Legal Question in Credit and Debt Law in Pennsylvania

I live in Erie, Pa. Eighteen months ago, I took a $1500.00 loan from Western Sky company. They actually only funded me $1000.00, keeping $500.00 as a fee. I was so desparate that I never questioned it. The $1000.00 helped me pay some overdue bills. I made one payment to Western Sky of $166.00, then I lost my job and couldn't continue to pay them. I have had several sporadic communications from collection agencies asking for payment..but amount owed keeps going up and is now well over $2500.00. I have phoned Cash Call (the last person who I knew held my debt records) and the tell me my account is with a collection agency called Noram Capital Holdings. I haven't heard from anyone in months regarding this debt, but I'm afraid that eventually they will sue me or come for me or something. What can legally be done by a lender like Western Sky? Do they have something called sovereign immunity and can they sue me? How much can they keep running up the tab??

Asked on 8/21/12, 12:02 pm

2 Answers from Attorneys

Brandon Benner Benner & Piperato

I have handled many of these matters. In my experience, you can negotiate the balance down pretty significantly because the collection agencies buy the debts for pennies on the dollar. After negotiating the price down, you can also enter a payment plan generally. This is something you can do on your own, but typically, you have more leverage when you get an attorney involved. Give me a call if you have any questions. Good luck.

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Answered on 8/21/12, 12:14 pm

My suggestion would slightly differ. NORAM is a junk debt buyer. But they don't actually negotiate in settlements (I had a client whose debt was purchased by them briefly). If that is the case, then they legally own the debt, not Western Sky. To collect, NORAM will do one of three things: (1) they may sell to another junk debt buyer; (2) if they decide to keep the account, they will send it out to a collection agency. The agency will contact you about the debt and you will have a chance to dispute or settle; or (3) if NORAM or another junk debt buyer decides to sue, they will need a PA licensed attorney to do that in most cases. Usually, the first contact by a debtor is a collection letter from the lawyer, not a lawsuit. Again, if you get a letter you will have a chance to settle or dispute.

A rule I have learned in the debt colllection setting is that no news is good news. So if NORAM is not hounding you then do not get them stirred up until you have the funds to resolve. Use the time you have now to start saving the funds so that you will have money when the debt re-surfaces. Attorney Benner is correct that you can negotiate a debt down, but what a junk debt buyer is willing to accept can vary depending on whether the case is in litigation (a lawsuit has been filed) or not. Creditors want 50% generally after a lawsuit has been file. It also helps if you can pay in one lump sum.

The debt is going to get bigger because of interest. Probably the contract you signed spells this out. Don't worry about this because: (a) there is nothing you can do to stop this; and (2) your goal should be to settle the debt and hopefully you will not have to pay any or very much interest.

Do not make a payment plan. These are bad ideas - lots can go wrong. I have had junk debt buyers go bankrupt or more common is debtors miss a payment. If this happens, any deal is off and soon you are back where you started. So its better to save up and then pay in a lump sum or maybe in a few installments. And never ever give a debt collector your banking information or make an agreement over the phone until you get something in writing. Debt collectors lie all the time so protect yourself.

I also agree with Attorney Benner that it helps to have an attorney on your side to help resolve the debt. I used to live in Erie, PA before I moved south. I am still licensed in PA and have a lot of PA clients. If you are interested in having assistance, I give free email consults, charge $50 for a 30 minute phone consult and resolve debts for a reasonable fee. Please contact me at [email protected] if interested.

PS - never ever get a payday loan. These are bad things - even worse than credit cards. Payday loans are legal in PA only if the lender is registered. If they aren't, then a lawsuit is not very likely. Here though, Western Sky has sold the debt and it is possible that NORAM or whoever buys the debt next can and will sue on it.

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Answered on 8/21/12, 8:18 pm

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