Going Into Debt Gives Away Your Power
Debt fuels the financial industry. Without the profit that lenders of all types earn by collecting interest and other fees, the economy wouldn’t be able to hum along. When the economy struggles, the industry does what it can to maximize what it earns from its borrowers, and some companies seem to be more comfortable than others with relaxing ethical standards.
Credit card issuers are within their rights to sue borrowers who fall significantly behind in paying their debt. Any borrower could find himself or herself in this position, even those who are normally able to dutifully pay off balances on a monthly basis. Even those financially stable from a paycheck-to-paycheck perspective are one lost job or one major medical bill away from financial disaster.
When you borrow money, even for the short term, you put your financial life in someone else’s hands. If a company, relying on its support, whether invented, faulty or true, sues you to recover what the company believes you owe in missed payments, you are in a difficult position.
According to the New York Times, 95 percent of borrowers choose to ignore these lawsuits. That’s the worst option, as it results in a default judgment against the borrower. Even without proof, a court order at that point declares without any doubt the borrower owes the issuer, even if there was no documentation. This likely outcome is a good incentive for lenders to file as many lawsuits as they want, using whatever support they can create or find.
Borrowers who take the time and money to fight back often find that issuers don’t have accurate or consistent records identifying the debt. Judges can determine that the support is not good enough to warrant debt collection, but only if the borrower shows up in court. You transfer power over your life to a company when you go into debt, but if you don’t use whatever power you have left when brought into court, you’re ceding your right to prevent companies from taking advantage of you.
Of course, borrowers should pay what they agreed to pay when they took on debt. Issuers can use the legal system to enforce their rights to collect that debt, and borrowers can use the same legal system. Declaring bankruptcy is one way to eliminate the requirement to pay off debt if a borrower’s financial situation makes that appropriate.
The ethical malleability doesn’t extend only to lenders. Borrowers use the bankruptcy system when not necessary to get out of repaying money they rightfully owe, though the system should prevent abuse most of the time. Consumers, when compared to credit card issuers, have limited resources to use the legal system, which still precludes a level playing field in the courts, even when both sides are prone to attempt to take advantage.
The best way to avoid this unbalanced power is to avoid debt as much as possible. Avoiding debt is a good idea otherwise, as it’s a costly way of buying the lifestyle a consumer wants. It’s difficult to avoid all debt, as the expectation of borrowing is built into the prices of housing and education.
Credit card debt, however, is completely avoidable when you buy only what you can afford and build savings for emergencies. Without your name in the borrowers’ systems, the chances of getting caught in a legal trap, whether justified or not, is almost completely eliminated. But if you do get sued, just appearing in court and forcing the issuer to produce accurate documentation increases your chances of being able to eliminate the debt, whether or not you owe it.