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Falling into significant, overwhelming debt can be one of the most terrifying and bewildering experiences of your life. Unbelievably, it can get worse.
Collections agencies can (and often will) sue you for the outstanding debt that you owe, demand repayment or seek a court judgment that forces you to deal with the debt on their timeline and their terms. Most likely, these collection agencies are not even your original creditors. It is likely that they purchased your outstanding debt from your creditors at pennies on the dollar and pivoted right to harassment and lawsuits to try to strong-arm you into paying.
If you thought your creditors were a hassle to deal with, then you'll be in shock at just how aggressive, underhanded, and severe these collection agencies can be. They have few qualms about bullying you into paying up, no matter what your individual financial circumstances might be.
When they serve you with a lawsuit, things get worse. Maybe you have been putting off paying back your debts. Maybe you really can't afford to do much about your debts. In the face of a lawsuit, none of that matters; you need to figure out how to deal and you need to do it fast.
That's scary; however, here's what your debt collector doesn't want you to know: not only is it possible to make the entire lawsuit go away, but you may even be able to turn it around on the debt collector We're not saying that's definitely going to happen to you, but it does happen.
Better yet, the strategies for pushing back against a debt collection lawsuit are relatively simple and commonplace. If sued by a debt collector, here's what to do.
1. Do NOT Ignore the Lawsuit
When faced with a reality that we find disagreeable, one of our first reaction is usually to ignore it. We don't necessarily eliminate it from our memory and forget that anything ever happened; we just refuse to deal with it.
If sued by a debt collector, ignoring the lawsuit is the absolute worst thing you can do. If you want to have any chance of reaching a favorable outcome, then you need to face up to the lawsuit and respond.
If you’re officially served with a lawsuit and you fail to respond, the lawsuit doesn't go away; the suit will still go to court. Without a response from you, the court will most likely award a default judgment in favor of the collection agency.
Once the judge enters that default judgment, your options for dealing with your debt lessen while the power of the collection agency to collect your debt gets stronger. With a favorable judgment on its side, the collector will likely gain the ability to garnish your wages, take money directly from your bank account, and even force you to pay for its court costs. Even worse, you'll probably lose the ability to dispute the debt in the future, locking you into whatever the debt collector decides to do.
For all these reasons, it's in your best interest to respond to the lawsuit. Even if you do owe money, you should probably still deny liability in the response. We'll get into that next.
2. Do NOT accept liability
If you're a good, honest person, then you might be hesitant to file an official response to a debt collection lawsuit denying liability for money that you do indeed owe. Denying liability is the key to fighting your debt collection lawsuit to the end. If you accept liability at the outset, then you're admitting responsibility and you won't have much luck in court.
Challenging the lawsuit isn't the same as denying that you ever borrowed money. The most common challenge, in fact, isn't a challenge to the debt itself. It's a challenge to the debt collection agency's "standing." Its standing is its right to sue you.
You might be surprised to find out that, despite the fact that the debt collections industry deals with large sums of money and many different financial institutions, your debt collectors can be sloppy behind the scenes. Collection agencies make their money by buying debt in bulk for pennies on the dollar from creditors and then trying to collect as much of it as they can en masse. Despite what it may have told you when harassing you, it's probably not laser-focused on your debt.
Because of this, it may back down immediately if you formally challenge its standing to sue you. It may instead offer you a much more favorable settlement or drop the issue entirely. Tangling with you in the legal system simply isn't in its best interest.
If it doesn't back down, it still might not have the evidence to actually defeat you in court. To a judge, evidence and documentation are everything That being said, your debt collector needs to prove comprehensively that it owns your debt and has the right to sue you for it. Quite often, the evidence simply isn't up to the legal standard.
That's because, among other things, the debt collector has to produce the proper "chain of custody" paperwork that shows that it obtained the right to sue you over your debt properly. Since debt can change hands so many times before you ever actually face a suit over it, proving proper custody in a legally binding way can be extraordinarily difficult for many collection agencies.
Aside from improper documentation, you may be able to raise other defenses. Lawsuits have been defeated on the grounds of mistaken identity, past bankruptcy, fraudulent charges, and other circumstances.
More often than not, the best way to defeat a debt collection lawsuit is simply to ask the debt collector to show you (and the judge) the evidence.
3. Do NOT assume that your debt lasts forever
Past the burden of evidence, you have another legal requirement that you can use to defeat a debt collections lawsuit: the statute of limitations.
That phrase might sound familiar if you're a fan of crime TV shows and cop dramas. The statute of limitations is a time limit that states how long an entity has to take action in a particular situation. In the case of your debt, the statute of limitations is how long debt collectors have to bring forth a lawsuit for your debt. If it's outside of the statute of limitations, then they have no legal right to sue you.
Despite this fact, debt collectors sue people whose debt is outside the statute of limitations all the time. They rely on the fact that so many people either don't know about the statute of limitations or don't respond to the lawsuit, which allows them to win a default judgment from the court and take aggressive action to collect your debt. While the Federal Trade Commission has taken steps to crack down on this kind of dubious legal action, it still happens.
If your debt collector has sued you outside of the statute of limitations on your debt, then you have an easy out when you go to court. All you have to do is prove that your debt is outside the statute and the judge should drop the case more or less immediately.
The statute of limitations on debt varies from state to state. Generally, it falls somewhere between three and seven years since the last activity on your account. That date should be marked somewhere on your account or on your credit report.
If you're trying to wait out the statute of limitations on your debt, you should know your rights and be careful. In particular, you should know that, if there's any activity on your account, the clock resets. If you make a payment or even make the promise of making a payment, the timeline may go back down to zero.
4. Do NOT let yourself be a victim
When you face a lawsuit, it can feel like the law is stacked against you, but that's not always the case. In fact, there's a law in place to ensure that debt collection occurs in a (relatively) ethical fashion: the Fair Debt Collection Practices Act. If you find that your debt collector has violated the FDCPA, you may have grounds for a lucrative countersuit on your hands.
The most common way that debt collectors violate the FDCPA is by constantly calling you and harassing you to pay your debt. No exact number of calls qualifies as harassment, so it's up to the courts to decide if the collector has broken the law. If you feel like you're facing harassment, keep track of when your debt collector calls and save any voicemails it leaves you.
Other rules govern the timing and content of debt collection calls. Collectors can't call before 8 A.M. or after 9 P.M. without your permission, or call you at work if you tell them to stop. They may contact third parties to locate you (such as family and friends), but they can't reveal how much you owe. They definitely can't threaten violence, use obscene language, or state that they plan to sue you, garnish your wages, or nuke your credit rating unless they already have the legal authority to do so (and if they haven't taken you to court already, they probably don't).
Debt collectors might also fail to send the legally required written notice of your debt. If they don't send a written notice that spells out the amount of your debt, the name of the original creditor, and a statement that tells you how you can dispute the debt, they've broken the law.
Debt collectors also tend to inflate the amount of debt that you owe. While they're legally entitled to charge interest, they can't exceed the limits of your original contract. That said, they could get greedy, assume that you won't check their math, and bump up the amount they're trying to collect. That's illegal.
If any of the above abuses have happened to you, then it's in your best interests to speak to a lawyer.
5. Do NOT assume that you can't afford a lawyer
Many people are hesitant to contact a lawyer when threatened with a debt collection lawsuit. They might assume that they can't afford a lawyer, or they simply might be embarrassed by their situation. If you plan to fight the lawsuit, it's worth it to speak to a legal professional.
Many lawyers offer free consultations where they'll sit down with you and review the legal merits of your case. If they don't think that you have a good case, they'll say so, and you won't pay a dime. If they decide to take on your case, they may not require you to pay fees unless you win money back from your debt collector. Better yet, they may even be able to get the debt collector to pay their fees, meaning that not only do you win your case, but you also get to hit the debt collector right in the bottom line.
Remember that while it can be satisfying to beat a debt collection lawsuit, it's better to manage your debt so you never have to deal with a debt collector in the first place. If you're struggling with debt, we urge you to give us a call at National Debt Relief for a consultation with one of our experts. We've helped scores of people get out of debt; just read our reviews.