The human brain is so illogical at times that it can defy understanding. Take debt and judgment collection, for example. We humans are particularly good at choosing sides. We see the debtor as the victim and the creditor as the criminal. Yet the truth is that nobody really wins when it comes to debt and judgment collection.
Judgment Collectors is a Salt Lake City debt collection agency that specializes in judgments. Every time they take a new case, they are agreeing to pursue collection efforts against an individual or business who has persistent failed to pay. It is never a good situation.
The debtor doesn’t win for the simple fact that collection efforts continue. The creditor does not win in that they have sold their judgment to Judgment Collectors for less than what they are owed. The collection agency doesn’t win, either. They have to put a lot of time and effort into collection even though there is no guarantee they will be successful.
Erasing Debt Isn’t That Easy
The CNBC website recently published an op-ed piece from Georgetown University law professor Adam Levitin. The piece discusses the idea of reforming bankruptcy laws to offer more protections to consumers – primarily those victimized by coronavirus. Levitin joins a chorus of other consumer advocates who say that current laws are disadvantageous to consumers with financial problems.
This particular op-ed piece is certainly not unique. For the last six months or so, there have been plenty of blog posts, op-ed pieces, and live interviews detailing the plight of consumers negatively impacted by the pandemic. Very few deny the financial problems the crisis has caused. But there is plenty of disagreement over the remedies thereof.
The fact is that erasing debt is not so easy. It sounds very noble to ask the federal government to stop evictions and forgive past rental payments. But the vast majority of rental properties in the U.S. are not owned by corporate entities capable of absorbing significant losses. They are owned by individuals who rely on rental payments as a source of income.
The Debt Chain Reaction
If laws are changed in order to allow consumers to discharge most of their debts, a lot of other people will suffer as a result. Imagine a landlord with five properties occupied by delinquent tenants. If those tenants are allowed to maintain their leases and not pay back rent, how is the landlord supposed to pay the mortgages on those properties? How are they supposed to pay their own mortgage – and their grocery bill, gas, health insurance, etc.?
The problem with mandated debt forgiveness and discharge is that it sets up a chain reaction. Every bill that doesn’t get paid saves one person from trouble by transferring that trouble to another person. It is simply not reasonable to wipe out all the financial impacts of the coronavirus crisis with the stroke of a pen. Any attempt to do so will just transfer the suffering and further harm the economy.
The best way to attack the problem is for everyone to cooperatively work together. If a landlord is willing to give tenants a reasonable amount of time to catch up on rental payments, their bank should give them a reasonable amount of time to make good on their mortgage payments. The government should join in by backing off on tax collections as well.
The problem is that the whole system doesn’t work together. Because human beings think so illogically, we choose our villains. And in situations like debt collection, those perceived villains are the ones most likely to suffer when consumer laws are reformed.
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