Overcoming Default Judgments

As anybody familiar with my work knows, most debt cases end in either default or “give-up settlements,” where the person sued agrees to everything (or almost everything) the debt collector wants. It is one of the strangest things in all of law: most debt cases that are filed couldn’t be won if they were opposed; but very few people fight. So 90 percent of the unwinnable cases filed in debt are in fact won with the greatest of ease.

Strange.

So what is a default? It is first a court order, and often a judgment immediately or after a short delay, giving the plaintiff – the person who brought the suit – whatever they wanted. It happens when the defendant does not show up or defend himself or herself in court. Note that “default” is not the correct way to describe what happens if you DO show up and lose. The result of not showing up is usually a complete, automatic victory for the plaintiff, and that’s what we’re talking about.

The courts do not “favor” such an outcome. That’s because a case that is won because it wasn’t opposed is not a victory “on the merits” – there’s no real indication it’s fair, and as everybody knows in the debt context, it often is NOT fair. But what can the courts do?

If you have had a default against you, you may have a chance to get that changed. If you take steps, and if they think you weren’t playing games in the first place, they will often reverse the judgment. Then you go back to defending the lawsuit. If you get that far, you will probably win the suit – 90% of winning the case will be in getting the judgment vacated (removed). That will stop collection and start the case over – but if you’re willing to fight, and manage to get the default judgment vacated, you’ll find the rest of it pretty easy.

We have products that can help you do all that.

You Will Probably Win if you Fight Debt Collectors

If you are being harassed or sued by the debt collectors, there’s no need to give up. You have an excellent chance to win, and it isn’t that hard to defend yourself.

 

Defending Yourself against Debt Collectors Isn’t That Hard

 

Your Legal Leg Up is designed to help ordinary people defend themselves from debt collectors. The problems occur in three main ways. First, before there is litigation, there is usually some sort of harassment – it would be easier and cheaper for the debt collector to scare you into paying if possible. At the same time, it might be possible to get the debt collector settle the issue with you without having to go to court. Thus we help people with debt settlement.

If debt settlement doesn’t work, or if the collector proceeds to a lawsuit without any chance to try to negotiate, you’ll need to defend yourself in litigation. That’s where we got our start, and we have lots of materials that will help you defend yourself. Keep in mind that debt collectors handle everything in bulk. That means they can be very efficient at parts of their lawsuit, but much less so at others. So our materials and approach are designed to exploit that problem. That makes litigation much more expensive and less profitable for the debt collector and maximize your chance of winning, too. That’s why most of our members win their cases.

Even after your lawsuit – or sometimes they don’t even sue – you will probably have damage to your credit report. Thus we help people repair and reconstruct their credit reports. This is a multi-step program that works at eliminating bad information on your credit report while generating new good information.

We have memberships aimed at each of these areas of the debt law. Find the right one for you and let us help you.

Preparing for Mediation Pro Se

Mediation is “rigged” against pro se defendants in debt law cases. Why do I say that? Is there some evil force at play? No…

The mediator might be trying his hardest to be fair and honest, but even so the process is rigged. To understand why, let’s first go back to who the mediator is.

A mediator is usually (but not absolutely always) a lawyer.  That is useful and appropriate in general because you generally want someone who knows how the legal process works and what you might encounter, in general, if you went to court. At the least it will almost certainly be someone who spends a lot of time in court or with lawyers and is impressed with lawyers.

Often the parties are given a list of “approved” mediators by the court. You’d have to get permission to get someone else. In some situations the parties are completely free to find their own mediator.

And I gather that in some situations a mediator is just assigned by the court automatically, and you don’t get to choose.

Mediation is Rigged

Whatever way it works, the lawyer has an advantage. The mediators have a reputation, and the lawyers can find out what that reputation is far more easily than you can. They won’t use a mediator who has a reputation of pushing too hard against them.

And the mediators know that, of course. You see, the debt collection lawyers are “constant.” They handle many, many of these cases, and if one of them decides never to use a mediator…well, that could be a lot of money to the mediator. If you decide against a mediator or don’t like him or her after going through the process, your options are extremely limited. Your opinion simply doesn’t matter as much to the mediator. And that’s true of everything in the whole process.

Lawyers Trust Lawyers

Next, have you ever heard the saying that “everything looks like a nail to someone who is good with a hammer?” That will apply to mediation. As I said, you can pretty much expect the mediator to be a lawyer or at least an ex-lawyer. Lawyers tend to respect, trust and understand other lawyers.

The mediator might like and respect you and be warm and friendly and all that. But when the chips are down, the mediator will tend to trust and believe the lawyer more than you. And he or she will also expect you to lose the case if it goes to trial, no matter what the evidence shows, because of this sympathy to the lawyer for the debt collector.

No matter what the evidence shows.

And this is true even if the mediator doesn’t specially trust or respect collection lawyers. We all know that debt collection isn’t rocket science, but lawyers come basically from the same caste, and they expect other lawyers to be able to beat non-lawyers.

Your Advantages Could Get Forgotten

The mediator will get paid regardless of whether you settle, and regardless of who wins. That reduces the amount of attention the mediator must spend on your central advantage: the price of litigation.

Further, the mediator will almost certainly not know much about debt law or the debt collection business. That means the mediator will tend to undervalue your second main advantage, the Rules of Evidence! If you have my materials (you should!), you will probably know far more about the relevant law and the “facts of life” than the mediator does. That’s because lawyers tend to take sides in their lives. I would never have represented a debt collection company, and debt collector lawyers rarely defend against debt collectors. So no debt collection attorney from either side would be likely to be truly impartial.

And most other lawyers don’t know much about debt collection at all. Thus the mediator’s tendency to trust and believe the debt collector is magnified in importance.

Mediation Can be Intimidating

Finally, let’s consider the mediation process itself. It’s a chance for one-on-one combat (so to speak) between the parties without the rules of evidence being so important. (And the rules of evidence are another of your biggest advantages). The debt collection lawyer will act like he can prove everything –no sweat. The mediator will believe that. Both will exert pressure on you to “realize” how strong the debt collector’s case is. You will feel lonely and outnumbered. The debt collector’s lawyer feels no risk in this situation –it’s just a job to him—whereas the personal stakes are much higher for you.

What You Must Remember

Through it all, you have to remember, cling tenaciously to the facts that… most debt collections lawyers do not have the evidence they need to win their case and cannot get it cheaply enough to go to trial against you and make money. What have they actually shown you? Can they pull up and show you and the mediator an affidavit from the original creditor that proves that they, the debt collector, actually own the debt, how much it is, that you owe it and didn’t pay? Can they prove that you owe the money? How? Remember that if they want to introduce any account information from the original creditor they’ve got to have either a witness or an affidavit. Can they get it cheaply enough to justify the expense? Not likely! You may have to remind the mediator of these facts—many times.

Don’t Forget Collection Risk

Also, you have to remember their “collection risk.” How likely are they going to be able to collect the money from you? If you didn’t pay (and if you owed) it was probably because you couldn’t afford to pay. Just because they manage to get a judgment, if they do and over your strenuous efforts in court and before, that doesn’t mean, by a long shot, that they’ll get their money.

Your Advantages

Your main tasks in mediation are to remember these facts. AND to remember not to provide them any information or material that could help them get past these problems. If you say you could pay, or if you admit the account was yours…you make their job in court much easier.

Also, remember your advantage: if they have a lawyer or two present, the clock is running, and someone is paying and not very happy about that. Time is on your side in mediation as elsewhere. Remember the Litigation materials and what your advantages are. If you can withstand the fear and temptation to give up, you’ll be in very good shape and can settle (or not) according to what is really in your best interests.

How Debt Troubles Start

Life History of a Debt

This continues the series of videos for people being harassed or sued for debt, and in this video we’ll look at the way debts evolve – from bills you can pay without problem, to bills you do have problems paying (or don’t want to pay), through the “charge-off” and sale of the debt to the debt collector.

Tomorrow we’ll lok at the “moral” duty to pay debts, and then we’ll move on to possible solutions to debt troubles.

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Dispute and Debt Verification under FDCPA

Within five days of first contact, a debt collector is supposed to identify itself and advise you of your right under the FDCPA to seek verification. This right will also have what we call the “mini-Miranda,” which is notification to you that the communication is seeking payment of a debt (alleged debt) and that any information you provide will be used for the purpose of collecting that debt. You should dispute the debt and demand verification.

Disputing – A Step toward Protecting What’s Yours

Mini-Miranda

You must take the mini-Miranda seriously. Debt collectors often record, and always at least make notes of, anything you say. They are building a file on you from the first time they contact you. You should remember that anything you say that reveals financial information will be remembered by the debt collector, and that anything you say that sounds bad for you, like cussing or name-calling, may come up again at a bad time for you. This is why I say that silence is golden with debt collectors.

Verification

The other right you are told about, of course, is your right to seek “verification” or “validation.” If you request it within thirty days of receiving notice of your right, the debt collector must validate the debt and notify you before taking any further action on the debt. For some reason, debt collectors often will not do this if you seek verification, but instead will either ignore the request or sell the debt and move on to greener pastures.

What Is Verification?

Verification is not a clearly defined term. It was certainly not required as a means of slowing the debt collection process substantially. It appears to be almost a pure formality, but it does at least, according to most courts, require the debt collector to contact the original creditor and make sure, in some vague sense, that the debt is supposed to involve you. If that sounds vague or minimal to you, I’m sure you’re right. But it is an actual obligation that the debt collector take some time and do something besides harass you, and it does require them to stop harassing you, and it may give you a claim against them if they continue bugging you before verifying the debt. These are all good things.

And it often makes them go away entirely.

Talking with Debt Collectors

If you have debt troubles at all, you’re probably going to be getting calls from debt collectors. Should you answer them and speak to the debt collectors? If so, what should you say? Usually you should not say anything at all, but if you have something you need to say, say it and then hang up.

Most of the Time, Silence Is Golden

Most of the time you should not be talking to debt collectors unless you have a specific, well-defined reason to do so. Otherwise, you can end up making their life a lot easier – and yours a lot harder.

There is almost no reason to talk to a debt collector. If you HAVE all the money they want, and you want to pay it, then it would make sense to negotiate. If you think you have enough to make a deal, you might also negotiate, but you should remember not to admit anything. YOU CAN ALWAYS NEGOTIATE A SETTLEMENT WITHOUT ADMITTING THAT YOU OWE THE MONEY.  People ask me that all the time – and yet everybody knows that companies settle lawsuits all the time without admitting they did anything wrong. You can do it because the assertion of a claim, or the threat (or existence) of a lawsuit is a threat. You settle to make that threat go away.

If you don’t have enough money to make a deal for at least 70% of the debt, it’s usually a bad idea to attempt to negotiate beyond a very preliminary stage. The person you’re talking to doesn’t have authority to make such a deal. So you can say you might pay 10% of the debt, but it would make no sense in attempting to negotiate beyond that. You will need to talk to someone higher in authority. You could ask to speak to that person.

Beyond that, anything you say will likely just be wasting your energy and time and may lead to other trouble. Remember that your dispute, in order to force verification, needs to be in writing, so you can tell the debt collector you dispute the debt but don’t forget the dispute letter.

Should you Pay a Debt Collector?

Should You Ever Give a Debt Collector Money? And What If You Have?

Should you ever give a debt collector money? You could be asking for big trouble if you do.

Giving the debt collectors money can have many bad legal results. It can revive a debt, starting the statute of limitations all over again. And the debt collectors will argue that you admitted the debt if you make a payment. So should you ever make a payment? Rarely. And you should make a part-payment even far less often than that.

Instead, you could make a payment if you have a written agreement AND HAVE IN YOUR POSSESSION at that very moment all the money you agree to pay. If it’s an old debt, agreeing to terms to pay over time is a recipe for disaster.

Defend Yourself – No one Else Will

If you’re being sued, you’re going to have to defend yourself – there’s no magical solution, and you will lose if you ignore the suit. Please don’t think that just because you’ve never heard of this debt or don’t think you owe it for any reason, you will win. Once you’ve been served with a lawsuit, you will lose if you don’t take steps to win it. Nothing is automatic.

And the lawyer on the other side just wants to win as quickly as possible. He or she has very little interest in “doing the right thing.” It’s up to you to protect yourself.

If you are being sued for debt, you must defend yourself. What that means, very simply, is actually proving you don’t owe the money to anyone – or, more likely, that the plaintiff cannot prove you owe it to it. There are simple ways to do this (not necessarily easy), and our job is to help you use those methods.

Anything that promises or appears to be an easy or automatic way to win is probably a mistake or a scam.

No Free Lunches

There are other products out there for people being sued for debt, and some of them will encourage you to invoke magic words like “fractional reserve banking” or other concepts which, though legitimate in their place, will not drive the debt collectors out of your life.

Remember that there are no free lunches for regular people in this world. The judges are not concerned about the U.S. Money supply or system, and they are not concerned about any abstract rights of yours at all. You’ll be lucky if you have a judge who understands what hearsay is and doesn’t want to allow the debt collector to use it. Trust me on this. If this case reaches litigation, you must be prepared to understand the way debt law actually works, tell the judge how it works, and hold the judge to his or her job of making sure the trial is fair.

Luckily you can do all that. If you spend your time invoking the ghost of Andrew Jackson or fighting the monster of Jeckyl Island, claiming that the government sold you somewhere as part of the Social Security program, or other, similar ideas, you will lose the case. Debt collectors have a tough time proving what they must prove to be able to win. Don’t let your desire for a shortcut to victory make you lose.

Negotiation and Settlement of Debt

This article talks about an important piece of the bad debt puzzle: debt negotiation and settlement.  Ideally this can occur without litigation – but you must be aware that if you decide not to pay someone what you owe – or they think you owe – you could get sued.

 

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.

 

What is Debt Settlement?

What Is Debt Settlement and Negotiation?

If you are being contacted by debt collectors for original creditors or debt buyers, there are things you can do to protect yourself. You may want to negotiate with them effectively so that you can pay them and minimize damage to your credit report or reduce the chance of their suing you, or you may just want to make them leave you alone.

Whatever you want, though, there are legal protections and tools you can use to move things forward and avoid hurting yourself in the future.

Know Who Is Trying to Get Your Money

It starts with knowing who is contacting you and what they want – and what they can or might do to you if they do not get it. Likewise, it is good to know what you can do to them, depending on how things develop. There’s an old saying that almost all lawsuits settle after negotiations, but that negotiations always occur “in the shadow of the law.” That is, what you will have to do after settlement has a lot to do with what they could make you do after trial. Thus there is a lot of information here designed for people suing and being sued – that’s how you know where the shadow of the law falls.

Credit card companies are different than other large companies or small businesses, and both are different than debt buyers. Talking to a bill collector inside an original creditor is different than talking to one outside the company, and it is yet another thing if you are contacted by someone on behalf of a debt buyer. It sometimes even makes a difference whether they call you first, or vice-versa. These are all important things to keep in mind. And there are many others. We have materials on the site that will help you understand how these things can affect your negotiations, and we have products that will make it easier for you to do what you need.

Debt Settlement – Not “One Size Fits All”

Many debt settlement companies attempt to force creditors to the negotiating tables by withholding payments. This is not always a good idea. There are also other alternatives, and we discuss some of those and ways you can act to minimize the damage to your credit report by negotiating with creditors, where possible, before that damage has occurred.

If you are negotiating, you will want to act in your strategic best interest, and our materials are designed to help you do that.