The UCC is NOT a Defense to Debt Collectors

Uniform Commercial Code (U.C.C.) and Debt Law – Fact and Fiction

To download a free copy of this article in pdf format, click here: The UCC not a Defense

The Uniform Commercial Code (UCC) offers no special protection from debt collection or debt collectors, and trying to use it that way will quickly lead to a judgment against defendants. Avoid this scam.

Introduction

There is an extremely vocal group of people who think that the U.C.C. offers special protections from debt collectors. They choose snippets of the text of the U.C.C. and highlight them in numerous videos on Youtube and in their other promotions, and they attack anyone who contradicts them. Like the (very similar) Strawman theory, however, the U.C.C. is a slender reed to support your hopes of avoiding or defeating creditors and debt collectors.

In fact, it does essentially nothing to help debt defendants. We’ll discuss the U.C.C. and then tell you what you should be doing instead of tripping over strawmen.

What is the Uniform Commercial Code?

The U.C.C. is just a model of commercial legislation for state governments to use in designing their own commercial laws. In itself, it has no legal force whatsoever, but all the states have adopted some parts of it, so most of the provisions of the UCC are incorporated into various state laws. Oddly enough, perhaps, the “Uniform” Commercial Code is NOT uniform – its drafters could not agree on every provision, and so there are competing provisions which are not the same, and thus state laws can vary on important parts of the commercial code.

Because of the federalized times we live in, and because most people confine their legal affairs to just one state, our daily lives rarely expose us to different state laws and their consequences. Still, state laws can differ both from state to state and from state to federal, and they often overlap in ways familiar to most lawyers (but out of the site of non-lawyers). The U.C.C. was designed to smooth out the way the laws overlap.

It all sounds non-controversial now, but at the time it was a big step towards protecting and encouraging interstate commerce, and in fact the U.C.C. was under construction at about the time the interstate highway system was developed.

How the UCC was Created

The U.C.C. was created by two nongovernmental legal organizations: The National Conference of Commissioners on Uniform State Laws, and the American Law Institute.  The document, standing alone, has no legal authority or power at all.

This is not saying the UCC is not significant – just that it is a document created by a bunch of academics that has no independent force or impact on anybody. So why is the UCC a big deal? It’s a big deal because all the states have adopted some portions of it. The UCC was designed to help legislators bring order to what was there, not force them to have the same laws. Remember, legislatures make laws, not think tanks.

The parts of the U.C.C. that have become law in your state will be reflected in your state laws, and you should look for the law in your state laws and not the U.C.C. itself. When people say “the U.C.C. does this or that,” or “requires this or that,” they’re showing you they do not understand the law. Don’t look to these people to tell you how to beat the debt collectors. Likewise, since the portions of the UCC that were adopted are just part of your state law they do NOT trump other laws and have no special, magical power.

The UCC Was Created to Serve Businesses, not Consumers

The main concerns of the drafters of the U.C.C. were the rights and abilities of businesses in relation to each other. The drafters believed that a set of laws that made businesses more predictable and reduced conflict would benefit everyone, but their concern was with business, not consumer, protection. A mere glance at the document will prove the point – it defines “bills of lading” and discusses where legal responsibility and risk shift from party to party in commercial transactions and things like that rather than the issues that concern consumers. Where the issues do have an impact on consumers, there are usually laws that override the U.C.C. and specify consumer rights.

There is almost no discussion of debt at all in the U.C.C. or in the state laws enacting it. Debt, and most particularly consumer debt, has primarily been addressed by a series of federal laws like, for example, the Truth in Lending Act and state laws based on these federal laws.

You CAN beat the debt collectors in many cases, and without even having to hire a lawyer – but your solutions will most often be in consumer protection laws like the Fair Debt Collection Practices Act or Fair Credit Reporting Act, or in the normal rules of the court.

We help you do that.

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.

Products Related to this Article

We have no products related to this article because you the article addresses your fundamental approach to debt defense. You would probably find our memberships useful, however, and we have materials designed to address specific situations as they arise.

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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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

You can sign up to receive free information from us by clicking on this link and following the instructions: https://yourlegallegup.com/blog/sign-up-for-free-information/

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.

California Debt Law

California State-Specific Materials

This will be a long-term project, as we begin to write more articles that will address issues that arise in specific states. We will eventually have member-only material catalogued here for greater convenience.

California-specific Articles and Videos

Bill of Particulars in California, Part 1

A powerful weapon in fighting debt collectors in California – the bill of particulars

Demanding a Bill of Particulars in California, Part 2
If you are in California, you have a powerful tool against the debt collectors – a request for a bill of particulars

California-specific Products

California Bill of Particulars Pack – Californians have a tool, halfway between pleadings and discovery, that can force debt collectors to provide all the information you need to defend yourself from most of their claims. The bill of particulars will often make them drop all or part of their case – or to give you what you need to hammer them in court.

Oklahoma Law on Debt Collection

Oklahoma Debt Law

This will eventually be an article on small claims courts in Oklahoma.

Small claims courts are a frequent bane to debt defendants because they apply loose rules (of evidence and civil procedure) designed for pro se, unsophisticated parties disputing small amounts of money. Debt collectors, however, have discovered that these lax rules can make it easier for them to get even more default judgments and to win cases on obviously insufficient evidence. Oklahoma put a stop to that by enacting rules that forbid debt collectors from bringing their claims in small claims courts.

Of course this hasn’t stopped them.

Here is the rule: http://www.oscn.net/applications/oscn/DeliverDocument.asp?CiteID=438809

Here’s an article. There will be more: https://www.okbar.org/freelegalinfo/smallclaims/

I Only Have Social Security and They’re Suing – What do I do?

What You Should Do if You Only Have Social Security

You will find a lot of material on our site addressing this question. It really boils down to two things: what does it cost to fight? And what does it cost if you lose?

What it Costs if you Lose

The good news is that, if your only asset is Social Security – or comes from Social Security (including age or disability benefits), you are “judgment proof.” That is, they can’t garnish your Social Security benefits. We don’t think that means you should just give up and ignore the suit, but it establishes a limit to the price of losing – it’s a low price.

There are other costs, however, that aren’t so clear. A judgment will hurt your credit report, for example, and this could affect insurance rates, credit eligibility, and even job opportunities. Since it isn’t garnishment, it’s a sort of hidden penalty, but under the wrong circumstances losing a debt suit can hurt you even if they can’t get anything that you own. These are the costs you will want to consider as you decide whether to fight

What Does it Cost to Fight?

We recommend our Litigation Gold Membership, which has a monthly cost, currently $20/month. In addition to that you will need to find a way to do the work associated with pro se defense, and you will need to get to court some to do the things that need to be done. If you are too frail or disabled to do these things, pro se defense won’t be good for you. If you are able to do them you’re in a great spot: it costs little to defend, your chances of winning are excellent, and the price of losing if you don’t win is very small.

You will enjoy our materials, and you will probably also enjoy – eventually – the experience of defending yourself in court. Likewise, the debt lawyer trying to sue you will very possibly go away once the important facts are known. All these things are why a lot of older people do actually defend themselves – the deck is stacked in their favor.

What if you have something more than Social Security?

Well, it depends on how much. What you have is what you could lose, minus state exemptions from collection which are pretty generous. But they have to beat you to get them. Our materials help you fight and win, and you might also find a law firm willing to take the case “pro bono.” That means for free as a part of social service that lawyers often do.

They’re Suing Me for A Lot – Won’t they Fight Harder?

For a copy of this article in pdf form, click here: why amount does not matter

Why the Amount the Debt Collector is Suing You For (Almost) Doesn’t Matter

From a normal consumer’s point of view, the threat posed by a suit for $500 or $1,000 is very, very different from one for $25,000 or $50,000. But the difference in amounts to the debt collector is much less significant than you might think. There are several reasons for this, from the way they view risk to something called “opportunity cost.” We’ll discuss both of those things here.

Our observation is that debt collectors do NOT treat cases for large amounts any differently than they treat cases for small amounts. They follow a set of standard procedures.

Sued by a Debt Collector

If you’re being sued by a debt collector on a debt for $500, the lawsuit itself probably scares you in that it’s pulling you into a hostile and alien world – the world of litigation – where you expect people to frown at you a lot and make you pay. And for most people being sued by debt collectors, $500 is not a negligible amount – actually having to pay it could be a significant hardship. On the other hand, a suit for five or ten thousand dollars is a different, and much scarier, thing. You’d get over a $500 judgment, but you might never be able to pay off $10,000.

There’s a tendency to project. Because ten thousand is such a hurtle for you, you think it’s a large amount of money for a debt collector. You might think they’d do a lot more for this larger amount.

For the most part, however, you’d be wrong in thinking that. This is because of the way they assess the various risks associated with collecting debt.

Risk

Debt collectors look at three primary factors in evaluating their cases. These are risk of losing, price of winning, and chance of collecting. To put it all in terms of “risk,” you might put the factors this way: the risk of losing, what you risk in order to win, and the risk of not collecting what you win.

Risk of Losing

Debt collectors regard the risk of losing a debt suit as negligible. Their business model, which involves bringing suit without ever even looking at the evidence that might support their suit, shows how confident they are. They know most lawsuits they file won’t ever be disputed at all, and the price of losing is trivial to them. They’re dealing in the hundreds of millions of dollars of nominal debt – your suit for $25,000 doesn’t even register as a risk worthy of concern.

Of course the lawyers who will eventually be involved in your suit take a somewhat different view. They don’t want to lose because of their pride and reputation, but at the end of the day the amount at stake is trivial to them, too.

Price of Winning

Debt collectors take the price of winning far more seriously. For one thing, the cost of buying the debt and filing suit are “sunk” costs. That is, they paid that up front as a minimal cost of doing business for any law suit. Every time you do anything that requires them to take action, it’s costing them new money, and it’s not the basic cost of doing business in the courts, it’s money you’re making them pay.

They can see that, and they know the money they spend on your case may be going away for good. Thus our materials aim to emphasize and increase this risk, and we are usually quite successful in doing so. Taking action that increases the cost of winning will have a significant impact on the way the debt collector values your case – it lowers the value of the case in the debt collector’s mind dramatically.

Of course if they’re suing you for $50,000, your actions wouldn’t seem likely to reduce the value of the case very much, right?

Wrong, and that brings us to the final risk factor, chance of collection – or you might call it the risk of not collecting (we often refer to it as “collection risk.”

Collection Risk

Have you heard the expression that if you owe the bank a thousand dollars, they own you, but if you owe them a million dollars you own them? This is related to the collection risk factor. Banks know, and collectors know, that collecting $1,000 is usually possible against an unwilling defendant. But collecting ten thousand? Not going to happen. You probably won’t have it, and if you do, you’ll hide it.

That sets up a dynamic: the more you owe, the greater the collection risk discount. If they’re suing you for $25,000, nobody expects to collect anything like that. They might get a little more from you with a $25,000 judgment than a $1,000 judgment, but not enough to matter.

And there is a good possibility in both high and low dollar cases that they won’t be able to collect a cent.

Thus debt collectors do not consider high dollar cases particularly valuable. They don’t like spending money on them any more than on low dollar cases.

Now look at the larger picture of the world in which debt collectors live.

Opportunity Cost

Opportunity cost is the cost of doing one thing rather than another.

Remember that the amount of debt in the U.S. is essentially unlimited. That means the opportunity for suing (other) people is equally unlimited.

Now remember that debt collectors get judgments approximately 80% of the time by default. That means they can file suit in 100 cases and get 80 judgments in about an hour. If those judgments, conservatively speaking, are for $5,000 apiece, that’s $400,000 in an hour. And these numbers are not only theoretically possible, but I have seen them happen many times.

Now consider your case for $50,000. Even if they thought they could get that – which they almost definitely do not – if they have to spend five hours working for it, they’ll lose perhaps two million dollars in default judgments in that time. Does that sound like a wise business decision?

Of Course They Aren’t Machines

You might think the debt collectors are cold-blooded opportunists, and you might think they would only do what makes them the most money. And usually you’d be right, but they are human, and sometimes other factors work their ways into cases. They won’t always do what you might expect.

But the odds are strongly in your favor, and that means that it makes sense to defend yourself as much in big-dollar cases as little dollar cases.

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

You can sign up to receive free information from us by clicking on this link and following the instructions: https://yourlegallegup.com/blog/sign-up-for-free-information/

What you’ll receive if you sign up is a series of several videos and articles spread out over several days, and then you will occasionally hear from us as we add information to the site. We don’t always announce that information, though.

Should I Buy Your Motion to Dismiss Pack?

Short Answer: Only if you need to file a motion to dismiss.

Long Answer – As follows:

When Should One Purchase our Motion to Dismiss Pack?

A lot of people buy our Motion to Dismiss Pack on the theory that they want the case against them to go away. It isn’t as simple as that. The motion to dismiss pack is applicable to situations where (1) you have filed a counterclaim and the debt collector moves to dismiss it, or (2) you have some legal basis for arguing that even if everything the petition against you is considered true the debt collector does not have a right to collect from you.

The first of these possibilities – that you are defending against a motion to dismiss – is obvious. If they want to dismiss, you will probably want to defend against that. Your motion to dismiss their claim is more of the question.

Purpose of Motion to Dismiss

A motion to dismiss is a way to “test the adequacy of the petition.” It is NOT a way to test whether the debt collector has evidence to support its lawsuit. Motions to dismiss are therefore appropriate, most generally, when you have a challenge to the company’s right to sue you in a specific court or in general, or when you have a challenge to the court’s power over you. There are also what are known as “equitable” considerations we will discuss.

The Debt Collector’s Right to Sue You

The main way this comes up is in jurisdictions where they have passed regulations on debt collectors which the collector has not followed. Most typically this is an issue of registering or not. Several states require debt collectors to register in some way before pursuing debt – and debt collectors often ignore those regulations. If yours did, a motion to dismiss on that basis would be a good idea.

Another way the right to sue you comes up – much less frequently – is that the petition fails to allege ownership of the debt. This could happen, for example, where ABC Collectors are suing you on a Citibank credit card. If they allege in the petition that they bought the debt, then you will want to find out what evidence they have, but this is part of the suit and not a motion to dismiss. If they fail to allege why you’re supposed to owe them on a debt apparently owing to Citibank, a motion to dismiss is probably in order.

The Court’s Right to Hear the Case

You may want to challenge the court’s power to hear the case against you. This arises in two ways. First, the suit could be brought somewhere other than the jurisdiction in which you live. You live in X county, and they bring suit in Y county and you never lived there. That would likely deprive the court of jurisdiction over you and constitute a violation of the Fair Debt Collection Practices Act.

The other, more common, reason for this sort of motion to dismiss has to do with service. Were you served correctly? And this question can be rather complicated. For present purposes, we merely say that a motion to dismiss is the appropriate way to challenge the court’s power over you, and this is a motion you would want to file before taking any other action in the suit. If you think you were not served properly, in other words, you will probably want to file a motion to dismiss.

“Equitable” Circumstances

There are certain gray areas that might be appropriate for a motion to dismiss, and these are called “equitable” considerations.

“Equity” is a historical reference to the way courts used to be in England, but for our purposes they refer to something more like moral rightness. If the debt collector waited too long to bring suit, if it did something to prevent you from making payments, or if you settled the case previously and they still sued you might all be examples of equitable defenses. While they DO involve evidence beyond the pleadings (the normal boundary line for motions to dismiss), you could probably bring these things as motions to dismiss. You would also be wise to plead them as “affirmative defenses” in your answer if you file an answer

What Motions to Dismiss are NOT for

You don’t file a motion to dismiss because you aren’t satisfied with attachments to the debt collector’s petition or don’t think they have the proof. Yes, you’ll attack their case – but later, and in another way. You don’t file a motion to dismiss because you just want the case to go away. And you don’t BUY a motion to dismiss pack here as an inexpensive way to defend the case in general. Our motion to dismiss pack is a specific product aimed at a specific situation. If it doesn’t apply to your situation, you will simply want to get the Gold Debt Litigation Membership and start doing the things you need to do to win the case.

We can help either way. Click on the Articles button on the menu bar above to go to publically available videos and articles,

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