No Magic – Sometimes a Rain Dance is Just a Dance Part 2

Sometimes it just rains.

This is the second part of this article. Click here for the first part. In the first part we talked about how people sometimes get lucky in defending themselves from debt lawsuits, but that doesn’t make them “good” – it makes them lucky. The question is, how can you increase your chances of being lucky, too. Should you do what worked once for somebody? or do what has repeatedly worked for a lot of people in a lot of ways over time? The answer is obvious. The rest of this article talks about how you can be lucky, too.

How Debt Lawsuits begin

A debt lawsuit starts with a “petition” – although it is sometimes called a “complaint,” and there may be other names for it, too: it’s the statement that you supposedly owe the debt collector money, some legal reasons why the court should order you to pay, and a “request for relief” (also known as the “wherefore clause”). The debt collector files this petition with the court and needs no permission to do so. When they file it, the also get a summons.

Some courts let the debt collectors issue the summons, too, although technically it comes from the court. The debt lawyer, as an _ of the court, writes it up, a clerk stamps it (or they may come pre-stamped), and the power of the court – over the case and over you – has been invoked. The summons tells you when to be at court and what to expect (“default judgment for the amount sued upon”) if you fail to show up. In all courts of which I am aware, proper service of the summons, which can happen in several ways, is necessary for the court to have jurisdiction over you.

What the debt collectors know is that somewhere between 80 and 95% of people who are served will not show up in court. If you do show up, and the other side does not – you should immediately ask the case be dismissed, and many courts (perhaps most) will grant that motion. That would be lucky – but only if you were there and knew enough to request the court to dismiss the case, as absent the request the courts will often simply continue (postpone) the case until the next court date.

Assuming the other side actually appears for court as scheduled, your next step is either to move to dismiss the case or answer the petition. Check your rules to see what the rules of pleading are, and if the plaintiff’s case does not comply – and they almost never do in Pennsylvania, for example – you might file a motion to dismiss or its equivalent (Preliminary Objections in PA). Often enough they don’t comply in whatever jurisdiction you may be in, and a motion to dismiss can be a quick way out of the lawsuit. Or you file an Answer. Whichever action you take, the debt collector might choose to walk away from the suit at this point: as I have often pointed out, there are a lot easier people to chase than those who file bothersome Motions to Dismiss or Answers.

Discovery

Often the debt collector will not walk away at this point, so the next thing you must do is both serve discovery on it and answer discovery if they serve it on you. It is important for anybody to serve discovery on the other side first, but especially for pro se debt defendants: you would never believe the games the debt lawyers play – you want to see those games in action before you start responding to their discovery.

Sometimes the mere service of discovery drives the debt collectors away, but most often, of course, it does not. You will receive vague and unresponsive “answers” like “pursuant to national banking regulation, credit card applications need not be retained beyond a period of two years” (What does that say, anyway?) or “Plaintiff is conducting a search for records and will make them available to defendant as they come into Plaintiff’s possession.” It is the task of the pro se defendant to push past these objections and vague statements to discover what, if anything the debt collector has, and to force it to admit it has nothing more. This, of course, is the reason for a motion to compel. If you do that appropriately, the chance of the debt collector dropping the case is actually pretty good.

Not Bad Faith or Frivolous

Performing legal actions with no reason other than to increase the cost and effort the other side must undertake in order to win its case is “bad faith” in litigation. An action with no reasonable basis in law or fact is “frivolous.” Both of these sorts of forbidden actions and motives can create significant problems for a person caught doing them. None of the actions listed above, however, come anywhere close to these forbidden zones: they all accomplish purposes for which the discovery and pleading rules were designed. The motions seek to weed out unwinnable claims, and the discovery probes the other side to find out what, if anything, they have in support of their claims. Following this broad pattern, you are not only increasing the chances that they will walk away at any point leading up to trial, but you also increasing your chances of winning if the matter does go to trial.

Good Luck

Lawyers are constantly performing a balancing act, always deciding whether it is potentially more profitable to act in one way rather than another. This is not because lawyers are greedy – although many of them are, of course – but is in fact part of their ethical responsibility to act in ways which promote their clients’ interests. These interests are virtually always financial, and thus as you continue to defend yourself with skill, you raise the issue more and more insistently that the lawyer would be better off pursuing other claims. When your skill has actually pushed the lawyer to take the step of cutting you loose, you are “lucky,” and the debt collector drops its suit. If you have a pending counterclaim at this point, you can force it to do so “with prejudice.”

Credit Repair – Life after Debt

 Defeat the debt collectors in lawsuits, end debt problems, and repair and restore your credit.

If you have had debt problems and struggled to find your way back to stability, or if you are in the process of making your way back into stability, you almost certainly have damage to your credit report that is holding you back. And this is particularly true of debt litigation.

It may be hurting you in ways you don’t even know about.

Simply put, a good credit rating is the “key to the kingdom,” your way back to the good life you either had before or always wanted.

We here at Your Legal Leg Up don’t really encourage anybody, at any time, to borrow any money. Ever. But we do realize that not everybody shares that opinion. Even if you do, however, your credit rating matters in so many ways and affects you in everything from the rates you pay on your loans to whether you can get certain jobs and where you live.

A bad credit rating is like an invisible, but very heavy, tax on your hopes and dreams. Even if you are still in litigation, you should be taking steps to repair your credit and remove that tax.

Fix It

Credit repair – correcting and improving the information in your credit report, is possible and can be done by following a series of steps that is not too complicated or difficult. The Credit Repair Manual is designed to give you all the information you need to do this yourself as well as if you hired a company to do it for you. In fact, since the bureaus and information furnishers are not required to do some things for professional companies that they would have to do for you, you can do it better for yourself than the professionals can do it for you..

And save hundreds of dollars while you’re at it.

We Can Help

All you need is the right information and the willingness and energy to use it. We can supply the information better than anyone else.

Why You Can Probably Beat the Debt Collectors

(Even If You Couldn’t Win the Lawsuit!)

If you will stand up for yourself, you can probably make the debt collectors go away even if they could win the suit against you. (Which they usually can’t.)

Why?

Follow the Money

It’s all about money, right? They want to make money. That’s why they’re suing you. If you will defend yourself it becomes too expensive for the company to pursue the litigation against you.

Let’s Do the Math

Consider the question from the point of view of the debt collectors. They buy debt cheaply (very, very cheaply), file sut in large numbers, and win the vast majority of cases without a fight. In St. Louis County, the “call dockets” often have 300-600 defendants, most of whom are being sued by a handful of debt collectors represented by two or three lawyers. If it takes an hour or two for the lawyers to get one hundred judgments totaling (by my guess) approximately $400,000 to $1,000,000 dollars, that’s a pretty good hour’s work.

Now look at the Petition in your lawsuit, down at the last paragraph near the end (where it says “wherefore, plaintiff prays…”). If the company is asking for attorney’s fees against you at all, they’ll usually say so right in the “wherefore clause,” and you may be surprised at how small the number is. In Missouri, the number is typically 15% of what they’re suing you for. If the company is suing you for $5,000, the attorney’s fees might be around $750, but that’s only if they are suing on a contract that allows attorney’s fees. In fact there is often no request for attorney fees at all in the suit.

They ask for the same amount whether or not you fight.

If you don’t fight the case, they get a windfall. If you do fight the case, they usually don’t get any more money even if they win. Instead of hoping for several hundred thousand dollars per hour of work, they’re trying to get $150 per hour-if that. That’s a lot less fun.

And if they are not suing you on a contract that specifically provides for attorney’s fees, they don’t get any fees for fighting no matter how long it takes. Every second you make them spend fighting with you costs them money that they will not get back. Everybody on the other side knows all this, and they never forget it. Neither should you.

What Would You Do…

What would you do if you were a debt collector who was bogged down in a suit for a few hundred (or even thousand) dollars-but which could cost just as much in attorneys fees. And on the other hand you could make a hundred thousand dollars in an hour of work by picking out other people to sue instead? Debt collectors are practical people. If you stand up for yourself in a way that shows them they will have a real fight on their hands, they will usually drop the suit. It isn’t worth it with so many other people around who will not fight.

Isn’t that what you would do?

What Debt Negotiation is

This article talks about an important piece of the bad debt puzzle: debt negotiation and settlement.

 

Pretty much everybody knows what debt negotiation is, at least in theory. It goes like this. Obviously there’s somebody who says you owe a bunch of money, you negotiate, and you end up paying either less than or none of what you supposedly owe. That’s the view from a mile up.  Sweet, isn’t it?

It sounds like free money, but it really isn’t. If you think of it as an opportunity for something free, you will not be able to do it – you’ll be left wondering what went wrong as your financial security goes out the window. Instead, debt negotiation and settlement is a cross between a hard-nosed, back-room negotiation and a game of “chicken.”

So What Are You Negotiating? What Are You Settling?

You know, it’s interesting that people rarely ask what debt negotiation is all about – what are you “giving up?” What are they getting in return for the large amounts of debt you hope for them to give up? Suppose you owe a credit card company $20,000 and you have been making the minimum payments most of the time – but sometimes you can’t, so they have hit you with a bunch of fees, and you’re watching the debt pile up at an incredible rate. What do they get if they agree to take a single payment of $1,500?

It feels like you’re stuck – there may be no way you can make payments that would significantly reduce that debt. So what do you have to negotiate with? A whole lot of “nothing.”

You have risk and the difficulty of collection. In other words, you have the fact that unless you agree to pay and really try to do it, they will likely get nothing at all – or will get much less than they could.

That doesn’t sound like much, does it? And yet it is much more powerful than you might suppose. Anybody you owe a lot of money to is feeling the pinch. Even a large credit card bank, which doesn’t need your money for its survival by any means, is watching that debt mount and realizing that every time it gets higher, you get less likely to pay it. At the bottom of your options may be the possibility of bankruptcy, but they know that long before that you will simply stop paying and dare them to sue you.

You Often Get their Attention by Stopping Paying them

In essence, that it what makes debt negotiation work. You stop paying them and dare them to sue you – and then you offer to pay them again, only much less. Sounds crazy, doesn’t it? But it works if you take it seriously and don’t think of it as some sort of gold mine or a way to “get away” with something.  Instead, think of it as a significant part of a serious turn-around in your life. It has several costs – you should have no doubt about that, and it is something you do when there are no better choices available. There’s a chance that withholding payments will result in your being sued, and it almost certainly will result in at least a temporary trashing of your credit report. How you manage these risks and costs will determine, more than anything else, how well you do in negotiation.

There are ways to make it work much better than others, though. There are things you can do to manage your risks of being sued, and when the negotiations actually begin, a few techniques that can help. The main thing about debt negotiation and settlement, however, is that it, like other kinds of negotiation, is much less about negotiation than positioning. People only give you what you want because they believe it is the best outcome for them, too – the question is, how to do you give them that feeling when you’re asking to pay ten cents on the dollar of debt? And how do you make the risks to yourself “acceptable?”

How you answer those questions will determine how good a deal you get from your creditors.

 

Sued for Debt – why your chance of winning is so good

Sued for Debt–Why Your Chances Are So Good

If you’re being sued on a debt by a debt collector, you have an excellent chance of winning. Debt collectors rarely have what they need to beat you – and often they can’t even get it without spending more money than the case is worth to them. If you know how to fight a little bit your chances of winning are good, and most of the time you don’t even need a lawyer to do it. Watch this video to see why your chances are so good.

 

 

Seven Steps to Take if Sued for Debt Part 2

This is the second video in this short series. In the next letter we are going to discuss the actual mechanics of answering the petition and the importance of counterclaims and possible counterclaims you may have. For the first video in the series, click here.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA)

A Basic Overview

The Fair Debt Collection Practices Act (FDCPA) was one of the first comprehensive set of protections established for debtors against debt collectors. It arose out of some truly horrific stories – and the reality is that the debt collectors continue to do horrific things in violation of the law. And yet the FDCPA is pretty good legislation that was designed to give the law enough flexibility to go after whatever the unfair collection practice of the day might be.

This video is designed to give you some idea of the scope of the Fair Debt Collection Practices Act so that you can begin to think of possible counterclaims against the people suing you.

More than that, it is designed to give you an idea of some of the protections that exist for consumers in a society that is awash in debt and plagued by debt collectors.

We hope you will defend your rights. In many cases you can get a lawyer who will help you sue bad companies. But when that isn’t possible, we’re here to help.

Debt Buyers vs Debt Collectors

“Debt Collectors” and “Debt Buyers”

I often talk about debt collectors, but many, and perhaps most people being sued for debt are being sued by people (or companies, usually) that have purchased the debt from someone else and are suing to collect the money for themselves. These are sometimes called “junk debt buyers.”

So What is the difference between a “debt collector” and a “debt-buyer?”

There are some companies that collect debts for other companies, taking a percentage of the collections as their fees, and most people think of these companies when they think about “debt collectors.” But the term “debt collectors,” in its legal sense, is broader than that. There are also debt buyers, who buy the debt from the original creditors and collect on their own behalf, and these companies can also be “debt collectors” in the law.

If a company’s “principle business” is the collection of debts, it is a “debt collector” whether it is a debt buyer or (just) a collector. So the company that bugs you on behalf of the original creditor is a debt collector, and so is the company that bought the debt and began harassing you in an attempt to collect for itself. And so, usually, are the lawyers suing you and their firms. All must obey the Fair Debt Collection Practices Act.

“Debt collector” used to be more conveniently determined as a matter of when a company purchased a debt – if it buys a debt that isn’t being paid solely for the purpose of collecting it, it is obviously functioning simply as a debt collector. But our distinguished Supreme Court – distinguished mostly based on its hostility to working people and its favor to the rich – sees otherwise. It ruled against common sense in 2017. So now one must look to the status of the company – what its “principle business” may be – rather than its actions.

One problem with using the “principle business” standard is that the term has rarely, if ever, been actually quantified. That is, no one really knows what percentage of a company’s business needs to be a certain thing before that thing is its principle business. More fundamentally, all the debt buyers are doing is changing the name of the person allegedly owed. They make exactly the same amount of money they ever did (or they can if the deal is structured that way because there is no real risk of ownership), and their business is exactly what a third person debt collector’s is: they collect money owed to someone else. This should not be changed if the company incidentally happens to have some other operations that are other than collecting debts.

For example, a law firm that buys debts and sues on them (as many do) will almost certainly no longer be a debt collector, whereas Congress has been pretty clear that it wanted them to be. And the standard wrongly seems to focus on the overall business of the business rather than the nature of its operations vis a vis the debt in question.

Nevertheless, to prove a debt buyer is a debt collector under the FDCPA, you will now have to prove that is it’s principle business, and that will make bringing a counterclaim more difficult.

However, for purposes of defense this will not make any difference. The important thing about debt buyers, from our perspective, is that they are suing on a debt which they did not generate. This means they probably won’t have, and won’t be able to get, the records that would legitimately support the debt at trial. You should be able to beat any debt collector or debt buyer in court.

Our materials work on both debt collectors and original creditors.

 

Debt Collection is a Social Justice Issue

When banks screw up, they get bail-outs and promotions. When you do, you get subjected to an elaborate rip-off system and called bad names by strangers. Stand up for your rights.


Anybody who has ever been to a court that handles debt cases has been impressed by what a travesty of justice the scene presents. People are herded in in large groups, and then there’s a cattle call. It goes like this:

Judge: “John Smith? … John Smith?”

Lawyer for debt collector: “Ask for default.”

Judge: “Granted. Joe Blow? Joe Blow?”

Lawyer for debt collector: “Ask for default.”

Judge: “Granted. Susie Q? Susie Q?”

etc.

And this goes on for possibly an hour. A few people will stand up and respond to the judge, and these are directed to “discuss matters” with the debt collection lawyer. These almost always end up as “give-up” settlements or judgments.

When the one in a hundred persons does appear and actually fight, the court is so startled, and yet so used to the giving up, that chances are good the person will have to work five times as hard to get a fair shake as you would in any other kind of case.

A glimpse at the people will tell you why: these are the working poor – or just the poor – being cycled through the system.

Wishful Thinking – Dreaded Enemy of People in Debt

There is a tendency among being drowning in debt to wish for a magic bullet or some other sudden, easy remedy. Or otherwise to take no action and hope the debt goes away. This path could lead to financial destruction.I am now not paying credit cards as I am swamped with debt, and the minimum payments are killing me. I have been told the banks only gave me debt, not money, and are guilty of conversion by selling my personal information. I have been told the banks are committing fraud, coercion, unjust enrichment and violation of FCRA section 619. Do I owe anybody any money?

Magical Thinking Does Not Solve Debt

I get variations on this type of question fairly frequently. Someone has told the person contacting me that either there is no debt because the person only applied for a credit card but did not sign a contract, or, more esoterically, that there is no longer any money in the U.S. and thus there can be no debt. That argument has its academic basis in the fact that the United States left the gold standard and has allowed the Federal Reserve to issue “currency” in the form of “Federal Reserve Notes.” But it has its true basis in wishful or magical thinking. It would be so nice to wave a wand or speak some powerful words that would make the debt collectors go away.

Fighting is the only way to make them go away.

Contractual Agreement?

To handle the more basic objection first, it is true that a contract is an “agreement” between two parties, but it is not true that the agreement must be signed by both parties. An agreement can be inferred where the parties act as if there is an agreement. For example, if I offer to pay you $100 to walk on your hands across the street, and you do so, then your action has consummated a “unilateral” contract, and I am legally bound to pay you the $100. Likewise, if you apply for a credit card and I accept your application and issue a card to you, and then you use it to make a purchase, your use of the card establishes an obligation to pay back the debt under the contractual terms stated in the application. As far as I know, no modern court has ever held otherwise. Of course, a debt collector might have a difficult time finding the application and proving the terms of the debt-in my opinion a more fruitful line of attack.

Debt collectors often do things which are legally wrong, but these are either defenses or counterclaims you can make against them. Or you can bring suit yourself. The key to remember, though, is that the law is almost never self-enforcing. The mere existence of defenses or claims does not do anything for you-you must assert and prove them in order for them to do you any good.

Gold Is Money

What about the constitutional directive that all money be gold and silver, does this get you off the hook for credit card debt? The argument goes that only “debt” (which Federal Reserve notes signify) has been transferred, rather than money. But the gold and silver provision of the constitution was “written out” of the law by the Supreme Court long ago. That decision was not, in my opinion, a great moment for the Court or the American people, but it has never been revisited. It probably won’t be revisited, either, at least until the U.S. currency is nearing or at the point of collapse. Then Federal Reserve currency won’t seem so central to American commercial life, and a far-seeing Court might, under radical conditions, take a new look at the question.

But even then I suspect that the argument that no money was paid will not fly, and that is because Federal Reserve notes do have at least some “value.” If I offer to pay you 100 clam shells in exchange for something from you, a contract is formed. If I breach it, I would owe you the “value” of the 100 clam shells, normally, or under certain circumstances the shells themselves. Although Federal Reserve notes certainly do not have the value they once had in the market, this has only been to the advantage of people who owe money rather than others. Ironically, about the time anybody would revisit the question of whether federal reserve notes can be used as “money,” they will be approaching worthlessness. Then the biggest disaster a debtor could face would be to have to pay back in something of more enduring value.

Federal Reserve Notes Have Value

A Federal Reserve note is basically an “IOU” by the Federal Reserve, a private institution. The Fed gives currency (these days mostly electronically) to the banks in return for some sort of assets or a promise to pay it back, and that is the way money is created. The banks then lend out the money and it “circulates.” In contract law, debt is normally freely transferable. So not only can federal reserve notes be used as currency, but other forms of “commercial paper” or even private IOUs can also be used to buy things. They aren’t money and won’t necessarily be honored at “face value,” but they can certainly be used to pay debts. This would establish a contract even if it left the value of the obligation uncertain.

No Silver Bullets to Debt

And that leads to the central problem with the various “silver bullet” arguments which try to kill a person’s debt based on technicalities. The judicial system is far more practical than many suppose, and it would not ultimately (after the appeals process-individual judges sometimes do almost anything) make a ruling that would destroy the American commercial system. And this is appropriate in a democracy, since the courts should interpret laws rather than make them. A commercial system which has grown up over many, many years by responding to practical needs and which every legislative action has either taken for granted or actually bolstered, should not be stricken down in an instant by a court opinion.

What to Do

Fortunately, a person being harassed by debt collectors need not hope for such a silver bullet. Most debt collectors have a lot of trouble trying to prove the debts they are trying to collect for much more practical reasons. Often the records no longer exist or cannot be legally introduced as evidence. If you fight back, you can either prove they cannot make their case, or take the fun and profit out of it for them so they drop the case and leave you alone. Tackling just the monster attacking you is probably going to be enough for most people. Watch out for people trying to sell you more.