Hi, I just got a call from one of the lawyers and got yelled that if I
don't pay $12,000 today, they will sue me the first thing tomorrow.

They said that they will take at least $1,500 from my checking account
automatically every month until the balance is all paid off.

The problem is I have other credit cards that went to collections and
I can't afford to pay $1500 just to cover one account. Also, I only
make $1,500/month and that's barely even enough to pay my bills and
student loans that I got back in the days.

I asked them if I can make a payment schedule, but they said no. Since
they are not a collection agent, they only want the full amount to be
paid. (I'm not sure if this is possible, but what they said was my
creditor, MBNA America, sold my account to a group of lawyers, not the
collection agencies.) I asked them what my options were, but they kept
yelling that I don't have any other options except to pay the balance
in full.

They called my relatives and told that they are going to sue me, so I
assuming that they will start harrassing my relatives until they get
their money.

God.. I don't know what I'm talking about. I've never been yelled at
like that. I'm like shivering right now.

What I'd like to know is how this law sue works and what will happen
to me in a short and a long term.

Also, if they sue me tomorrow and I file a bankrupt after that, will
that be a wise decision? I don't even have a car to sell. I got
nothing.

Please help.

---

Clarification of Question by 3211knox-ga on 23 Feb 2005 16:46 PST

Hi, thank you so much for all the replies.

I think he really was a lawyer, because when I called his office there
were like three choices to choose from and they were as follow:

#1 ???? Law Office
#2 ???? Collection Office
#3 ???? (I can't remember which one it was)

And I had to press #1 to talk to them. I searched their phone number
on google yellowpages and it is listed as Law Office. (I don't know if
I can post their number here, so I won't.)

Also, he asked for my physical address, so they can and will deliver
the paper if I don't pay the money. I forgot what it's called, but
it's notifying you of that you're sued.

To answer some of you guys' questions:

*I'm currently living in California and my relatives live in Florida.
That lawyer is from New York.

*I should've been more clear about this. They did not say that they
are going to take money from my checking account at the very this
moment. What they said was after the judgement, the judge will allow
them to take $1500 away from my pay checks until the money has been
fully paid off.


I have some additional questions.

So, if he was a real lawyer and files a lawsuit against me what will
the judge order me to do? I doubt that I'll be ordered to pay them
$1500/month when my income is only about $2000/month with all the
other depts to pay.

If he files a lawsuit against me, should I wait 'til the lawsuit is
over to file a bankrupt or should I file it asap?


And I just want to confirm this. So, even if they (I've spoekn with
two different people) were real lawyers, they were not supposed to
yell at me, tell my relatives that I'm about to be sued for, and make
fun of me? It was so embarrassing when the first guy just kept yelling
at me and hung up on me and the other guy did not even allow me to
talk by saying that "I'm giving you an hour to call your families and
friends for help, but if you open your mouth again, I'm only gonna
give you 30 minutes. and if you keep opening your mouth like that,
it's going to be 15 minutes and none after that." And when I asked him
a couple of questions, he shouted, "That's it. I've had enough of you.
We're just going to file a lawsuit against you." and then hung up on
me.

I think I'm going to call them again tomorrow and see if they really
sued me. Would it be alright for me to record the conversation without
their permissions?

Hi Knox,

OK, first thing, take a big, deep breath and try to settle your nerves
a little.  I've been in your shoes, and while it's not a pretty
situation, I learned a lot from it.

You have rights, Knox, and the first thing to help you in getting this
all straightened around is knowing your rights.  Let's get to it.

You are protected by a federal law called the Fair Debt Collection
Practices Act (FDCPA):

Fair Debt Collection Practices Act
http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm

Are lawyers collecting a debt bound by this law?  You betcha.  They
have to play by the rules too, and you can get a good explanation of
this right from a lawyer:

What Debt Collectors Are Covered By The Act
http://www.expertlaw.com/library/consumer/fair_debt_collection.html#3

The FDCPA clearly states that debt collectors may only contact third
parties to verify your location and/or telephone number, and they may
only contact a given third party ONCE.

They MAY NOT tell any third party about your debt - neither what you
owe nor that you owe anything at all.  Telling a third party about
your debt violates Section 804(2) of the FDCPA:

Gathering debtor's location information 3rd Party Contacts - Section 804
http://www.fair-debt-collection.com/rules/third-party-contact-4.html

Debt collectors MAY NOT use threats or intimidation to hasten your
payment of your debt.  They cannot demand you call family or friends,
they cannot threaten to "sue you tomorrow", they cannot tell you to
shut up, call you names, yell at you, or otherwise use abusive
tactics.  This is covered by:

Debt Collection and Creditor Harassment Abuse Laws - Section 806 of the FDCPA
http://www.fair-debt-collection.com/rules/harrassment-abuse-tactics-6.html

The 17 false or misleading tactics are prohibited according to section
807 of the FDCPA
http://www.fair-debt-collection.com/rules/false-misleading-tactics-7.html

So, how are you supposed to get these guys to leave you be? 
Easy-peasy:  Document, document, document.  Start screening all of
your calls for now - let them go to voice mail/answering machine.  DO
NOT call them!  No, you MAY NOT tape future phone calls without
telling the collector you're doing so.  Just screen your calls for a
little bit, it's not illegal and it will help lessen your anxiety. 
BUT!  If they leave abusive messages, you may make tapes of those.

In the meantime, you can invoke your rights under the FDCPA with a
cease and desist letter to the debt collector:

What If You Don't Want The Collection Agency To Contact You?
http://www.expertlaw.com/library/consumer/fair_debt_collection.html#7

As tempting as it might be to thumb your nose at the debt collector,
DO NOT tell them "go ahead and sue".  They may very well do exactly
that, and if you intend to stand a snowball's chance of making some
sort of reasonable settlement arrangements on terms that won't break
you, you need to be able to show that you're making a good faith
effort to pay.  Offering to make arragements:  Good.  Document this,
making note of the precise arrangements you've offered (amount
monthly, by what date, and the fact that you were rebuffed). Getting
belligerent with the collectors:  Very, very bad.  Don't do that.

(Aaron Larson's entire explantion of the FDCPA is a must read.  Start here:

The Fair Debt Collection Practices Act (FDCPA)
http://www.expertlaw.com/library/consumer/fair_debt_collection.html )

Send your letter by certified mail, return receipt requested, and keep
several copies for yourself in a safe place.  When you get your return
receipt back, put it with these copies.

File a complaint with the FTC.  Describe the nature of the violations,
with dates and copies of any correspondence (including the cease
contact letter above), and send it to:

Federal Trade Commission
One Bowling Green Ste. 318
New York, NY 10004

If you're not sure about what to send, you can call the FTC for more
information.  They're very nice, and will explain what you need to
know:

1-877-382-4357 (877-FTC-HELP)

Of course, that still leaves the debt.  What if they do sue?  Can they
get to your meager wages?

Yes, they can.  You are NOT judgement proof.  But first, they have to
sue and win, then file for wage garnishment.  Wage garnishment
essentially orders your employer to pay no more than 25% of your
paycheck to the local sheriff, who then forwards it on to your
creditor.

NOLO explains it (for those seeking to garnish someone's wages) here:

Collect Your Court Judgment With a Wage Garnishment
http://www.nolo.com/printerfriendly.cfm/objectID/D290F59B-0501-49EA-A540ABBE602C261E/catID/697A614B-B8AD-43EB-BE4B39DA5E65686B/104/308/191/ART/

Note that low income folks are granted additional protections - their
take hom pay after garnishment must be 30 times the prevailing minimum
wage.  Also, you may file an objection to the garnisment in court, on
the grounds that you need the money for your own support.

Although you should certainly prepare to be sued (consult an
attorney!), it's possible that it won't get that far.  Taking someone
to court is a great hassle for most debt collectors.  It's entirely
likely that they'll simply sell your debt off to another collector,
and you'll have to begin all over again.  (This is what happened to
me.  The third collector was amiable and willing to work out payment
arrangements, and - yippee! - seven years later everything was paid in
full, and we got out of the experience much, much wiser, with our
dignity intact.)

Is bankruptcy right for you?  Only you and your attorney can answer
that question.  Do keep in mind that bankruptcy is supposed to be
considered a last resort, and it will leave a nasty mark on your
credit report for 10 years after your debt is discharged. 
Additionally, bankruptcy will not get you out of your student loan
obligations, and may make it difficult for you to buy a car or a home,
or even get a job, as many employers check your credit as a condition
of employment. Please consider your options very carefully with the
help of an attorney.

I hope this answer has been helpful to you.  There is light at the end
of the debt tunnel, it just might take a while to get to it.  Hang in
there!

If I can be of further assistance, please don't hesitate to ask.

--Missy

Search terms: [ fair debt collection practices act ]

---

Clarification of Answer by missy-ga on 22 Apr 2005 20:24 PDT

Hi Knox,

Reading the news reminded me of you and of some of the...um...advice
you've been given, telling you not to pay your debts and just file for
bankruptcy.

This will be of some importance to you if you were planning to take that advice:

"Many debtors will have to work out repayment plans instead of having
their obligations erased in bankruptcy court under the law, which will
go into effect in six months. The legislation won final congressional
approval last week after being touted for eight years by banks and
credit card firms.

The measure would require people with incomes above a certain level to
pay some or all of their credit-card charges, medical bills, and other
obligations under a court-ordered bankruptcy plan."

President toughens law on bankruptcy
The Boston Globe - April 21, 2005
http://www.boston.com/business/personalfinance/articles/2005/04/21/president_toughens_law_on_bankruptcy/

Please be careful, Knox.  In the meantime, I hope you've been able to
get your creditors to shut up and leave you alone so you can get
things sorted out.

-- Missy

Well since you owe them money they're allowed to demand anything that
the contract you signed with them allows for.
If you don't pay they can and will sue you.
Bankruptcy is probably the only bet if you can't pay and they won't
work with you....
http://www.law.cornell.edu/uscode/html/uscode11/usc_sup_01_11.html

P.S. I'm almost positive they are not allowed to harasses your
relatives if you don't pay.  If they continue I'd contact local
counsel to find out about any recourse you or your family may have.

The treatment you received is not legal.  Pretend like you are going
to pay and get the name and address of their company.  You can then
report them to the FTC and your state's attorney general.  It is quite
common for collection agencies to claim to be lawyers to collect a
debt.  This violates the law.  You can also tell them not to contact
you or your relatives by phone and then they are no longer allowed to
do this.  The chances of them being lawyers and suing you is very very
slim. Firstly, lawyers don't collect debts, they practice law.
Secondly, suing you will be expensive and if you don't have the money,
they will gain nothing from suing you except a judgement, but if you
don't have it to give them, then there is nothing for them to take.

Please note that the first comment is just someone's opinion, which
happens to be incorrect.  They cannot do "whatever they want." There
are many laws to protect people in your situation.

It sounds like someone is full of it, collection agency's will try
just about anything. And heres the interesting part they can only deal
with you the second they started contacting your relatives and
discussing the matter with them the "lawyers" were breaking the law.
Also I am not sure what state you live in but alot of states do not
allow companys to take the money from your accounts. Also you may want
to make sure that you actually owe this money as sometimes these are
scams.

Collection agencies CANNOT access you bank accounts and have NO way of
taking money out of your account. These people are NOT lawyers but
simply paid employees that are harassing you so that they can get
commissions. Its ridiculous to believe that your bank "sold" your
account to *lawyers*. Banks do not do that.
I know it can be rough to be hounded by these collection agencies, but
please don't believe that they can "take" your money from your bank
accounts.

Steph53

Steph53, some states will allow a garenshi s/p? of your checks.

Hi David, 

All states allow garnishment, but the creditors have to go to court
and win a judgement first, and there are very strict rules governing
how much the creditor can take.

--Missy

After spending years in Real Estate/Finance, I can tell you.. Even if
you are sued, the odds that anything will happen are between zero and
none. $12,000 just isn't enough money for anyone to really bother
with.

Bottom line is this. You're insolvent (based on the fact that you
can't pay your bills). I'd let the collector know that you can file
for bankruptcy and they get nothing--or very little. Tell them that
they either settle with you, or they can go and get a judgment, and
you'll promptly go bankrupt (after the judgment). Force their
hand--you'll be surprised how quickly they settle.

Missy's information is great text-book info, but, I can guarantee you
that I can deal with these guys better than her. Collectors are kinda
like bottom-feeders.. They prey on people's worry and anxiety to
extract money. The odds that they will 'take your money' is low. And,
you are allowed to be able to live on your income. Debt isn't supposed
to destroy you.

Bankruptcy after a judgment will include the judgment amount.

As far as the collection company is concerned, it's a mathematical equation.

Amount of money owed + Cost of obtaining judgment = Amount of exposure

amount of exposure is greater than the amount of money owned (and
certainly more than the amount of money they paid to 'buy' the debt).
If you go bankrupt, they get less than the money they paid, and
certainly less than what they expended for a judgement. It's not
rocket science to figure out that they don't want you to do that..
They'll LOSE money--and lots of it.

Anyways, play hardball with them. You'll be surprised by how far you'll get. 

Oh, and you are essentially judgment proof. Like I said, what's going
to happen? You have no ability to pay $12k now, how does a Judge
saying you have to pay $12k change anything at all? You _still_ can't
pay it! And, with Bankruptcy, all your debts go away... However, like
Missy said, you're credit will suck for 10 years. BUT, it already
does, and it WILL suck the same amount with all the deliquent debt on
there too! So, the differences are minimal if any.

The problem with most credit counsellors and collectors is that they
get a commission when you pay your debt. They wont tell you the truth.
A bankruptcy lawyer wants to sell their services to go bankrupt. It's
hard to find the real truth. But, the real truth is that there's
little that can be done and little that will be done with your debt
(as far as you're concerned).

Oh, and as for recording the phone call:

California law does not allow tape recording of telephone calls unless
all parties to the conversation consent (California Penal Code 632),
or they are notified of the recording by a distinct "beep tone"
warning (CPUC General Order 107-B(II)(A)(5)). However, tape recordings
can legally be made if an individual or members of one's family are
threatened with kidnapping, extortion, bribery or another felony
involving violence. The person receiving the threats can make a tape
recording without informing the other party. (California Penal Code
633.5)

Again, no legal advice, just opinion...

Legolas

From my own experience:

Don't file for any type of bankruptcy.  The company you owe is a
business and they are going to write off your bad debt as an expense. 
It is not going to cost them a thing.  Ignore them, screen their
calls, laugh at them, write them letters telling them to go away. 
Change your phone number, make it unlisted, and not accepting private
calls.

The biggest gotcha with bankruptcy - it stays on your record FOREVER,
but it only "officially" counts against you for SEVEN YEARS AFTER it
is discharged.  Mentally prepare for the fact that every company that
CAN take advantage of you, will.  Higher interest on anything.  Higher
rates on mandatory insurance.  Greater deposits on housing, rental
equipment, everything.  (And that's if they will let you have it to
begin with.)  Btw, don't think that cash will save the day - most
companies don't want cash when they have the opportunity to charge you
a higher rate for the same (or worse) products and services.

So, let's say you're going to be responsible and pay back your $12,000 in full.

The court and a lawyer (each of them, not both together) are going to
tack on some money, let's say about $2,000.  Then, your wages will be
garnished and a portion of each payment goes to everyone, (except for
the court and lawyers - they get paid first...)  After the time it
takes to pay off your debt (I'm guessing 3 years or more), then you
will finally receive a letter that says "Congrats!  You've repaid
everyone!  Now, the SEVEN years begins!"  And the every company that
has been taking advantage of you, will continue to do so.  Same higher
interest on everything.  Higher rates on mandatory insurance. I hope
you get the idea.

If your credit is shot, you're going to be living on a cash basis for
a long while (which is a good thing, not a bad thing.)  Make sure you
have (or create) a good relationship with your current bank, or a
small local bank or credit union.  It will be much easier with them
helping you rebuild over time.

After about 3 years, the companies who got screwed will give up.  For
some real fun, I recommend contacting the company after about 5 years
and complaining about the black mark on your credit report.  If they
can't pull up all of the detail about the old debt, they are required
to remove it from your credit report.  The onus is on THEM to prove
it, not you.

THAT is much faster than 10 years or more, and much cheaper, too.

(In closeing:  Been there, done it all.  One of the hardest beatings
I've ever had in this life was going through this.)
Cynical?  You betcha.  I repaid my debt through bankruptcy over seven
years, and now, I only have another 5 years before it drops off my
credit.  But wait, those applications ask if you've EVER had a
bankruptcy...

Well said mauryster-ga! Ignore them. Don't bother paying. Really,
what's the point? If you have a black-mark on your credit from a
creditor, paying it just prolongs the 'clock' on how long the black
mark will stay on your credit bureau. Credit is all based on your
'good name'. Since that doesn't exist anymore, I wouldn't let it
bother you. :)

For those who think I'm being immoral and/or really inducing someone
to commit a crime, not paying a bill isn't a crime. And, in this case,
if you can't afford it, you just can't afford it. That's the end of
the story. Sure, like Missy you can do the honorable thing and pay,
but, whether you pay or not, it won't make you credit any better/any
worse than it already is. The net effect would be to make you $12,000
poorer--that's about it.

I'm cynical. I've seen people who were **IN** bankruptcy get a
mortgage because their bank liked them and they had a TON of money
that was, ahem, hidden from the bankruptcy. Then, I've seen others who
really tried hard to make everything better after a bankruptcy (and
were literally a few months from it falling off their bureau's) who
got screwed on a mortgage with high rates, high downpayment and a
really crappy offer (plus a completely bogus 'uh, we said we were
going to fund, but, we changed our minds.. Yes, we know it's supposed
to have closed in a week, but, so sorry'.)

I really hate most banks, and love the challenge of making them pay
for *all* their screw-ups, etc.. :-)  You can always consult a lawyer
about suing for Intentional Infliction of Emotional Distress... Might
make you more than the $12,000 you owe!

Legolas-ga

p.s. Again, personal comments only. Not a lawyer, not your lawyer, not
a law-talking-guy. Just personal opinions.

Some advice is good, some advice is bad, and some advice is dangerous.

A judgment is very much a black mark on your credit. A judgment can
trigger a garnishment against your bank accounts, which can leave you
unexpectedly bouncing checks or unable to afford that vacation or car
repair you so desperately need. Even if not collected, judgments
typically remain on your credit history for ten years, subject to
renewal for similar periods of time if the judgment creditor files a
form with the court. That is to say, a judgment can very well stay on
your credit report long past the date when a bankruptcy would be
removed from the report.

Many creditors actively seek judgments against debtors, often for
amounts smaller than $12,000.00. (This can be particularly true with
certain kinds of debt, such as student loans.) Your contract with the
issuer of the credit may entitle them to charge you their attorney
fees on top of your debt - and in some states (sometimes dependent
upon the type of debt) that can be a contingent fee. So your
$12,000.00 debt can suddenly become a $16,000.00 or $18,000.00
judgment even though the only work the collection firm did was to file
a lawsuit upon which you defaulted. Tread carefully here.

Sure, it is possible that they are blowing smoke. If you know the name
of the "lawyer" who contacted you, you may wish to check with the
State Bar to see if the person is really a lawyer or if this is a
collection agent's intimidation tactic. But if this matter has been
passed to a lawyer and not a collection agency, it is a sign that the
creditor is serious about filing a lawsuit. In many states, probably
most, lawyers are ethically barred from threatening litigation unless
they have the actual intention of filing a lawsuit.

Lots of debtors threaten to file for bankruptcy. That impresses no one
in the collections trade until the  notice of bankruptcy is received.
Lots of debtors file frivolous challenges to valid debt. Filing a
fraudulent challenge to a debt you know to be valid is not a wise (or
legal) path to obtaining a clean credit record.

I find curious the notion that a bank happily lent money to a person
in bankruptcy on the basis of assets fraudulently concealed from the
bankruptcy court. You see, when you apply for a mortgage, you have to
describe those assets on your application. And the mortgage
application becomes a document subject to discovery through the
bankruptcy court. So the disclosure of those assets to the bank could
result in extremely serious consequences, potentially including having
any bankruptcy judgment set aside, prior debts being restored to their
full amounts (plus interest), and a bar against discharge in
subsequent proceedings. And, of course, a judge might hold the debtor
in contempt, or refer the matter to a prosecutor's office for review
of the case for possible criminal charges.

In the U.S., many creditors love to issue post-bankruptcy credit
(albeit at high cost and at high interest rates) because they know
that the debtor is barred for a significant number of years from again
filing for bankruptcy. Bankruptcy is not an appropriate first choice
for credit woes, and the financial consequences can be very
significant as a debtor attempts to rebuild a decent credit history,
so it is not a decision to be made lightly, and is usually best made
after consultation with a bankruptcy lawyer.

If you are considering filing for bankruptcy, keep an eye on the
bankruptcy legislation presently under review in Congress, which is in
large part a grant of the long-standing wishes of credit card
companies and other unsecured creditors to limit debtors' ability to
have their debts discharged. A few months from now, the landscape
might look very different for somebody who is considering the
possibility of bankruptcy.

It is possible for creditors and third-party collection agencies to
use legal means as a way to collect debts. The likelihood of being
sued or having your wages garnished depends largely on the creditor
that is owed money. It has been my experience that certain creditors
are more prone to legal action than others. Traditionally, creditors
seek legal action only if there is a considerable lack of contact with
regard to the account or if they feel that a consumer could simply be
trying to escape their financial obligations. If the debtor currently
earns a respectable salary, owns a home that has a sizable amount of
equity, or can most likely afford to repay your current debts without
the use of credit counseling, debt settlement, or bankruptcy, then
there is a possibility that a judgment may be filed against you if
begin to miss your monthly payments.

Additionally, for legal action to proceed, third-party creditors and
collection agencies must retain the services of an attorney that is
LICENSED in the state in which you live.

Even if legal action is pursued, a wage garnishment can take a
considerable amount of time and depends upon your current employment.
Many states have laws that stop creditors from being able to use wage
garnishment as a means to collect debts.

Further, it is illegal for Debt Collectors to do any of the following:

Suggest that failure to pay your debts could result in arrest,
jailtime, or wage garnishment
 
Contact consumers at their place of employment if they know the
consumers employers prohibited such calls

Talk with third parties, including family, neighbors, children, and
employers, for purposes other than acquiring location information
about consumers, without consumers consent

Engaged a person in telephone conversations, repeatedly or
continuously, with the intent to annoy, abuse, or harass a the person

Threaten to take action with regard to filing a lawsuit when they do
not intend to do so
 
Call consumers at times or places that they know or should have known
were not appropriate
 
Fail to inform consumers of their legal right to dispute and obtain
validation of their debts, and to obtain the name of the original
creditor
 
Continue to try to collect debts after consumers have formally
disputed them in writing, and before verifying the debts.

Use obscene or profane language with the intent to offend

You can also send a Cease and Desist letter to stop the communication.
Make sure you send it via certified mail with a return receipt
request. I hope this helps and feel free to reply if you need more
assistance.

If you would like additional information, please feel free to visit
our FAQ page on http://www.debtregret.com. We specialize in Debt
Settlement Services.  Debt settlement is a legitimate and legal way of
solving your debt and credit problems without the need for bankruptcy.
It's a program that has been specifically designed to lower your
current debt by 40-60%. This is accomplished by negotiating approved
payoff amounts with your creditors.

Okay... say the credit card sues you. What if you dodge the lawyers
just like you dodge the collection agency?
I mean change the phone number and send back mail to sender. Many
people often move and switch jobs... How good is the court at tracking
you down? Hell, if you owe a lot of money, change your name. OR move
out of the country for a few months and come back. Say you get a wage
garnishments, just find a new job and dont tell the sheriff or court.
Sure you might have to EVENTUALLY PAY - but what the hell, dont let
your money go without a fight.If you're luckily, it wont be worth the
costs to track you down, and they'll drop the case.

I see credit as a business arrangement. They give you the card, and
want to make money off you. BUT you're a risk. They know you may not
pay (which is why they charge interest rates). So i say, if you dont
pay, they get nothing - that's implied language in the whole
debtor-creditor relationship.

-EWM

Eastwestmover,

The fact is, the business DO get paid for bad debt in the form of
write-offs.  Plus, these companies that loan money as a business make
money from the interest plus any fees they can tack on.  These
companies usually loan money to individuals who can't afford the debt
(maybe the customer could in the beginning of the arrangement - but
some can't - as in the case of college students who don't even have a
job yet!)  Most consumers have no real training in debt management,
but that doesn't stop the solicitations!

My favorite scenario is this one:

Customer charges up near their credit limit.  Customer is 1 day late
on sending their payment (like, say, over a holiday or weekend.)  Late
fee is assessed for Late Payment.  Late fee pushes total over credit
limit.  Over Limit fee is assessed.  Btw, interest rate is
automatically adjusted as high as the law will allow when the payment
went late.  Customer now owes at least $50 more in fees, plus the
additional amount generated by the new, higher interest rate.

I have no sympathy for these companies.  They play all sides ("Here,
here, please take the loan..." "Whaaaa, we lost our money to that
deadbeat. (Shhhhhh, don't mention that we already wrote it off!
LOL!)")

I'm waiting for them to form their own collections side businesses
(Wait, isn't that Consumer Credit?) and work that angle as well.

By the way, the same "risk" protection doesn't work for the
individual.  How much interest does your tax overpayment earn when you
get your refund back?  Do you think this money just sits in jar in
Washington DC until you ask for it back?  Heck no, it's being used by
the government and generating interest!

As I said before, I went through bankruptcy and repaid my debts IN
FULL, including every damn fee the courts, lawyers, and anyone else
could add in.  While repaying my debt, I also paid every inflated fee
structure these companies could think of.  (For example, I bet you
didn't know that you will pay more for MANDATORY car insurance if you
are in a bankruptcy.)  AFTER I repaid my debt in full, I continued to
be charged more interest and fees than others because I had a
bankruptcy in my past.  (Anyone know about the sub-prime mortgage
business?  Option One (owned by H & R Block) can teach you a lot, if
you're interested.)

I wouldn't hide from anyone.  I would just tell them "I'm broke."  If
they want to take you to court to prove you're not lying, then let
them.  They are taking a calculated risk that you will blink before
they will, and pay them without going to court.

One last thing:  If one of your creditors is the Government (taxes,
student loans), they won't ask you to pay to avoid going to court -
they will take it directly from your paycheck.  The Government doesn't
threaten, it simply informs you what is about to happen.

If anyone else here has more experience in living through a repayment
bankruptcy than I do, I would love to hear their differing opinion. 
The rest of you are talking academics and moral issues.