By: Lisa E. Spiwak

Debtors today have become extremely savvy. Many of them have dealt with enough creditors and creditor's attorneys to know exactly how to turn the situation around to their advantage. The following scenario is a typical example of this:

A credit manager has an account that goes delinquent. After unsuccessfully attempting to collect the debt, he turns the matter over to our law firm to institute legal action to collect the debt. The debtor contacts our office and trys to get us to agree to allow him to enter into a ridiculously lengthy payment plan.

When we refuse to agree to the plan, the debtor refuses to deal with our law firm and instead contacts the credit manager directly. He tells the credit manager that we were rude, unprofessional, and that he doesn't want to deal with us any longer.

The credit manager is then put in the position of having to contact our office to find out what actually happened and we inturn are forced to defend ourselves to our client against the debtor's accusations.

After everything has been documented, the credit manager will then call the debtor and inform him that he must deal with our office to settle the case. Since the debtor has already dealt with the attorneys, and knows that we will not give in to his demands, he must now find a third party to listen to him. This third party is usually the president of the company.

The debtor will then proceed to call the president of the company and tell him that both the credit manager and the attorneys are treating him rudely and unprofessionally, and he would like to deal with the president.

Now, the president is forced to investigate the situation to find out what is going on. He contacts both the credit manager and the attorneys to find out the facts. Now, the credit manager and the attorney are both placed in a position of having to defend their actions.

Sometimes, if the debtor is really savvy, he can get all three parties, the president, the credit manager and the attorney, to play against each other. This whole time, the debtor is sitting back laughing because he knows how frustrated he has made all of the parties, and he knows that all of this confusion will probably lead to him eventually getting the settlement plan he desires.

I cannot tell you how common the above scenario is. At any given time in our law practice, we must have a minimum of five debtors that are playing this game.

It is extremely frustrating for us for a number of reasons. First, the high volume of telephone calls going back and forth between our office, the credit manager, the president and the debtor causes a great deal of time to be wasted.

Second, it results in a great deal of frustration in having to document and defend our actions against a debtor who we know is playing us for a fool.

Lastly, as unfortunate as it is, the debtor usually succeeds in wearing down our clients to the point where they agree to accept a payment plan that would normally be unacceptable.

However, it does not have to turn out this way. If the attorneys and the client are able to recognize what the debtor is doing before it gets out of hand, it can be stopped.

The first step to take in preventing this from happening, is to clearly identify the roles of the credit manager and the attorney once a case is turned over for legal action.

Once the case leaves the credit manager's office and is turned over to the attorneys, it should be a steadfast rule that the attorneys are the ones in charge of negotiating the settlement. If the debtor contacts the credit manager to try and bypass the attorneys for purposes of discussing settlement, the credit manager should politely direct him back to the attorneys and refuse to discuss the case with him. If the debtor understands from the outset that he is forced to deal with the attorneys, then he will not be able to get away with playing everyone off each other.

This will also result in a psychological benefit for the attorneys which will result in a better settlement for the client. The way this works is as follows:

Debtors like to deal with the credit managers and presidents because with them, the debtor is a "customer", and the customer is king. This status gives him power over the credit manager and president.

But to the attorneys, he is merely a debtor who owes money and has no favorable status. The debtor understands this as well as the fact that the attorney is most likely a tougher negotiator. Therefore, the settlement is going to be much harsher for the debtor.

In conclusion, make sure that a firm policy is in place for settlement negotiations so that you can avoid being played for a fool by your debtors.