Am I Too Soft On Collections?

If you have had tenants or worked with people who are in perilous financial straights, you might have heard some real fish stories in your day about why people can’t pay their bills.

Recently, I have been working with a family who bought a home from me (exercising their lease option) and I had the pleasure of financing their closing costs for them – about $6,000 owed to me.

This was an unsecured note (as required by the lender) based on the sellers’ good name and intentions.  Although I knew it was risky, I needed to front the cash to get the closing to go through.  I thought I had a decent chance of repayment due to their excellent on-time rental payment history.

To buckle them in a little tighter on the note, though, I also secured the note against their two vehicles.  These cars were junkers to be sure and already had notes on them (probably for more than they were worth) but I wanted these buyers to FEEL like I had a little more leverage on them.

After about a year of paying their $100/month obligation, payments started to get spotty.  I kept in touch with the debtors over time trying to work out payment plans (going down to $25/month instead of $100), but they plead off citing medical bills, the teenage pregnancy of one of their children, the retirement of their two oldest family members (it’s a multi-generational family living in the house) and a number of other financial woes.

I left them alone for a while and recently got in touch again because I thought it might be tax refund time and they would probably be getting some money back from the government which they could send on to me.

Here are some of their replies…. Now as you read ask yourself, "What are the attitudes these people are displaying?"  "What would you estimate their level of wealth to be currently and in the future?"

EMILY’S ORIGINAL COLLECTION LETTER:

Hi Carol and Karen,

Happy Spring!  We haven’t talked in a while, but I wanted to see where you were with your financials right now.  I don’t think I’ve gotten a payment from you for over a year.  You last asked for a little extra time to get back on your feet.  I thought with the tax return season upon us, I should check to see if we can get back on track with payments on your $6,000 note.

Obviously, the longer it goes, the more interest accrues. If you could give me an update, that would be great!

Emily

DEBTOR REPLY #1:

(Note – This is not edited/truncated in anyway)

the amount owed is $3400 not $6000, you cannot accrue interest on this contract the solution was
that you hold the title on the chevy venture.   The total amount to be paid back to you is $3400 which will be paid in increments of $25.00 a month beginning on the 16th of the month.  This is within keeping the original agreement which is null & void with the submission of the title.

OK – I don’t understand a few things in this letter…

1. How she got the balance down to $3400
2. Why she thinks that the $25/month payment was in keeping with the original agreement.
3. Why I can’t accrue interest, etc.

Clearly there is confusion, so I tried to clear it up, and still be nice.  I’m not coming down too hard on these people because I don’t want to file a judgement against them because I don’t think they have any assets. I think the only way they will pay is if they WANT to pay me, which is why I’m trying to be nice.

Emily’s Reply #1:

Hi guys,

Sounds like there was some confusion on both ends here.

I have attached a copy of the note so we can both refer to the terms we agreed on 3 years ago… I know it was a long time ago.

You’re right, the principal at that time was not $6,000 it was $5233 and you have made $1330 in payments toward the principal.  The monthly payments are supposed to be $99.29.

However, you have not made a payment since August of 2007 and late fees and interest continue to accrue even though your vehicles as well as your personal promise are operating as security for the note.

I am willing to forgive some of these charges if we can get the payments coming in on track again.

Let me know what you’d like to work out.

Thanks,
Emily

DEBTOR REPLY #2:

Hi Emily,

You say there seems to be some confusion of what is owed on the loan. There is on your end.

Originally when you loaned the money it was $5233.00. The first month after the house was purchased You were charging us rent and your were no longer owed rent due to the purchase of the home. You in turn stated you would subtract the amount of rent from the loan which was$1086 dollars. and making the first due date of the loan 1/15/06 in the amount of $100.00. Adding this Amount subtracted $1600.00 for 1 year four months and the partial payment of $25.00 in August 2007 comes to $2522. !

And you are not a financial institution. This amount will be paid and no more than the amount originally owed. You are not a bank and either are we. We never were well off if we were we would not have needed your assistance to begin with. We will make the attempt to pay this balance of $2522 and no more than this amount owed.  YOU WERE SENT THE TITLES TO THE SAID VEHICLES .You can add on as much as you like but you will only recieved what is owed. I have other bills and  just like you or maybe you are in a better position to pay yours. Maybe money is not object to you but its a survival on our end. Maybe you are hard up for extra cash and harrassing us is a way to scare us into paying you more than you are entitled? Nothing has changed from last year I still work and my parents are retired and we try to maintain a home for the childern. We offered a payment arrangement and its up to you to except it or not… Its up to you?
Karen

Emily’s Notes:

1. I have no recollection of verbally crediting them for a month’s payment of $1000+ toward this note.  My records do not reflect it, but she is ADAMANT about it, so I may eventually forgive it to keep the peace.  However, that’s not our only issue here.
2. She notes that neither of us is a bank.  Perfectly true, perfectly irrelevant.
3. She notes that we have title to the car.  Yes – but that’s not turning into cash for me, is it?
4. She suggests that I am harassing her for funds.  2 emails in 1 year is not what I would consider harassment.  Especially when I was trying to be very nice in the emails.

Let’s see how the saga continues…

Emily’s Reply #2:

Hi Karen,

I would love to speak to you on the phone about this.  Please give me a call at xxx-xxx-xxx between 12-8PM Eastern Time.  Or I’d be happy to call you if you’d give me a good time and number to reach you.  I’m also happy to talk with your whole family if you’d like.  It seems like I am making you upset and that is not at all my intention.

I don’t remember the $1086 being credited to you, but I am willing to be convinced….  According to my records your last rent payment was $1045 on 10/3/2007 and the sale of the home took place on 11/22/2005.

DEBTOR REPLY #3:

Hi Again Emily,
Just wanted to let you know I did receive your email and still its not accurate. The selling of the home took place on 11/10/05. The  completed process was 11/16/05.  You charged us for rent for november the amount was $1045.00 and you in turn told my mother you would apply this amount to the loan…. And now you are in denial …how is this working this issue out? I WORK DAYS AND I GO TO SCHOOL SO I AM NOT AVAILABLE TO TALK…I GET HOME LATE. I OFFERED A SOLUTION AND TALKING TO YOU ON THE PHONE WILL NOT MAKE THE DIFFERENCE BECAUSE IT  SEEMS YOU BELIEVE YOU ARE RIGHT AND WE ARE WRONG.ITS UP TO YOU TO TAKE THE $25.00 PER MONTH ITS WHAT WE CAN AFFORD AND MY WALLET WILL NOT GROW EITHER WAY…..!
KAREN

Emily’s Reply #3:

Hi Karen,
Yes, that would be great if you could get back on track with the $25/month payments I would really appreciate it.  Thanks and good luck with your classes!
Emily

Emily’s Notes:

At this point, she has refused to talk with me on the phone, and has offered to start making $25/month payments again.  That’s more than I’ve been getting, so I’m trying to snap that offer up without arguing/confirming my position on the debt owed.  Even if she only does pay $2500 more, that would be a lot more than I have collected thus far and more than I’m likely to see any time soon if I apply for and receive a judgement.

I’m probably being too soft on them, but my primary objective is to get more of what I’m owed, even if it’s not all.

This is the last email from our correspondence so far, so we’ll see if the $25/month payments resume on the 16th of the month, as she suggested….

How do you handle collections?  Am I too hard, too soft or just right here?

Even with a judgement, I don’t know if I would be able to garnish wages or attach to an asset, so I’m willing to continue trying to work with them and bide my time.  It’s a learning experience….

Emily

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