Sunday, April 19, 2020

A storm is coming and it is time to prepare now - Bankruptcy

I want to be clear, this blog is strictly my opinion and it based on the information I found. My research is by no means exhaustive and my conclusions could turn out to be wrong. But I truly believe this is the quiet before the storm and collection efforts on outstanding debt are going to explode as soon as restrictions on the court are lifted. Here is why I hold this belief.

First, collection agencies and attorneys are businesses too. They have payroll and overhead expenses like any other business. People's livelihood rely on income from this industry. Most of them only make money when they collect money. They are not making money now and they are falling behind on there own bills too. The only way to catch up is to collect.

Second, they are planning for the courts to open. It may seem quiet for some (not all) because the law suits have slowed and local governments have set up temporary protections but creditors are working in the background. I did another quick check of the filings (the dockets) of Montgomery and Bucks Counties from March 1 to April 30, 2020 (April 18 actually) and I found 176 cases in Montgomery County and 132 cases filed in Bucks County. Again this is not an exhaustive search and these numbers may have some duplicates due to multiple parties (husband and wife). 

Here are a couple interesting/concerning things I found:

Creditors are setting up judgments for execution. I found several creditors filing numbers of district court judgments in county court. 

The filings above set the creditors up to file for Writs of Execution that direct the Sheriff to go out to people's homes and levy against property and/or garnish bank accounts.

I also noticed that some creditors are still filing new cases. Several creditors have filed multiple new complaints while this crisis was developing and continued into the state shutdown.

During this same time period, mortgage companies seemed to continued filing foreclosure complaints as well. Some people may be surprised after all the political talk about stopping foreclosure and evictions. That is all fine for now but it is temporary. 

Now realize that the cases above are for debts that accrued and the debtors defaulted prior to the current crisis. The cases were probably prepared before the full scope of the pandemic was understood. Also, these filing may even be less than normal but the creditors have not completely paused their efforts and continue to posture their cases to go forward.

Finally, in addition to the cases above, people now are falling behind on current debt and many are burning through their savings. Once we come out of this lock-down, people are going to find their debts have grown, their ability to pay has weakened, and, I expect, the demands for payment will be aggressive. 

The bottom-line is creditors and their collectors are taking a hit in their cash flow too. While they have to wait now, they are poised to start collecting as soon as the courts open. Also, they will have plenty of new accounts to collect as we start to come out to assess our damage. 

They are preparing. Shouldn't you?  

If you want assistance, legal representation, or just want to know more about me, Mark M. Medvesky, or Wells, Hoffman, Holloway & Medvesky LLP, check out our website at

During the "stay at home" orders, we are working with clients via telephone, internet and limited video conferencing. 

NOTE: this is similar to or an extension of my previous blog: 

Corona virus, finances, bankruptcy ... Part 4 ... Credit Card Collections

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