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ALPENA -- Of the nearly 10,000 debt-collection lawsuits filed in Northeast Michigan courts in the past decade, only 22 involved an attorney fighting on the side of the person being sued, according to data released on Wednesday by the Michigan Justice for All Commission.
Using data gathered from district courts around the state, a work group created by the commission recommended fixes to a debt-collection system it says leaves residents under-informed, lacking adequate legal help, and at risk of a crippling financial hit.
Debt-collection suits come in second only to traffic violations for number of filings in district courts statewide, the majority of them filed against low- and moderate-income residents, the commission reported. Often, the person sued doesn't show up in court, and only a miniscule fraction of those sued for a debt have an attorney's help.
Many people in that situation may not know they can try to get help, and others may be too embarrassed to ask for it, said Mary Kavanaugh-Gahn, deputy director for Legal Services of Northern Michigan.
Busy legal aid attorneys with full caseloads can't represent everyone facing a debt-collection lawsuit, but defendants who go it alone probably face worse outcomes, at least until the state puts its recommendations into action.
"Call and ask if we can help," Kavanaugh-Gahn urged. "The worst we can say is, 'No.'"
Creditors filed 9,589 lawsuits in Northeast Michigan between 2010 and 2021. An attorney represented the defendant in less than a quarter of a percent of those lawsuits.
A person with legal representation in a debt-collection lawsuit is twice as likely to reach a settlement, and their case is 10 times more likely to be dismissed, the commission reported.
While banks or credit card companies, auto loan companies, and medical care centers originated a large chunk of those lawsuits, more than half of Alpena-area filings came from large companies that buy debt at deep discounts, then use the legal system to try to collect.
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Such third-party companies account for a majority of debt cases filed in district courts statewide, the Justice for All Commission reported.
Attorneys in downstate offices churn out paperwork, trying to collect on debts from people with whom they have no other connection, Kavanaugh-Gahn said.
"It's just another piece of paper to them," she said, "as opposed to your whole life to you."
Many people don't ask for legal help when served with a court summons regarding a debt, some out of pride and some because they don't know help is an option, Kavanaugh-Gahn said.
She has encountered people who, confused by a debt notice or assuming they've forgotten a payment, pay the debt without confirming it's theirs.
An attorney can check the legitimacy of debts, look for flaws in a lawsuit, and negotiate on behalf of the person being sued, she said.
Most people don't get that legal help. Creditors, on the other hand, are almost always legally represented in debt-collection cases, the commission said.
In the Alpena area last year, about 65% of debt-collection lawsuits were resolved by default judgment, meaning a judge rules in favor of the person presenting the lawsuit because the other person never shows up in court.
That could mean the people being sued don't understand their options. It could also indicate other barriers in their path, like inability to get time off or find child care or transportation to court.
Others never receive notice they're being sued until it's too late to do anything about it, the commission said in its report.
At the resolution of many debt-collection lawsuits, dented credit scores and wage garnishment leaves residents already struggling financially with less money to pay for food, rent, and other necessities, including making debt payments.
To protect residents from that snowball effect, the commission recommended the state create user-friendly forms and require more information from creditors. It suggested modernizing rules for serving court paperwork to ensure residents learn about the lawsuits against them.
The commission also urged a collaboration with legal services to find new ways creditors and debtors can settle without resorting to litigation, the Justice for All Commission said.
In the meantime, people faced with debt-collection legal action can learn what to expect and how to advocate for themselves by visiting Michiganlegalhelp.org, where a robust menu of self-help information answers questions and provides toolkits covering specific debt-related situations, including "How to handle creditors before they sue you."
People facing debt they can't pay are not alone. A quarter of Michiganders with credit reports have at least one debt in collections, according to the commission's report.
Debt can be brought on by a surprise medical crisis, a lost job, or wages that don't keep up with rising inflation, Kavanaugh-Gahn said.
"We're quick to cast a moral fishnet and think that there's a simple answer," but anyone can struggle with debt, Kavanaugh-Gahn said. "People get behind."
Julie Riddle can be reached at 989-358-5693, jriddle@thealpenanews.com or on Twitter @jriddleX.