Three Weaknesses Almost Every Debt Collector Has and How to Use them to Win

Three Weaknesses Most Debt Collectors Have

For a free copy of this article in PDF format, click here: Three Weaknesses article

Debt collectors tend to buy debts in large quantities (called “tranches”) at a cost that varies from 25 or even 50 cents or more per dollar of “nominal” debt owed (that is, how much the documents say you owe) all the way down to small fractions of a cent per dollar of nominal debt. The price depends on various risk factors, including the date of the debt, how many other people have owned the debt, and so on. As a general rule, the older the debt, and the more owners it has had, the less a debt collector pays for them.

Most of the debts tranches are sold at auction, so there is also a competitive factor, although considering the amount of debt that exists, this can’t be very significant. We have written extensively about the contracts that control the terms of these auctioned debt sales, because getting this contract can be extremely helpful in defending against a debt lawsuit. Members, See, Assignment Contracts, Holy Grail for Debt Defendants.

Most debt collectors bug the people who supposedly owe the money and collect as much as possible before bringing suit, but they can simply bring suit immediately. In any event, when they file lawsuits, they tend to file them “in bulk” often filing fifty or a hundred suits at a time in the same court.

Most of the people they sue do not fight back.

Because the price of the debts is often so low and so many people don’t respond to lawsuits against them and give up a default judgment, the debt collection business is mainly not designed to fight a determined opponent, and it rapidly becomes uneconomical for them to do so.

This gives ordinary debt defendants a tremendous advantage if they know how to defend themselves and where to focus their efforts. Our materials are designed to help you fight back intelligently, and our Three Weaknesses Report will show you where to focus your efforts in most cases against the debt collectors. You’ll have to do some work both to figure this out and to apply it to your case, but it will take much of the work out of your defense and give you a shortcut to victory.

The Weaknesses

The weaknesses debt collectors share all come from the carelessness that handling cases in bulk with an absolute minimum amount of individual time spent on them brings. There is very definitely a “factory mentality” among the debt collectors, and individual time is by far the most expensive part of the collection process for them.

This factory mentality pervades the process from top to bottom and infects sales of debts between the debt collectors. Remember, none of these weaknesses are “magical” or “secret.” They are simply the inevitable result of a process which focuses so much on bulk purchases and processes that rarely get tested by defendants. The debt collectors tolerate problems that can be fatal to their case in individual cases because most people don’t attack the problems.

No Adequate Bill of Sale or Chain of Title

We tell you specifically what to look for to know that the debt collector has this problem, but many debt collectors can’t seem to show an adequate bill of sale that proves they own the debt.

A related problem occurs when the debt has been sold more than once. In that situation adequate proof of every transfer is necessary. And when the debt has been sold more than once, the debt collector is almost never going to have what it needs to prove its right to sue you. The Report shows you what questions to ask in discovery to get proof of the problem, how to show it to the court, and give you case authority for the position you are going to take. The bottom line, though, is that the debt collector will often fail to prove actual ownership of the debt. Without that, it has no right to sue you.

Hearsay and the Business Records Exception

Debt buyers buy debts from other people who created and kept all the records of the debt. They almost never get what they would need to introduce these records in court properly. We explain the rule against hearsay in the report and show why the debt collectors’ efforts to avoid that rule not only should not work but actually probably amount to a violation of the Fair Debt Collection Practices Act (FDCPA). We give you cases and arguments, and we show you how to get what you need to prove your case.

No Contract

Debt collectors rarely bother to get the credit card contract or application for which they are suing you. They say they don’t have to, but…

We’ll show you why they usually do need to have that proof. Again, we give you the case law and show you how to find the debt collector’s weaknesses through discovery. And we also show you how to deal with the most common way debt collectors try to avoid the huge problem not having a contract can often bring: the “Account Stated” claim.

Conclusion

As we’ve said, almost all debt collection cases share these weaknesses, and you can usually kill their case with the information in this report. You will need to do some research to make it just right, and you will definitely need to understand the arguments, but this report will take you a long, long way towards beating any case brought by a debt collector.

Your Legal Leg Up

Your Legal Leg Up is dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. Lawsuits have a number of points where specific action is called or, and we have products to help you deal with most of these situations. We also have memberships that give you access to more materials and better training, and also provide a regular opportunity to ask questions and get answers in real-time. You can use this time to find out what the debt collectors are trying to do and what you might do in response, and you can get guidance on the issues that matter and how to think about and address them.

In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many others are available to everyone. Every page has a site search button in both the header and footer.

Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Products Related to this Article

This article is largely a promotion for the Three Weaknesses Report. You can buy that directly if you’d like by clicking here: Three Weaknesses Report. Or you can join us and receive the report for free as a special bonus for joining.

You may be reading this article because you are being sued. If so, the first question to address is whether or not you have been properly served with the suit. We have two ways of helping there. You can use our Case Evaluation product for a quick evaluation of the legal issues presented by your suit, which will include a discussion of the way you were given it, or “served.”

A second way would be to join us as a gold litigation member or above and ask about it at a teleconference for free.

If you are satisfied that you were properly served, you should consider our First Response Kit. It is designed to help you consider significant early issues and to commence the process of defending by answering the suit and beginning discovery. Of course we also believe that a gold litigation membership will help a lot at this stage and beyond, and not only will you get to ask unlimited questions about your own suit, you will also receive a discount on the price of any products you need

Memberships

Members get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences. This gives invaluable real-time assistance, answers to questions, help with strategies, and encouragement. You also get the Litigation Manual and the Three Weaknesses Report for free with membership. Find out about memberships by clicking the “About Memberships” link in the menu at the top of the page.

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Is Pro Se Debt Defense Hard?

Is Pro Se Debt Defense Hard?

For a free copy of this article in pdf format, click here: is pro se defense hard

How hard is it to defend yourself from the debt collectors?

You would think that wouldn’t be a very difficult question to answer, given that the business is largely automated and conducted by people who all want one thing: your money. And yet the answer can vary because all litigation is a fight, and how hard you will have to fight depends on a number of factors you can’t know ahead of time.

Still, with that said, the difficulty is mostly psychological. It can be scary at first, but if you do the things that need to be done one at a time, it isn’t that hard. And you have a great chance to win.

The Factors

The first, most important factor in determining how hard it will be to fight the debt collectors is probably YOU.

Courage

I often say that debt collectors “aren’t the sharpest knives in the drawer” when it comes to legal work. They could be, but they aren’t, because lawyering as a debt collector rarely requires legal expertise beyond a very basic level. For the most part, they file suits and collect judgments – it requires the expertise of a bully walking up and down a beach kicking sand in the face of people who don’t look like they’ll fight back.

The bully’s expertise is in choosing victims and scaring them, not in fighting them, and debt collectors are the same way. The first, most difficult, step is to get up and fight. It doesn’t take that much effort, but it’s the hardest thing you’ll do.

The Debt Collector

The next biggest question is what kind of debt collector do you have. Many of them have no interest in fighting the case at all. I don’t know what the percentage of debt collectors is who are like this, but it is surprising how many of them will drop the case if all you do is answer the petition. They don’t show up, and the court dismisses their case, just like that.

Most of them have more fight than that, but as I say, you’d be surprised by how many walk away as soon as you answer the petition. They’re only interested in the absolute easiest pickings, and when you answer, you aren’t that. They go away.

The others have some point to which they’ll go. It appears to me that lines typically get drawn near the following events:

  • You answer
  • You file counterclaim
  • You serve discovery
  • You pursue discovery
  • You file motion to compel
  • You file motion for summary judgment
  • You defend against their motion for summary judgment
  • You show up for trial

Each of these steps is one step further along, of course. What may not be so obvious is that each of these steps involves a decision on their part to spend money and time on your case. It isn’t the fact that time is passing, it’s that you’re making them spend money on your case.

Why is That?

When debt collectors purchase your debt, they do so at a small price, and they can file suit remarkably cheaply – that’s their business. By the time you’ve been served, they’ve “sunk” these costs of doing business into your case. Their goal is not to spend any more, but simply to pick up a default judgment and send it to the people who look for your money or try to harass you into paying it. Low wage earners. It works this way 80 – 90% of the time.

Every time you make the legal department take some action, though, you are making them pay high wage earners, and you are making them pay for something they didn’t expect to pay. AND you are making them pay something that wasn’t already a sunk cost. You are costing “extra.”

They don’t like this, and for good reason. A dollar spent chasing you is much, much less efficient than a dollar chasing the 80-90% who give up. And when they spend NEW money to chase you, they have to worry more about whether they’re going to be able to get the money out of you. It’s one thing to get a judgment, but a different thing to collect it. And they’re very aware of that difference.

Almost all debt collectors have a line beyond which they will not go. The sooner you make them think they’ll have to go past that line, the sooner they will drop the case.

Notice I haven’t even mentioned the possibility that you could win the case. They don’t worry about that much, but if you can make them worry about it, that will push all but a tiny fraction of them to the point where they drop your case. It’s not “weakness” on their part or laziness or any other bad quality. It’s business.

So that Brings us Back to you

The question is, how hard is it to make them go away? You will have to learn how to do things up to the point they give up. It might be just learning how to answer, and that is very, very easy. It might be putting discovery requests together or pursuing the steps leading to a motion to compel. It might be filing or defending against a motion or two.

No one of these things is all that hard, and you will have time to learn as you go. You’ve probably heard the saying, “inch by inch it’s a cinch.” Well, I don’t know about “cinch” once you get past the answer, but it’s all manageable, and in the greater scheme of things it isn’t hard at all. And it pays you very well, depending on how much they’re suing you for.

It Isn’t Hard

So after all, it isn’t hard. You will need to learn enough to defend yourself intelligently at each step. It takes some effort, but mostly it’s the psychological effort to realize that you CAN do this and that you DESERVE to win for yourself.  The more you do, the more you will realize these things are true, so you don’t even have to start with much hope of winning.

Eventually you will learn what you need to know. When you do, you’ll know they’ll never be able to push you around again.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Difference between Original Creditors and Debt Collectors

Debt Collector or Original Creditor

For a free copy of this article in pdf format, click here: difference between original creditors and debt collectors

We used to face a simple either/or question in debt defense. Were you being harassed or sued by the original creditor? That’s the person who allegedly lent you the money in the first place. If so, you were dealing with a person who had better rights against you – but some concerns over public perception that could help you. If it was a “debt collector” who had bought the debt from someone else and had nothing else to do with you, you had better rights and a better chance of winning.

Various things have blurred the line somewhat, but it is still worth keeping the distinctions in mind. There are now really three important categories to consider: original creditors, debt buyers, and “debt collectors,” and the last two categories overlap to some extent.

How Debt Arises

Debt can arise in a number of ways. If you buy a club membership, for example, and then stop paying on it, the club is the original creditor. If you stop paying, the club will bug you for a while, and then they may send the account to a debt collector to bug you some more. Eventually, they may sue you or sell the debt to another company. Whatever they do directly to you, however, they must worry about their reputation in the community, and harsh collections might reduce their sales.

This concern, that they needed to have – about reputation, was considered a check on their debt collection practices. The legislature thought that was enough protection against the worst abuses.

Debt Collectors

Debt collectors, by contrast, lack that relationship with the consumer. Their only client is the creditor company or, if they have purchased the debt for themselves, their only loyalty is to their own bottom line. Thus that protection from abusive collection practices was not there, and the FDCPA was designed to put it there.

The emphasis was on how the debt originated and how it came into the possession of the person bugging you. Thus for a long time we simply considered anyone who bought debts as a “debt collector.” Such people or companies had no need to protect their relationship with the public, and so the public needed protection from them.

Supreme Court

The Supreme Court has made things a little tougher for debt defendants by holding that debt buyers are not, by that fact alone, now defined as “debt collectors” under the Fair Debt Collection Practices Act. Legally, a company can be a “debt collector” under the FDCPA if its “principle business” is the collection of debts. But otherwise a debt buyer isn’t necessarily a debt collector.

This will protect some very bad people from consequences for some of their actions, and it will prevent many people from being able to get lawyers to protect themselves from debt lawsuits.

It will also complicate the way you handle your lawsuit against someone who may be a debt collector, since you will have to try to prove the company bugging or suing you is a debt collector. We have changed our model discovery to address that new reality, and if you’re being sued, you will need to take it into account.

New Reality

Unfortunate as the Supreme Court decision was, it’s now the law until and unless it gets changed. In the current political climate, that seems unlikely. So you must bear in mind some practical distinctions.

Debt buyers, whether or not they are “debt collectors” under the FDCPA, will have difficulty getting or using certain evidence in court. The distinction is very important in assessing your defenses against a lawsuit for debt. Debt buyers will likely face major hurdles from the hearsay law, and they won’t have the same records as an original creditor.

You will have more and easier counterclaims against those who are defined as “debt collectors” under the law, but you will need to conduct discovery specifically to prove that they are, in fact, debt collectors.

Original creditors will probably have fewer issues with hearsay and may or may not have many records. They seem to have fewer records and less control over their files than they used to, for whatever reason, so you will need to explore this in your discovery and defense strategy. And you will have a better chance defending against an original creditor than used to be the case.

Difficulty of Defense

It is not more difficult to defend yourself from one group than another. The legal process itself is basically the same. You have to do all the same things to defend yourself, from answering the petition to showing up in court, responding to discovery, and going to trial if necessary. But the content of the discovery as well as the process of the suit, will likely be different. The original creditors will be more reluctant to sue you, but will have more materials to support the suit. The debt buyers will be more willing to sue, but have less material to support their claim, and if you  can prove the other side is a debt collector, you’ll probably have a counterclaim.

Whichever you’re facing, you should defend yourself. We suggest our materials and membership if you’re ready to do that on your own.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

If Everybody Defended, What Would Happen to the Debt Collectors?

What would Happen if Everybody Defended Debt Lawsuits?

To get a copy of this article in pdf format, click here: what would happen

Sometimes people ask me what would happen if everybody defended against the debt collectors. Would they fix things and be able to move back to business as usual without a second’s pause? Would the courts let it happen? And what would happen?

A Matter of Scale

To answer this question, consider the scale – first we’ll talk about the national scale, but then we’ll
bring it down to one member’s recent experience, an experience I had many, many times while I was representing people in this type of case.

On the national scale, it isn’t clear exactly how many of these suits are being brought. But there is over a trillion dollars of consumer debt out there, and a lot of it is “troubled.” And that doesn’t even count duplicates or old debt. We’re talking about a gigantic business here. You can see that by the fact that on any given day in St. Louis County – in the middle of Middle America – there are several thousand debt cases pending. That’s one small county in a mid-sized state.

How it actually works

You know that debt collectors buy huge amounts of debt at a time for small amounts of money. They ship them out for collection. The collectors either bug you for the money or just bring suit – they can do either one. They file – I’m guessing here – over a million suits per year, maybe many millions.

They file them in every magistrate court, small claims court, district court… all over the country.

In St. Louis County (which doesn’t include the city), there are ten courts that receive the bulk of these
cases, and it is not unusual to see 400 cases set for one hour of one day in ONE court. I’ve been there on days where there were 800 cases set for hearing. In one court, at the same hour.

One Member’s Experience

Now to discuss a member’s recent experience. He said there were 400 cases in the court his case was set in. He sat there for an hour while ALL of them “went away.”

In other words, the people being sued all either gave up to the lawyer (out in the hall, so the plaintiff related that the case had been “settled”) or the judge, or by default. Of the 400 cases set that day, ONLY ONE person chose to defend. That was our member.

What if People Defended?

Now consider that court again. It handled almost 400 cases in a little over an hour – and then it went
on to other business. What if all 400 people had said “No” and opted to defend themselves?

That would mean that the court would have to set 400 hearings and listen to the arguments one at a time. If they went to trial, it would have to set 400 cases and spend, at a minimum, two hours on each one – a hundred long days.

In ONE HOUR, the court would find itself half a year behind schedule.

Or consider the ten lawyers who handled those cases. Suppose that, instead of giving up, everybody
engaged in debt defense. They asked for discovery, haggled over objections, demanded real proof
of their supposed debts.  In one hour, those ten lawyers would be a full year behind schedule. Instead of collecting $500,000 in judgments in an hour and shuffling those off to the machine to collect, they’d have to work a year for whatever judgments they got.

And they wouldn’t get nearly as many, either. Do you think they could keep doing that?

The System Would Simply Collapse

All over the country, the debt collection business would bog down and come to a screeching halt – the courts would have a backlog of cases two and a half years long after just one week.

I don’t think anyone knows what would happen after that.

If people being sued by debt collectors could just realize it, they’d see that they own the system. It all depends on everybody giving up. Stop giving up, and the debt business collapses. Every defense increases the burden on the system.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Conditional Acceptance and Other Bad Ideas when you’re Sued for Debt

What’s an Admission, and What’s an Answer When you’re Sued for Debt?

For a copy of this article in pdf format, please click here: Conditional Acceptance

Conditional Acceptance Is a Bad Idea in Debt Defense

One of my Youtube viewers told me about some trouble she’d gotten into with something she called “conditional acceptance.” The idea sounded like something she’d gotten off the internet, of course, and it sounded farfetched, but I thought that was all.

I should have known it was another scam going around.

A Little Background

As far as I know, it started with a lawsuit – a petition and summons were served on a woman we’ll call “Ms. Smith.” Instead of answering the petition or denying the allegations, Ms. Smith filed a “conditional acceptance” with the court.  Here’s what she said.

I, Ms. Smith, a living woman, conditionally accept the offer of [Law firm] and [lawyer], upon proof of claim that Law firm and Lawyer bring forth the original contract agreement between Ms. Smith and [original creditor] and contract between original creditor, Law firm, and lawyer, with all parties signed contracts and testify under oath.  If these contracts are not presented to said court, then I, Ms. Smith, a living woman, consider Law firm and Lawyer’s claim against me, Ms. Smith, the living woman, to be a false claim and subject to liability on the part of Law firm and Lawyer.  Please produce and or bring forth the bond for sending me a false claim.

Legal Effect of Conditional Response to a Lawsuit

Legally, Ms. Smith’s “conditional acceptance” was just noise. If you get served with a petition, you must either file an Answer that denies liability or some sort of motion. Failing that, the case will be ripe for either a default (if you don’t answer) or a judgment on the pleadings (if you don’t deny). A lawsuit is not an “offer” that can be accepted, it’s the invocation of legal process, a process that will end in judgment.

It appears that the court in Ms. Smith’s case took some middle ground and seems to have entered judgment for some reason that is still not clear to me.

I have hopes that whatever was done will come undone. If the court granted a judgment on the pleadings, I suspect this shouldn’t have been done without a notice and opportunity to be heard for Ms. Smith. Otherwise the whole thing should be treated as a default and subject to a motion to vacate, which should be granted in my opinion. What is clear from the pleadings is that Ms. Smith thought she was effectively denying liability. She wasn’t, but it was an honest mistake the court should allow to be undone.

But courts don’t always do what they should do by a long shot.

What is “Conditional Acceptance?”

In my research, I’ve run across some of the conditional acceptance “gurus” who think the way to defend yourself in court is by starting every sentence with a conditional acceptance – i.e., starting every sentence with the words, “I conditionally accept your offer to…” They actually called it a “mantra.”

One of the endorsement videos involved a woman who had been arrested for some sort of disturbance, it wasn’t clear what. The video showed her telling the judge she “conditionally accepted” his various offers, most of which were of course not offers but instructions. Then the video broke to a scene outside of court where the woman said she’d gotten off with paying a fine and court costs – jail time had been suspended. The Youtuber asked if she’d recommend the conditional acceptance training to others, and she said “yes.”

And that’s about as good as it gets.

What Law Is

Law is not magic, and lawyers and judges are neither magicians nor subject to magic. The law is a set of requirements that apply to people within the jurisdiction. Judges are supposed to apply those laws consistently over a host of circumstances, many of which were never foreseen. And lawyers are supposed to help their clients figure out what judges will do – or try to persuade judges to allow what their clients already did do.

All of law is really just an elaboration of those ideas. And of course applying that process to the vast number of laws and people that exist in our country.

Using “Magic Words” Only Hurts you

What do you think you’re doing by reciting a formula as a mantra? Legally, you aren’t doing anything good for yourself – you aren’t doing much of anything at all. But this is not to say you aren’t hurting your case, because you are.

The hardest challenge a pro se litigant faces is getting the judge to take what she says seriously, to listen to it and apply the law correctly rather than, as they all too often do, habitually.

You want the debt collector to have to prove its case, and you want the judge to see that it can’t. That means you need the judge to pay attention to you. When you start every sentence with a formulaic mantra, do you think the judge will listen to you? Would you listen to someone acting like that towards you?

The judge will not listen to you if you start every sentence with a phrase you think will have some magical effect. The judge will think you’re an idiot and do what the debt collector asks him or her to do.

Contract Law

I have spent considerable time looking for some basis in legal reality for the conditional acceptance notion. It is apparently some illegitimate offspring of contract law, but there is simply not enough there to refute in legal terms. Psychologically, it would seem to draw from some idea that you can get an advantage by not straightforwardly denying or rejecting something, but instead by modifying it with a “conditional acceptance.”

In law, you get no such advantage, and in court you will be crushed if you attempt to use the phrase to get one.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Memberships

We have quite a few products that will help you with specific issues (you can find them by clicking on the “products” button in the top menu of every page on the site), but most people should consider starting with a membership.

Members get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences. This gives invaluable real-time assistance, answers to questions, help with strategies, and encouragement. You also get the Litigation Manual for free with membership. Find out about memberships by clicking the “About Memberships” link in the menu at the top of any page on the site.

Sign Up for Free Information

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Why It’s Hard to Find a Good Debt Lawyer you can Afford

Why it’s so Hard to Find a Good Debt Lawyer you Can Afford

For a copy of this article in pdf form, click here: hiring debt lawyers

What Lawyers Need to Charge for Debt Defense Work

In this article we talk about what lawyers need to get in debt cases and why you probably can do better by defending yourself.

I hear lots of different numbers from members who have tried to get a lawyer to represent them in debt cases – there’s no telling exactly what number you’ll hear if you talk to a lawyer regarding your specific case. Probably big. That isn’t necessarily wrong or a rip off in any way – it just reflects some underlying financial realities.

Law is a Business

Most debt lawyers who represent defendants are in it for ideological reasons – this is a type of law where the lawyers choose sides and pretty much stay on them. And as you should know, it pays much, much better to be on the side of big rich corporations than it does to represent the people they’re after. There may be some firms that have managed to automate and mechanize the defense process to such an extent that they can do a good job and make a bundle, but I haven’t seen or heard of them.

As far as I’ve ever seen, representing debt defendants is a very tough business. How does that translate into daily reality?

Daily Realities

First, an established lawyer needs to bill about $150 – $200 per hour. I know that seems like a lot,
and it is a lot, but you don’t just get a lawyer for that money – you get an office and a staff. Or to put it slightly differently, the lawyer has to hire those people and pay for those things out of what she charges you.

When a lawyer takes a case, and “appears” on your behalf in court, it often isn’t easy to “withdraw” from it later if, for example, you don’t pay your bills or if the case goes in unexpected or disastrous ways.

That means the lawyer, as a practical matter, has to charge you up front at least enough to make the case pay, taking his best guess where that case may go. And then hope for the best regarding whatever else you may come to owe. Hence a high retainer – often particularly high in debt cases because… let’s face it… you’re being sued because someone says you didn’t pay your bills.

Uncertainty

Then there’s the uncertainty regarding how much time the case will take – good lawyers often have lots to do, and lots of choices. Taking one case can mean NOT taking another one. A debt case, with relatively low amounts at stake, can be low on the totem pole of priorities.

The Duty to Make Fees Reasonable

The amount at stake – no matter how much you think your case is big – is small for most lawyers, and that raises an ethical issue. Lawyers are supposed to keep their fees somewhat in line with the results obtained.

Does saving you from a $25,000 debt justify a $10,000 bill? Maybe – although if you could afford the $10,000 you probably wouldn’t be being sued. What about a $7,500 debt though? How much fee is justified there?

The average lawyer is caught between a rock and a hard spot in debt cases, because doing a good job takes time. If it’s a big debt, it might allow more time, but getting the fee could get tough. If it’s a small debt, it won’t justify the fee.

And then there’s the learning curve. Most lawyers don’t know debt law, and they don’t know how much they don’t know. The good ones know it could take some time to catch up, but how do they charge you for that? That’s easy to do in a corporate merger involving millions of dollars, not so easy in a debt case where you’re sweating bullets over ten thousand in possible liability.

The bad ones don’t worry about catching up. But you’ll obviously pay for it one way or another, right?

Leverage

We just came out with a product – the First Response Kit – that includes an Answer and a first set of discovery – interrogatories, requests for documents, and requests for admissions. That took about ten hours to create.

Your Lawyer Works One Case at a Time

A lawyer working on your case would probably charge, or want to charge, around $1,500 – $2,000 for doing that. Or would have to do a less thorough job. And that’s just one small example of the way the business works. Every time someone has to show up for your case or do any work on it, someone has to pay.

Or Maybe a Little More

If the lawyer can take a large number of cases, he or she can achieve some economy of scale – that is, can divide the cost of showing up among all the clients who need it on a given day. But it’s tough, and very rare, for anyone to manage this.

The Debt Collector’s Lawyer Works a Hundred Cases at a Time

The lawyer suing you shows up on a hundred cases at a time. That’s because he filed those suits, and it doesn’t matter whether the people being sued want to show up or not – they’re in the case because he put them there. The debt defense lawyer, on the other hand, is representing only voluntary clients. When I was practicing law, I’d send people letters suggesting, more or less, that they hire me. I got a 3–5% call-back rate. That is, only 3-5% of the people I sent letters to even discussed the suit with me.

A union-paid lawyer I knew offered all union employees being sued for debt free representation. And under his circumstances, he could tell them he’d get them off every time. He got a 1% return on his letters.

That meant the debt collector’s lawyer could work 100 times more efficiently at the early stage of a lawsuit.  As the suit wore on, some of that advantage went away, but they never lost it all. And that advantage translated into every document created, every argument made, and every appearance at court throughout the lawsuit.

And that’s why it’s so hard for you to get a good debt lawyer at a price you can afford. Your lawyer is always fighting against a lawyer who can charge less to do more for his or her clients.

There Is a Happy Ending

As uneven as the process is in terms of hiring a lawyer, there is another way. You can represent yourself.

Sure, you have challenges, from scheduling for hearings to learning a bunch of new stuff. But you don’t have to make $200 per hour or worry about cutting corners to justify what you charge. You get the full value of your work, and it is often worth much more than $200 per hour.

And when you make the other side work, you know you’re making them worry because someone is paying their lawyer that $200 per hour.

Of course you want to do a good job, but because the case is worth the full value to you, you can take the time to do a good job. If the time comes when you decide it isn’t worth fighting anymore, you can stop. You’ll lose the case if you do, mind you, but it’s your choice, while a lawyer representing you wouldn’t have that choice and thus must charge you to prepare for the possibility of being stuck in a case.

All you need is a little help doing some of the new stuff that you don’t understand, and you can get that help from us.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Don’t be a “Verification Sucker” – When You’re Not in Kansas Anymore

When a debt collector sues you as the first thing you hear from it (they can do that), this does not give you a right to dispute and require verification. Your rights are through the legal process, and you must answer the petition or you will be defaulted. Sometimes debt collectors use people’s confusion over their rights and do things which suggest you could dispute the debt. This video discusses your rights.

You would be amazed how often people ask me whether they should “just send a verification letter” to the company or law firm when they get served with a debt lawsuit. Or as one person put it, “now that I’ve called the court to tell them I object, should I just send a verification letter? Or was that enough?”

No. It wasn’t enough – it wasn’t even anything at all.

Dispute and Verification

Click here for a copy of this article in pdf form: Don’t be Verification Sucker

Let’s take a quick step back here and review some facts and some rights.

When a debt collector first contacts you regarding a debt it is attempting to collect, it is required by law to provide you certain information. If the contact is not in writing, it must send you a notice in writing. If the contact is in writing, that contact must contain a notice. That notice must inform you of the debt collector’s identity, the nature and amount of the debt in question, and your right to dispute the debt and require verification. People often refer to this notice as the “verification letter,” although more properly it’s a notice of the right to dispute the debt. If you dispute, they must verify the debt before attempting to collect again, and you have thirty days to dispute the debt.

If they don’t want to attempt to collect again, they don’t need to dispute. It’s a law supposed to prevent continued attempts to collect on an unverified debt.

A Lawsuit is NOT a First Contact

If you’ve never heard from a debt collector, can they sue you for a past due debt? And if they do, must they give you notice of your right to dispute? Yes. And no. They can sue you without first bugging you for money. If they do sue you, the lawsuit is NOT a contact that triggers your right to dispute and verification. That’s what the Fair Debt Collection Practices Act (FDCPA) says, and the reason for that is simple: you’re in the court system and play by court rules once a lawsuit gets filed.

You Must Answer

And the court rules are that once you get served with a lawsuit you must file an Answer (or other “responsive filing” – a motion to dismiss, for example) or you will be in default. Put another way, if you don’t respond in court with an Answer denying liability or a motion to change or get rid of the lawsuit, you will lose. The lawsuit changes the rules, and you “aren’t in Kansas anymore.” [That’s what Dorothy says in the Wizard of Oz when all the weird things start happening.]

Don’t be a Verification Sucker

The debt lawyers know the rules very well, and one would like to think that it’s only an “excess of caution” that causes them sometimes to print the FDCPA language on their lawsuit. But given the fact that so many people have sent dispute letters instead of answers, and the fact that the debt collectors KNOW this, that might be naïve.

What I’m here to tell you is that whether or not such language is on your lawsuit, YOU MUST ANSWER THE SUIT or face a default judgment. Don’t be a sucker – file an Answer or other responsive document within the time allowed by the rules of civil procedure. You must defend yourself in court – you’re not in Kansas anymore, and the FDCPA no longer applies.

A Little Window, Maybe

Litigation does not technically rule out the FDCPA entirely, just the “first contact” rule. It may be that the debt collector’s attachment of the notice to a lawsuit is itself a violation of the FDCPA, as it may be an attempt to sucker you into seeking verification instead of answering the lawsuit. It might be an unfair attempt to get a default judgment. I have argued as much before. That might give you a counterclaim to their lawsuit.

And if you have sought verification rather than answering, and they got a default judgment, you should certainly consider moving to vacate that judgment either on the basis of that deception or your own confusion. The courts favor judgments on the merits rather than technicalities, so there’s a very good chance such a motion to vacate, if filed in time, would work.

But these are not exceptions to the rule that you must respond to the lawsuit in court. If you get sued, the FDCPA no longer applies in that way. You must respond or they will get a default judgment against you, and the next you will hear about it will be when they garnish your wages or bank accounts. Don’t let that happen.

Disputing and demanding verification would be much easier, no doubt, but it doesn’t work at this point.

Don’t look for the “easy” way. Look for the RIGHT way.

 

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Library of Glossary Videos

Library of Glossary Videos

The videos on this page are part of our glossary and our efforts to make the public more aware of it. You will find a brief description of the videos and a link to the page on which they occur.
Click here for the Glossary.

Glossary: Introduction Video

Glossary: Assignment

Glossary: Business Records Exception Video

Glossary: Charge-offs

Glossary: Dismiss, Dismissal

Glossary: Small Claims Courts

Glossary: Statues of Limitations

 

The Best Defense is a Good Offense

Debt Law and Motions for Summary Judgment

Get a copy of this article in PDF format: Sometimes the Best Defense is a Good Offense article

If you’re being sued for debt, your case is going to head for a show-down on a couple of main issues. These will probably involve some billing records or some record-keepers wanting to testify. And these are primarily “legal” issues – that is, the facts may be clear and undisputed, and the judge might be able to make the important decisions in the case. When a judge does that by motion and before trial, it’s called a “summary judgment,” and the parties ask for that by filing a “motion for summary judgment.” You will want to consider trying this.

Before we get deeply into motions for summary judgment, let’s discuss the way cases develop, go away, or are decided. It’s really just one process after the case is filed and you’ve answered.

The Way Debt Cases Develop

First, the parties conduct discovery which aims to find out what facts are, indeed, uncontested, which ones are disputed, and what evidence there is in support of them. What this really means is, discovery looks for what you can prove about your case or their case. In debt law, you either want to prove it was all a horrible mistake (if that’s what’s going on) or that the debt collector cannot prove its case. Since most debt cases come from what were at one time legitimate debts, most debt defense boils down to an attack on the debt collector’s case. And you will have an excellent chance of winning.

In your discovery, you will probe for what evidence they have and how they plan to get it “into evidence,” i.e., into the court’s consideration at trial. (Incidentally, our Discovery Pack is designed to help you do this.)

As facts emerge, and as work happens and becomes necessary, the debt collector might decide to drop the case. In fact that often happens, and of course it often doesn’t, too. Sometimes the debt collector will try to shorten things up by motion for summary judgment, but more usually they just want to get to trial as quickly as possible. If they do either one of these things before you have conducted your discovery, there’s a good chance you will be snowed under. Thus you should do your discovery quickly.

You want to aim for the motion for summary judgment right from the time you file your answer. If it doesn’t work, well, you’re halfway to being ready for trial anyway, and you will have started talking to the judge about the issues that matter.

Now to talk more specifically about motions for summary judgment.

Motions for Summary Judgment

A “motion” is just the formal way you ask the court to issue a ruling of some sort. A motion for summary judgment is asking the court to find that all the necessary facts for a ruling in your favor have been established, and to grant you a judgment as to them. It’s possible to get a summary judgment about some parts of a case but not others (a “partial summary judgment” in legalese).  To end the case, you have to get a judgment on all of the claims.

What to Do

If you are being sued, you need to begin with the ending in mind. That is, right from the beginning you should think long and hard about what it takes to win your case. In debt law, the first big challenge most defendants face is to answer the petition – just to take that first step in defending yourself. If you’ve managed that, congratulations. Just by doing that you’ve given yourself a better chance to win than approximately 90% of the other people being sued. And in some cases, to be sure, that’s all you need – the debt collector may walk away right now. But in most cases they won’t.

So your next specific step is to start discovery – the sooner the better. And you should start discovery with the firm goal of finding and proving the things you need to win. We have a product that can help with that, but this video is about the next step following discovery: the motion for summary judgment.

In a way, it’s simple, although this is one time you should never confuse “simple” with “easy.” If they’re alleging a breach of contract, for example, you will discover that they must prove the existence of a valid contract, its breach (failure to pay as agreed), and damages. The burden of proof is on the debt collector as to each of these things, and they have to show it using admissible evidence.

In your discovery, you should have narrowed down exactly what they have to offer as proof. In the case of a debt collector this is usually documents created by some other person, usually the original creditor. And they may have documents or testimony by some of their own employees as well. This material is generally intended to try either to fool the court into believing the other evidence is admissible, or to pull it within the rules of evidence.

Your job will be to look at each bit of evidence and show why it cannot do what the debt collectors want it to do.

Filing a Motion for Summary Judgment

Of course this isn’t very easy, and there are significant procedural requirements, but going through this process increases your chances of winning dramatically in three important ways. First, if you can show your right to a summary judgment, you should win the motion and get the case kicked out. Before that happens, though, you will be putting the plaintiff to the expense and effort of responding, and if they think they will lose (and often even if they think they will win), they’d rather just drop the case than keep going. And finally, even if the court does not rule, or rules against you, you will have learned a tremendous amount about the law and begun the process of teaching the judge what he or she needs to know, improving your chances of winning at trial a lot.

There’s every reason to do it. You just need the energy and courage to try. We can help.

Product Information

Because much of this article involves taking action and creating legal document, we include an addendum of the products we have that can help. First, if you are at the beginning stages of your case and needing to answer (or otherwise respond to) the petition, our First Response Kit is designed to help with that. If you have already answered and need to start (or restart) conducting discovery, our Discovery Pack will help. The Discovery Pack is included within the First Response Kit, so don’t get both. If you are trying to force the debt collector to respond to your discovery, you may want our Motion to Compel Pack.

If they’re filing a motion for summary judgment and you are not ready to file a motion for summary judgment yourself, our Motion for Summary Judgment Defense Pack could help. But if you want to respond to theirs and file one of your own, you will want our Cross-Motion  for Summary Judgment Pack. And if they haven’t file a motion for summary judgment but you want to, that would be our Motion for Summary Judgment Offense Pack. Don’t get more than one of the MSJ packs.

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Members get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences. This gives invaluable real-time assistance, answers to questions, help with strategies, and encouragement. You also get the Litigation Manual for free with membership. Find out about memberships by clicking the “About Memberships” link in the menu at the top of the page.

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If you sign up, you will receive a series of videos and articles over the next few days designed to help you get a grip on debt litigation. Then we will occasionally send you information on new materials we have added to the site. This is rarely products and almost always new publicly available articles. You will not receive sales messages regarding other products, nor will we sell your information to any third party.