Sometimes it pays not to be a New Yorker. A recent change to New York’s Civil Practice Law and Rules will benefit non-New York residents. The new law allows a party to obtain a judgment by confession, allowing the other party to admit they’re indebted for a sum of money and agreeing that a judgment can be entered against the signor. There’s no need to sue; skip the debt collection litigation and go straight to judgment.
Before the law changed, anyone could request a judgment by confession. Neither party needs to have a connection to New York — like a transaction, office, or a residence. Meaning some lenders and other creditors with no connection to New York were using the courts to get speedy judgments. These were obtained from both New Yorker and non-New Yorkers alike.
Over the past few years, there has been a marked increase in the number of debt collection lawsuits filed in the civil courts in New York City. Even if you’re not filing debt collection cases, the rise can still affect you.
New York’s civil court is the city’s lower court. Creditors can sue for balance up to $25,000 on the condition that one of the parties is located in or the cause of action occurred in one of the five New York’s boroughs — Manhattan, The Bronx, Brooklyn, Queens, and Staten Island.
According to The Wall Street Journal, debt collection filings in New York rose by 61 percent in 2017 and 32 percent in 2018. That increase comes at a time when U.S. household debt is at record levels. The number of defaults for credit cards and auto and student loans is up, and there has been a significant increase in the debt buying industry.
The graph illustrates the sharp rise in debt collection filings in the past three years.
If you are counting on the fact your debtor won’t show and you will win your New York Debt collection case on a default judgment, don’t. The number of default judgments awarded in New York debt collection cases is declining.
Based on statistics reported in the Wall Street Journal, the number of New York City debt filings has more than doubled based on figures reported in 2018. The last time filings were this high was 2012. While the number of debt collection suits are increasing, the number of default judgments are not rising in proportion. Bottom line, more New York debt collection filings are being defended.
You need to think ahead and make sure you are represented by competent counsel. You should not expect to win your debt collection case by default because the debtor does not show up to contest the case. An attorney who understands the nuances of debt collection will be able to bring the disputed case to judgment.
Unfortunately, debt collection scams are becoming more commonplace. Any imposter can try to collect a debt that might not be due. Some scammers are even targeting debt collection attorneys. How can you tell if you received a call or letter from a real debt collector?
The New York State Society of Certified Public Accountants (NYSSCPA) recently warned of taxpayers receiving debt collection scam letters from the Internal Revenue Service. All too often these letters claim to be from the so-called “Bureau of Tax Enforcement,” when in fact there is no such agency. Others claim a warrant has been issued to confuse and trick unsuspecting taxpayers into handing over their hard-earned cash, tax return, or even their cryptocurrency.