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.

What to do if you have debt troubles part 2

This video goes through the reasons you should win if you get sued for debt and begins the discussion on how to send the right signals to the debt collectors to leave you alone.

 

This is the second video of this series. Here is the link to the first one: https://yourlegallegup.com/pages/RO2-1

In these videos we take a basic look at debt – the way it piles up and the problems that come along with that. And we talk about the actions you should start taking to defend yourself from possible consequences.

Negotiate for yourself or use a service?

One question we have often gotten is whether you should negotiate for yourself or hire someone else to do it. We will address that question more extensively below, but in general, debt negotiation companies do not have any secret tools or special access to get you better results than you could get for yourself. They can’t get you better results than you could get yourself, although in rare situations you might find a gifted negotiator who is simply better at it than you are, of course.

But usually, as a matter of fact, you will probably be able to get a better result than a debt negotiator because it’s your debt and you care more about it than a negotiator would. Also, you will have power to take, or to threaten to take, actions that a hired negotiator would not have the power to take — i.e., you could threaten to file suit, defend their suit, or declare bankruptcy (just to mention three examples) that a hired negotiator would probably not be able to say. Most of debt negotiation involves not backing down and the effective use of time – along with not giving away too much and building up your actual rights. You’re in a better position to do that for yourself than a debt settlement negotiator could ever be.

The main advantage of a debt negotiator would be one of convenience or, more likely, as a cost of being afraid. Consider the deal the debt negotiator offers: they’ll want a percentage of what they save you. You can figure out how much that will be. Are you willing to pay someone else $5,000 to make twenty minutes of telephone calls for you that you could make because you’re uncomfortable making those calls? It’s a high price to pay.

Requiring Verification – Your Secret Weapon against Debt Collectors

When you get the first notice that a debt collector is after you, you should get an opportunity to “dispute and request verification.” That right is provided by the Fair Debt Collection Practices Act (FDCPA). Click here to get your free copy of the FDCPA. This video here explains why you should dispute the debt and require the debt collector to verify it. In other words, always seek verification  And this video shows you how to do it, and how it affects some of your other rights, because often a debt collector will either disappear completely once you seek verification or will fail to provide verification but still harass you – a violation of the FDCPA.

But remember this does not work if they file suit against you – if you don’t answer a lawsuit when it is filed, you will lose the case. See Bogus Right to Verification on Petition – Dirty Trick! If you have already sought verification but not received it, you might file a motion to dismiss based on their failure to verify.

Here’s what to do if they fail to verify the debt before suing you.

When debt collectors contact you for the first time, they are supposed to send you a written notice of your right to dispute and require them to verify the debt. They are to inform you that you have 30 days to send in this dispute, and if you do so, they are supposed to “verify” the debt prior to taking any further collection actions.

Now, to be clear, we do not think the “verification” to which you have a right under the FDCPA amounts to much, but we do, in fact, recommend making sweeping demands of the debt collector. At a minimum, you may get some materials that will be useful if they decide to sue you. And there’s a pretty good chance that disputing the debt will cause them to go away and leave you alone. I have never had a satisfactory explanation for why this might be, but it appears to be the case. Therefore it makes sense to demand verification when you first hear from a debt collector.

Take NOTE

This right to verification does not extend to law suits. If they serve you with a lawsuit, you must answer the petition or lose the case. You HAVE NO RIGHT TO VERIFICATION ONCE THEY FILE SUIT. But if they have contacted you, and you have demanded verification before they filed suit, then they should verify before filing suit. Failure to do so violates the FDCPA.

Also note two other things: your dispute should be in writing – they don’t have to verify if it isn’t. And while you have only thirty days to make the dispute, they can take any amount of time in providing that verification – it’s just that they cannot make other attempts to collect the debt until they do.

Class War and Debt Law

Class War – How it Applies to Debt Law

There is a class war going on, but is an “undeclared war,” where the wealthy and politically connected are being allowed to do anything they want andtake anything they want, and the poor and working classes are left to foot the bill. We at YourLegalLegUp believe that Debt Collection is a Social Justice Issue, both in who is targeted, and the methods used. If you are being targeted, you can and should defend yourself. Use our materials to start protecting what’s yours.

 

As we often say, around 90 percent of people being sued for debt do not defend themselves. Consider what that means: it means that it’s really more expensive for a debt collector to find out whether it has a good case against you – much less to build it and beat you in court if you fight  – than just to bring cases and dismiss them if things get tough. And that’s exactly what most debt collectors do. Therefore, rather than look for words to scare the debt collector away, it makes sense to build a tough defense that makes them work hard to try to beat you. That’s what the our materials help you do. No magic words or secret loopholes, just intelligent defense which makes the debt collectors think they’ll lose money by chasing you and gives you a chance to win even if they do.

You may know that the value of time worked has gone down quite a bit in the past forty years, while the value of things – stocks, bonds, collectibles, etc., has gone up. As has the cost of living. What that means in plain English is that the rich have gotten richer, and the poor have gotten poorer. This is not some sort of weird accident or fluke of nature. Rather, it is the result of deliberate policies by the government and banks.

Don’t let them rip you off in court.

 

Blaming the Victims

Blaming the Victims – Defending Banks by Ridiculing Consumers

Debt collectors often ridicule consumers who got in over their heads, but the banks themselves have set up their business models to encourage debt and debt troubles. Don’t fall for debt collector false morality – fight back.

 

 

Blaming the Banks for the Problems they Caused

Has it occurred to you that all or most of your problems were caused by the very bank that is now suing you or that the debt collector purchased the debt from and is now suing you for? Would that work as a defense against their claims?

My feeling about saying the banks caused all the problems with their various practices -either by lending to you when you were a bad credit risk or by crashing the economy in general – is that it will not work. It’s a kind of “unclean hands” argument, but I believe the concept of “proximate cause” will prevent the argument from working. The people who argue that this argument will work in court have my sympathy, and everybody knows that I do believe the banks caused many of the difficulties people have in paying their bills. The argument has or may have some effect as a social-movement type force, but legally… very iffy. In my opinion it should not work – which is not to say that it never will, of course, so you must make your own judgment.

Proximate Cause

The problem with arguing that “the banks” caused your problems is “proximate cause.” Proximate cause means the “specific problem” must be linked to specific actions by a specific entity. Viewed in that light, how can you argue that, say, Capital One, by extending credit cards and maintaining their policies, has really “caused” anything to happen in society? Many people may believe that the banks, collectively, caused big problems that resulted in raising taxes and sucking resources away from regular people, but how can you assign a specific role in that to Capital One?

Likewise, how do you prove that Capital One caused you problems that you could not have, and should not have, overcome? If we were truly in a capitalistic society the argument simply could not be made: the fact that you did not overcome the problem would be proof that you should not have done so. But we live in an age of bailouts and government interference, of course.

Tell that to the judge, a life-time public employee wielding far-reaching government power every day of his or her professional life.

And then the final zinger: how do you prove what specific action by your specific bank caused some specific injury to you?

Cigarette Litigation

This whole complex of proximate cause issues prevented anyone from winning cigarette litigation for decades. What finally allowed people to get through and win some of the cases was very strong evidence of conspiracy to hide specific facts that the companies knew and had a duty to disclose. There may be evidence of banking conspiracy – there is in some cases – but unlike a cigarette plaintiff who died of lung cancer, you will be hard pressed to show how your injury came from the banks’ action unless there are more specific grounds for applying the doctrine of unclean hands.

Cutting Edge Arguments and a Warning

As I say, I have my sympathies for the position that banks should not be permitted to profit from disasters they themselves caused. And many arguments that end up winning started out as sounding a little far-fetched. So you could consider it. On the other hand, the courts sometimes punish what they consider to be “frivolous” arguments and disputes. Arguments talking about banks and banking, like arguments claiming that our monetary system is completely corrupt live on the edge of “frivolousness” from the point of view of the courts. It would be possible that they could make you pay for taking that position.

Practical Defense

If you are actually defending yourself from a debt collector or defending against a foreclosure, there are weapons available for you to use against the banks, but you will probably not win by arguing the broader social issues or “justice.” You will need to take the practical steps you can.

Things you Should Know before you Settle

Things You Should Know before You Settle with the Debt Collector

If you’re being sued by a debt collector, you’re probably worried–of course you are–but think twice before settling the case just to make it go away. Sometimes that can be a very bad idea, and if you will hang in there and fight a little bit, you’ll be in much better shape.

A Few Basic Facts about Settling Debt Cases

The lawyers for the debt collector never worry about losing a suit – they always assume they will win. And has nothing to do with the evidence, because they rarely have any idea of what the evidence is or what they could prove if they have to. Their confidence comes from two things: they don’t worry about losing a case because they have many of them and they’re cheap. And they don’t think you – a non-lawyer – have much of a chance against them anyway. So going to court and claiming they’ll win (if you try to negotiate) is nothing to them at all – and it should mean nothing to you, either.

So what do the lawyers for the debt collector fear? They fear wasting time – or spending it at all. That’s why they never do more than glance at your case before you show up. They have the business down to spending just a very few minutes per case.

They can do this because they do lots of cases at the same time and because most people give up or default.

So in Order to Settle in Any Meaningful Way

In order for you to get them to take you seriously, you will need to do a little work – and you will need to make them do a little work. Before that happens, they might knock off 20-30% of what the case is seeking if you ask (or they might not), but they won’t do serious negotiation. To settle, you have to file an answer and begin to defend yourself. Once you file an Answer and serve them some discovery, they start noticing you, and after that the chances of settling just get better and better.

And so do your chances of winning outright.

So hang tough for a bit and do a few things – they’re easy to do and not really scary. And if you want to settle eventually you can be sure that you will have made that easier and better. Or keep fighting and see if you can make them give up.

Tip 1 Uncommon Common Sense

Tip 1: Standing up for yourself isn’t hard – it’s just different

And it gets easier

You probably wouldn’t believe how often I get asked the question: “is it hard to defend yourself from the debt collectors?”

Or maybe you would.

If you’re being sued or harassed by a debt collector, one of the very first decisions you face is whether or not to defend yourself. And it is tempting to walk away, no doubt. So what you want to know is, how hard is it not to run away, but to stay and fight?

And luckily, it isn’t really hard.

One Step at a Time

I’ve started a lot of things in my time that if I’d had any idea how much work they would involve I probably never would have started in the first place. Fighting debt collectors is probably not going to be one of these things for you. But what makes it possible even to do the truly difficult things in life is simply to concentrate on the one step in front of you. As a debt defendant you will have a series of these steps. That’s what lawsuits are – a series of things to do, like steps. How many steps it will actually take, no one can say. What I can say, with certainty, is that if you are reasonably smart and willing to work a little bit, you can do every single step. One at a time.

Debt law isn’t rocket science.

You’re going to need to file an Answer or Motion to Dismiss. Could you do that if you set aside ten hours to do it? Yes. Using our litigation materials, it will take you half an hour to draft an answer, and you can do it yourself without our litigation materials in a somewhat longer time.

You’re going to need to draft “discovery,” which is the formal way you ask the other side what they have to use against you – what could hurt or help you. Could you do that? Yes, you could. Our materials make it relatively easy, but again you can do this on your own.

You may need to file or respond to a motion. Or more than one motion. Can you do it? Certainly you can.

And so it goes. You need to develop a broad strategic plan and then take a series of very manageable steps to get there. You may or may not need to take them all – again, only the debt collector really knows how far it will take things – but you can take every necessary step from being served with the suit through trial if necessary. Each step is relatively simple.

The Difficulty is in your Mind

What is “hard” about standing up for yourself is not the actual standing up or doing what needs to be done. What is hard is to do something different than you have done. Debt troubles are usually not an accident. They are usually the result of certain actions that you or someone took (or failed to take). They are often the result of certain habits. And these habits often accompany a habit of not “taking charge.”

Habits can be hard to break, but anyone can do it if they’re determined enough, right?

Standing up for yourself is “taking charge.” It’s just a different mind-set. Easy as pie – and hard as the devil! I won’t kid you – if you are going to defend yourself you must be willing to start to make the shift from “letting things happen to you” to “taking charge.” It isn’t “hard,” in the sense of physical labor or even intellectual challenge, but it does require paying attention to things you haven’t paid attention to before. And it requires looking at something you’d probably rather not look at, right?

It does require “growth.”

This growth is why people who do stand up for themselves and beat the debt collectors feel so good about doing it. Even more than the money, maybe, standing up for yourself and growing into that sort of person is deeply satisfying and – yes – liberating. You will never be sorry if you take on the debt collectors. Any work you do on it will be “good” work. You’ll know that right from the very beginning, and you’ll get to like it more and more, probably.

The difficulty is just in changing. It’s like stepping through a wall that isn’t really there. So if you’re going to do this, start today to look out for yourself. And watch for the next tip tomorrow.

Understanding Opportunity Costs in Debt Litigation

Read more

Tip 3 of Uncommon Common Sense

Tip 3: Time is Always of the Essence

Everything in law is tied to a due date – a deadline. The rules provide very specific amounts of time for everything you must do, and missing those deadlines, while not always fatal in itself, will usually lead to dire consequences.

On the other hand, the deadlines can seem so far away as to be unlike deadlines at all, so that you are tempted to hang around doing nothing without any regard to time at all.

Time is ALWAYS Limited – You’re Either Gaining Ground or Losing it – All the Time

It is tempting to believe in litigation, as in life, that time is unlimited – that there will always be time to do the things you need to do. And the truth in law, at least, is that if you know how to do things and you are willing to take extreme action at some given points in time, it is possible to stave off disaster most of the time.

Rising to the serious occasions that come up while ignoring developing problems most of the rest of the time is very stressful, and you are likely to try to rely on someone else to do something for you on very short notice. If you are defending yourself pro se – that is, without a lawyer – you simply do not know enough about the law to be able to afford to operate “by the seat of the pants” in this way. You don’t know what it takes to do most of the tasks set before you, and you don’t know how long it will take. Therefore, you have to start long before you feel like you’re running out of time.

I often receive messages from people with a court date a day or two away, or a response to a significant motion due in a day or two. I cannot respond to many of these messages. If you had money you could hire a lawyer and trade money for time, to an extent. For most of the people reading this, however, that is simply not going to be an option. You’re trying to trade your time for money.

So what do you do? What do you do in order to stay on top of the deadlines?

First, of course, you must know how much time you are allowed by the rules to do each step. We are going to discuss that tomorrow. Today, however, I just want to emphasize something we all know all the time, and yet we ignore most of the time: time passes. If you want to win your case, you have to use the time you’ve got carefully – even when it appears that you have more than you need.

Staying On Track

The main trick of having “enough” time in litigation is knowing exactly how much time you have to do any given task. And then you must give yourself that time to do what it takes. Since you won’t be experienced in the law, you won’t be able to predict very accurately how much time things will take. Therefore you must start immediately when things come up and not stop until you’re finished.

The Time Allowed for Tasks will be Revealed in One of Two Places

There are two sources of time limits for the things that come up in your case: the Rules of Civil Procedure, and the court itself (your judge).

Time in the Rules of Civil Procedure

The Rules of Civil Procedure give you a certain amount of time for everything that happens in a case. You’ll either find this in the specific rule applying to whatever you’re doing, or in more general rules. Discovery – interrogatories, requests for documents, and requests for admissions – and Motions for Summary Judgment all have their own specific rules, and these rules will include how much time there is for response. For other motions, more generally, there’s usually a “notice” rule which will require that you give (or be given) a certain amount of time after a motion is filed before the motion can be argued. This is the time for response.

Court Scheduling Orders

Another main way time is determined is simply by the judge, usually by means of a “Scheduling Order.” This order will give the parties a certain amount of time to complete some phase of a case – to conduct discovery, for example, or to file a “dispositive” motion (a motion that could end the case). These orders DO NOT NORMALLY alter the amount of time you have for a specific task. If you’ve been given a set of interrogatories, you’ll have the amount of time allowed by the rule to answer, not the end point of the scheduling order. However, if you submit discovery to the other side without enough time for them to answer before the scheduling order ends the discovery process, they may not have to answer at all. Thus you must make sure your answers will be due before the discovery cut-off in the scheduling order.

Leave for Additional Time

Whether you have a iscovery cut-off or need more time for discovery (or need them to answer quicker), the solution is to ask the court for a special order that does what you need. Remember that you’re asking for something special, and such a motion would need to be justified.

Your Problem is Not Someone Else’s Crisis

I often receive messages from people with a court date a day or two away, or a response to a significant motion due in a day or two. I cannot respond to many of these messages. If you had money you could hire a lawyer and trade money for time, to an extent. For most of the people reading this, however, that is simply not going to be an option. Remember the saying, “your deadline is not my crisis.” Most people already have too much to do to take on some massive problem of yours on short notice. You must remember this.

So what do you do? You have to stay on track as much as possible every step of the way.

Tomorrow we’ll discuss the “other side” of time – the way you can use time pressure to weaken the debt collector’s resolve to keep suing you. Do that enough, and they’ll drop the case.

See you then.