Quote:
Originally Posted by chrisshiherlis
Yup. Except that in the real world debt isnt really like that.
Take UK credit card debt and bank overdraft debt about 10 years ago.
This concerns billions of pounds owed by millions of people.
Mr X , say, signs up to a credit card and bank overdraft. Freely agrees to the terms for both.
Things go a bit wrong for him, he has an illness and cant work for 2 months. Kids need to eat and wife needs her housekeeping money. He misses a credit card payment and goes £12 overdrawn at his bank. Cc charges him £25 for the default and the bank another £25 plus £12 for a letter. He agreed to their ability to charge him in this way. No money coming in so the cycle repeats over several months. Now he's hundreds in debt and its building up due to the 28% apr interest. Within two years it's ballooned to thousands.
Normally he'd be taken to court. And the court would write off the debt in many of these cases, saying the original contracts were unfair: they allowed the banks to levy fines without proper process. Even though Mr X had signed up to them.
But it didn't go to court. The debt was sold to Travis, who used hardball tactics to deny MrX proper process.
Mr X, unable to feed his family (a factor the bank , and the courts MUST take heavily into account when chasing the debt) , and terrified at the prospect of arrest and imprisonment, jumps in front of a train.
'Just collecting money owed'.
The courts in the US generally are not going to wipe the slate in a civil suit because of 'inability to pay.' If you want that 'clean slate' (which really isn't a true clean slate), then you file for bankruptcy.
Fortunately, the government clamped down on some of the abuses. There were serial filers who were in BK court roughly every seven years. They would file, some subprime issuer would give them new credit almost right away and then eventually some better banks would extend credit and right around the time the deadbeat was defaulting and about to be sued, they would file BK7. Rinse, lather and repeat...
Credit terms in the UK do tend to suck relative to what is offered to MOST borrowers in the US. Why anyone would revolve a balance on a card with almost a 30% APR is mind-boggling.
However, even those with cards in the single digits have a potential to default. And all contracts allow for the debt to be sold. At the most basic level, it is no different than the sale of mineral rights on real property. The buyer might hit it big or they may have bought a hog...but the law says efforts to collect may still be made, to include through litigation. Once the statute of limitations has expired, litigation may no longer successfully be had, although the worst of the worst still try to file...leaving the debtor to have to file an Answer that asserts the absolute defense of SOL.
If banks believe that a regular lawsuit to collect an amount owed is going to result in a judge waving a magic wand on in-stat debts, then banks lose their incentive to lend. That is NOT a good thing to see occur...
