2d 569 (10th
Cir. 1952). Where the court concluded there was a binding contract between the
parties; thus the judgment was based upon breach of contract rather than quantum
meruit, interest was properly awarded from the time the money was due. Warde
v. Davis, 494 F.2d 655 (10th Cir. 1974); Danburg v. Realties, Inc.,
677 P.2d 439 (Colo. App. 1984). In breach of contract cases, action accrues when
breach and damages occur, and prejudgment interest accrues from the time of the
breach, not from the entry of judgment. Board of County Comm'rs of Adams
County v. City and County of Denver, 40 P.3d 25 (Colo. App. 2001).
Where a promissory note is made payable "with interest", without
specifying the rate, or the time from which the interest is to be computed, the
general rule is that the note carries interest from the date of its execution at
the legal rate fixed by law. Salazar v. Taylor, 18 Colo. 538, 33 P. 369
(1893).
Interest is allowable on mechanics' lien claims as an incident to the debt
against the property. Buerger Inv. Co. v. Salzer Lumber Co., 77 Colo.
401, 237 P. 162 (1925). Interest is allowed upon a balance due for work
performed. Wells v. Crawford, 23 Colo. App. 103, 127 P. 914 (1912).
See Donley
v. Bailey, 48 Colo. 373, 110 P. 65 (1910); Idaho Gold Coin Mining &
Milling Co. v. Colorado Iron Works Co., 49 Colo. 66, 111 P. 553 (1910).
A debtor cannot avoid the payment of interest by disputing an account, and
when the account or any portion thereof is found due, the creditor is entitled
to interest on the amount due. Quad Constr., Inc. v. Wm. A. Smith Contracting
Co., 534 F.2d 1391 (10th Cir. 1976), Florence & Cripple Creek R. R.
v. Tennant, 32 Colo. 71, 75 P. 410 (1904); York Plumbing & Heating
Co. v. Groussman Inv. Co., 166 Colo. 382, 443 P.2d 986 (1968). The mere fact
that one disputes the amount due on a bill does not render an account
unliquidated; hence, one is therefore entitled to interest from the date he
rendered his bill, at which time the account became due and payable. Western
Oil Fields, Inc | |
