Why Is the Debt Collection Industry Thriving in the Age of COVID-19?
For most businesses, the outlook for the near future is bleak. Small business owners are constantly brainstorming ways to make it through the next few months, until better times finally arrive. The scramble for grants and loans, the plans for quickly pivoting to another set of products or another target market, and the negotiations with landlords and creditors will be futile unless business picks up somehow. News headlines frequently announce that yet another well-known, decades-old corporation has filed for bankruptcy. While these are not easy times for retailers and restaurant proprietors, one industry is, perhaps surprisingly, thriving, namely the debt collection industry, and the reasons for this are various. To discuss how to approach collecting the debts owed to you during the COVID-19 pandemic, contact an Alabama creditors’ rights lawyer.
Why Americans Put More Money Toward Debt Repayment in 2020
The financial catastrophe suffered by millions of Americans during the COVID-19 pandemic began long before 2020. So many people have lost their jobs or seen their incomes reduced that official and unofficial extensions on bill payment due dates have become widespread. Because of eviction moratoriums or non-enforcement of eviction judgments, people have had more money in their bank accounts that would have ordinarily gone to rent. Therefore, some borrowers who struggled to make minimum payments on credit card debts or installment plans for medical debts have put some of the money that would have gone to rent in non-pandemic times toward paying down debts. According to a report on Pro Publica, near 25 percent of recipients of CARES Act stimulus checks used some of the money on debt repayment.
Loopholes Enable Garnishments to Continue
The CARES Act stimulus checks were famously debt-proof. Debt-ridden Americans still received the check, even if they owed back taxes or had fallen behind on repayment of federal student loans. Creditors were still able to collect stimulus money through pre-existing garnishment orders. In other words, if the creditor had obtained a garnishment order for a borrower’s bank account before March 2020, the creditor could still take all or part of the stimulus money out of the borrower’s account if the borrower deposited the check in the account. Therefore, some personal finance sites encouraged stimulus check recipients to cash their checks instead of depositing them.
What’s Next for Creditors?
Alabama courts have reopened and are hearing cases about debt collection. The pandemic has done little to reverse the rising trend of business-to-consumer lawsuits over unpaid debts. Businesses are back to suing borrowers over debts that they have been unable to pay for years. Therefore, you can still sue borrowers who owe you money from before the pandemic. The debt-buying industry is also thriving, although some lenders are refusing to sell debts.
Let Us Help You Today
Creditors must ask themselves several questions about collecting debts during the pandemic. What is legal? What is ethical? What is practical? An Alabama creditors’ rights lawyer can help you develop the best strategy for your situation. Contact Cloud Willis & Ellis for help today.