By Paul Kiel, ProPublica
Two years ago, the president of Credit Management Services, a collection agency in Grand Island, Nebraska, presented a struggling local family with the keys to a used 2007 Mercury Grand Marquis. To commemorate the donation, the company held a ceremony that concluded outside its offices, where the couple and their two young girls could try out their new car.
The familyâs story was dire: their eight-year-old daughterâs failing kidney had led to multiple surgeries and a deluge of medical bills, according to an article in the local newspaper.
But CMS played another role in the familyâs life, one the article didnât mention. The company had previously sued the couple eight times over unpaid medical bills and garnished both of their wages. As recently as two weeks earlier, CMS had seized $156, a quarter of the girlâs fatherâs paycheck.
Shortly after the ceremony, CMS released the family from further garnishment, court records show. But just four months later, the company filed a motion to start up again. The couple, who did not respond to attempts by ProPublica to contact them, has since declared bankruptcy.
In almost any other state, such a barrage of lawsuits against a family in desperate financial straits would be remarkable. Not in Nebraska. There, debt collectors frequently sue over medical debts as small as $60 and a simple missed doctorâs bill can quickly land you in court.
Filing suit is one of the most aggressive ways to collect debt, but no one tracks how frequently it happens or to whom. An examination of Nebraskaâs courts, however, shows that where debtors live can have an enormous, and unexpected, impact on the quantity and types of lawsuits.
Nebraskaâs flood of suits isnât merely a reflection of residentsâ inability to pay their bills. About 79,000 debt collection lawsuits were filed in Nebraska courts in 2013 alone, according to a ProPublica analysis. In New Mexico, a state with a population, like Nebraskaâs, of around 2 million, about 30,000 suits were filed. Yet by virtually any measure, households in Nebraska are significantly better off than those in New Mexico: Income is higher. Poverty is lower. And fewer families fall behind on their bills.
The reason for the difference is simple. Suing someone in Nebraska is cheaper and easier.
The cost to file a lawsuit in Nebraska is $45. In New Mexico, where suits are filed at about one-third the rate as in Nebraska, the fee for smaller debts starts at $77.
Nebraska lawmakers, of course, didnât set out to turn the Cornhusker State into the Lawsuit State. Instead, it appears no one understood the consequences of having cheap court fees: Suing became an irresistible bargain for debt collectors. Itâs a deal collectors have fought to keep, opposing even the slightest increase.

For debtors, unaffordable debts turn into unaffordable garnishments, destroying already tight budgets and sending them into a loop. âItâs just been a vicious cycle,â said Tanya Glasgow, a single mother in Lincoln, Nebraska whoâs been sued several times. âItâs been horrible.â
âI resent the stereotype that these are not hard-working people,â said Katherine Owen, managing attorney in Legal Aid of Nebraskaâs Omaha office. âTruly the majority of them simply cannot afford it. Thatâs it.â
Lawsuits over medical debts are, of course, filed in other states, usually by hospitals. What makes Nebraska unusual is that almost all the suits are brought by locally owned collection agencies that pursue debts on behalf of medical providers. Although ProPublica found collection agencies filing suits in large numbers in other states, particularly Indiana and Washington, none could match the sheer volume in Nebraska.
Itâs a difference that came as a surprise to researchers, consumer advocates, and collection professionals both in and outside of Nebraska.
âThereâs very little information, periodâ on the number of collection lawsuits in different states, said April Kuehnhoff, an attorney with the National Consumer Law Center. Policymakers in Nebraska and other states should pay attention, she said. âBeing sued on a debt has very serious negative consequences for consumers.â
In a statement, the Nebraska Collectors Association said collection agencies file suits as âa last resort,â after attempts by the original provider and the agency to resolve the debt have failed. âCooperatively working with the consumer is always the preferred approach to the collection process,â it said.
THE KING OF COLLECTIONS
Credit Management Servicesâ offices are housed in a squat, brick building thatâs conveniently located just a block away from the county courthouse in Grand Island, a city of about 51,000 in central Nebraska.
Local businessman Michael Morledge has owned the company since 1995. His son serves as president and his daughter as vice president of customer relations. CMS, with about 200 employees, boasts of having âthe industryâs highest recovery ratesâ on its website and counts two-thirds of Nebraska hospitals among its clients. In addition to other medical clients like doctorâs offices and clinics, CMS also handles non-medical debts such as overdrawn bank accounts, utility bills and payday loans.
Like other collection agencies in the state, CMS employs collectors to persuade debtors to make voluntary payments. And like those other agencies, CMS routinely sues those who donât. But itâs here that CMS sets itself apart.
In 2013, CMS filed almost 30,000 lawsuits in Nebraska, more than the rest of the collection agencies in Nebraska combined. That would be a staggering number of suits in any state. In New Jersey, with a population nearly five times larger, only one company, the nationâs largest debt buyer, filed more than 30,000 lawsuits that year.
To file those suitsâabout 120 per working dayâCMS has its own staff of six attorneys. The complaints are prepped by support staff and then presented to the attorneys for review, CMSâs general counsel Tessa Hermanson said in a 2012 deposition from a class action lawsuit against the company.
Debtors arenât sued unless âthe individual has a means to pay,â she said. But when pressed about how CMS determines this, Hermanson, who supervises the companyâs lawyers, said she didnât know if it was done by âone person or a department.â
A review of CMSâs lawsuits shows the company is routinely aggressive even when itâs obvious the debtor is poor. In one case, CMS emptied a debtorâs bank account 11 times over the course of two years, even though in all but three instances the debtor had under $100. One garnishment netted the company $6.50.
Competition for clients can encourage this sort of approach, said Judge Craig McDermott, former counsel at a CMS rival and current presiding judge of the Douglas County Court in Omaha. Companies may sue even when itâs apparent the debtor canât pay just to prove to the original creditor that they are making an effort: âOtherwise theyâll go to another agency down the street,â he told ProPublica in a 2014 interview.
CMSâs frequent use of the courts has brought millions back to the company, which retains a percentage of what it collects, and its clients. From 2008 through 2014, CMS seized at least $88 million from Nebraskansâ wages and bank accounts, according to court data analyzed by ProPublica.
In a brief response to a list of questions from ProPublica, CMS wrote that it âplays an active and important role in assisting creditors in Nebraska with recovering money owed for goods and servicesâ and that it âstrives to comply with all applicable laws and regulationsâ and only files suit after other collection attempts fail. The company declined to discuss any individual debtor case.
THE FIGHT AGAINST A $1 FEE
Earlier this year, state Sen. Adam Morfeld introduced a bill in the Nebraska legislature that seemed too benign for anyone to oppose: It proposed raising the fee for filing a lawsuit by $1. The extra money would go to civil legal aid organizations to provide more services to low-income residents.
But, to Morfeldâs surprise, his bill quickly encountered stiff resistance. Tim Keigher, CMSâs lobbyist in the state capital, made it clear the company would fight the bill every step of the way, said Morfeld, a Democrat. Keigher did not respond to requests for comment.
At a February judicial committee hearing, CMSâs Hermanson appeared on behalf of the Nebraska Collectors Association to oppose the bill. Raising the cost of filing suit in county courts from $45 to $46, she said, would create a âburdenâ on the businesses that hire collection agencies. Collection agencies ask, âis it worth it to pay X amount to recover a small, you know, medical debt of $200?â she said. A higher filing fee may cause them to decide âitâs just not worth it,â she said.
The gathered senators were skeptical. After Hermanson testified that collection agencies filed thousands of suits each month, one senator volunteered that maybe increasing the filing fee âwould be betterâ if it meant fewer suits.
Sen. Matt Williams, a Republican and former president of the American Bankers Association, asked Hermanson, âSo your testimony is that a one dollar increase in this fee that your client is going to pay, not you, would stop you from filing claims for $200, $300 medical bills?â
Hermanson, perhaps betraying an industry fear that opening the door to a dollar would ease the way for further hikes, said âThereâs always a need for increased funds and at some point it becomes less practical to continue to pay for those fees.â
âSo you would weigh that one dollar against the ability to provide legal services for the poor people of Nebraska?â asked Williams.
âNo, certainly not,â she replied.
âBut thatâs what your testimony is.â
âMy testimony is that the legal services fund, weâre not disputing that itâs needed,â said Hermanson, âjust that maybe thereâs a better way to do it than increasing the court cost.â
Ultimately, CMSâs efforts to halt the bill were unsuccessful. On a 40-0 vote, the bill passed the legislature this month and was quickly signed by the governor. But Morfeld said, âItâs really been eye-opening. I think we have a broader problem.â
ProPublicaâs review of court data across several states suggests a relationship between court costs and the number of collection suits filed.
In 2013, Cook County, Illinois, which contains Chicago and has a population of over 5 million, had about the same number of collection suits as Nebraska with its population of fewer than 2 million. That year, it cost $172 in Cook County to file suit for the sort of small amounts that predominate in Nebraska, where the fee was $45.
Not surprisingly, lawsuits over debts of a few hundred dollars are extremely rare in Cook County. The typical collection suit in 2013 sought around $3,000, according to ProPublicaâs analysis.
In fact, suits for a few hundred dollars are generally rare. Debt buyers, for instance, usually donât file suits for debts smaller than $1,000 due to the costs involved in suing, said Jan Stieger, executive director of the industryâs trade group, DBA International. Debt buyers, which primarily purchase defaulted credit card accounts, file more collection suits nationwide than any other type of company.
Some states, like Missouri and New Jersey, have filing fees comparable to Nebraskaâs. But even there the rate of suits, when adjusted for the population, was still substantially lower.
Kuehnoff of the National Consumer Law Center said the volume of suits in a state is also a reflection of how easy it is to sue. Nebraska has a number of collector-friendly policies, such as looser standards for serving debtors with a lawsuit. Tougher standardsâsuch as requiring collectors to serve defendants personally with a suit or provide more documentation of debtsâcan decrease the number of suits and make the process fairer to consumers, she said.
In February, a federal judge deemed CMSâs practices unfair, siding with the plaintiffs in a class action lawsuit against the company. CMS, ruled U.S. District Judge Joseph Bataillon, had deceived consumers with its collection suits by wrongly claiming interest and attorney feesâcharges that CMS adds to debts and keeps for itself. CMS agreed to settle the class action this month, but the settlementâs details remain under seal.
In his ruling, Bataillon wrote that the extra charges were just one part of a process that can be bewildering for defendants, who are very rarely represented by an attorney.
âWithout any special knowledge of the law, a layperson could not figure out, on the face of the collection complaint, what the claim was for or to whom he or she was indebted,â he wrote.
CANâT AFFORD TO GET SICK
To get a sense of who is affected by collection suits in Nebraska, ProPublica reviewed 100 randomly selected cases where a collection agency had garnished the debtorâs pay or bank account. Most of the debtors were lower-income: more than half earned below a rate of $30,000 a year.
âI have to work two jobs just to try to make ends meet,â said Robin Kerr, 55, of Norfolk, a city of about 24,000 in northeastern Nebraska. Kerr has been sued four times, three times by CMS, and in each case, the agency sought to seize a chunk of her wages at Burger King.
Most of the suits we reviewed sought less than $700, and 40 sought less than $500. Four of the suits, all filed by CMS, were for under $100. In one case, a $66 chiropractic bill transformed into a $275 court judgment after court costs, attorney fees, and interest were tacked on.
The vast majority of suits were over unpaid medical bills: the providers ranged from rural hospitals to the largest in the state, from specialists to family doctors. Debts from multiple providers were often combined in the same suit, even bundled with non-medical bills.
The suits sometimes came quickly, in some cases only three months after the provider sent the patient a bill. That speed is in contrast to recent national reforms meant to protect consumers from being penalized for medical billing errors. Last year, the three main credit reporting agencies announced a new 180-day waiting period from the time a medical account is created until it can appear on a patientâs credit report as in collections.
But in Nebraska, said legal aid attorneys, once an account is sent to a collection agency, the patient has little hope of sorting out a billing issue. Instead, collection agencies often give them the option of paying in full or facing a lawsuit, they said.
THE ONLY ESCAPE: BANKRUPTCY
Tanya Glasgow, 39, has had health problems for years, at one point requiring surgery to remove her gallbladder and recently suffering from epileptic seizures. Making matters worse, sheâs gone for stretches without health insurance, which sheâs struggled to afford. She has two teenagers at home and a third child in college and works the graveyard shift at a nursing home for $18.50 an hour.
Glasgowâs tried various strategies for dealing with her medical debt, which she estimates at about $20,000, but any plan can suddenly fall apart. âIâm paying on three of them and then the fourth one sues me,â she said. Sheâs been sued five times, four by CMS.
The worst blow came last fall. CMS had filed its third suit, a bundle of radiology and emergency room bills, for over $1,000. A week after obtaining a judgment, CMS moved to garnish her pay. But the same day, CMS also filed to seize funds from her bank account.
The action froze Glasgowâs account and secured the entirety of what she owed under the judgment, $1,315. But because it took several weeks for CMS to actually receive that money through the court, CMS allowed the garnishment of her wages to continue.
Glasgow said she struggled for two weeks to put food on the table. But when her paycheck arrived, it was short $226, because CMS had taken money she no longer owed. CMS garnished her next paycheck, too, before the case was finally closed.
Glasgow said she had to call both the court and CMS to get her money returned, and then CMS took more than a month to do so.
The experience convinced Glasgow it was time to pursue something sheâd put off considering: bankruptcy.
Itâs a step that wouldnât be necessary if she lived in a state where lawsuits over medical debt werenât so common, she said.
âThe amount of stress this has brought into my life has been almost unbearable.â