(More extensive notes coming soon)
It is not yet clear whether the courts are now accepting new cases for filing in debt collection or not, but some people are contacting me with cases they have recently received. Are some law firms have cases previously filed served? Are service processors just finding people home now? Or are people just finding cases that have been dropped off in some way? I don’t know.
But here’s what I do know: if you get served and do not answer a lawsuit in time, you will be “subject to default.” It could happen without further notice. And this presents a huge risk for people in debt.
Let’s talk about what “default” is, first, then I’ll show you why it’s such a risk now.
In litigation, a default judgment occurs when you don’t respond to a suit within a certain amount of time. The judgment will normally be for whatever was sought in the lawsuit. If this happens to you, you have “lost” your suit.
Default is a two-step process, though often, but not always, these two steps are collapsed into one. The first step is the “Order of Default.” In that, the court finds that service of process occurred and was proper to establish jurisdiction, and you failed to respond. It declares you liable.
The second step is the “Judgment of Default,” in which the court establishes the amount you owe and enters a judgment against you. At that point the debt collector can begin to garnish wages or attach bank accounts (take them). They don’t start collecting, in other words, till there’s a judgment.
The way defaults normally happen in most courts is you are served and due to respond or show up in court on a specific date. THAT is your NOTICE. And no other notice is required unless you do, in fact, respond in court. The court doesn’t require plaintiffs to keep you informed after you ignore service of suit.
Suppose you receive summons now of a lawsuit. You may, or may not, even be able to file an answer. But probably are able to, even though you won’t be required to go to court (as of now). If you do NOT file an answer, you may not be entitled to any further notice of the suit at all. That would mean, or could mean, that when the courts reopen, you are immediately liable to have an order of default against you. It MAY even mean that there already IS one, because the courts are in business even if they are closed to the public, and they could be issuing default orders.
When they open again, the debt collector will seek and get a default judgment without ever needing to tell you. Your first notice could be from your employer telling you your check has been garnished. Or from bounced checks coming back to you. During a time like this especially, but always really, this is likely to be a life-threatening disaster.
If you have been served a lawsuit, you should respond either with a motion to dismiss or an answer. You cannot ignore the suit just because the court is closed and you don’t have to, and cannot, go to court. In other words, don’t treat this as a vacation. If you’re being sued, take defensive measures immediately. Start defending yourself. As I have pointed out elsewhere, this is actually a good time to do that, because the debt collectors are not in a position to a lot of work on your case. Start defending, and they may drop your case and look for easier pickings.
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Debt collectors tend to buy debts in large quantities (called “tranches”) at a cost that varies from 25 or even 50 cents or more per dollar of “nominal” debt owed (that is, how much the documents say you owe) all the way down to small fractions of a cent per dollar of nominal debt. The price depends on various risk factors, including the date of the debt, how many other people have owned the debt, and so on. As a general rule, the older the debt, and the more owners it has had, the less a debt collector pays for them.
Most of the debts tranches are sold at auction, so there is also a competitive factor, although considering the amount of debt that exists, this can’t be very significant. We have written extensively about the contracts that control the terms of these auctioned debt sales, because getting this contract can be extremely helpful in defending against a debt lawsuit. Members, See, Assignment Contracts, Holy Grail for Debt Defendants.
Most debt collectors bug the people who supposedly owe the money and collect as much as possible before bringing suit, but they can simply bring suit immediately. In any event, when they file lawsuits, they tend to file them “in bulk” often filing fifty or a hundred suits at a time in the same court.
Most of the people they sue do not fight back.
Because the price of the debts is often so low and so many people don’t respond to lawsuits against them and give up a default judgment, the debt collection business is mainly not designed to fight a determined opponent, and it rapidly becomes uneconomical for them to do so.
This gives ordinary debt defendants a tremendous advantage if they know how to defend themselves and where to focus their efforts. Our materials are designed to help you fight back intelligently, and our Three Weaknesses Report will show you where to focus your efforts in most cases against the debt collectors. You’ll have to do some work both to figure this out and to apply it to your case, but it will take much of the work out of your defense and give you a shortcut to victory.
The weaknesses debt collectors share all come from the carelessness that handling cases in bulk with an absolute minimum amount of individual time spent on them brings. There is very definitely a “factory mentality” among the debt collectors, and individual time is by far the most expensive part of the collection process for them.
This factory mentality pervades the process from top to bottom and infects sales of debts between the debt collectors. Remember, none of these weaknesses are “magical” or “secret.” They are simply the inevitable result of a process which focuses so much on bulk purchases and processes that rarely get tested by defendants. The debt collectors tolerate problems that can be fatal to their case in individual cases because most people don’t attack the problems.
We tell you specifically what to look for to know that the debt collector has this problem, but many debt collectors can’t seem to show an adequate bill of sale that proves they own the debt.
A related problem occurs when the debt has been sold more than once. In that situation adequate proof of every transfer is necessary. And when the debt has been sold more than once, the debt collector is almost never going to have what it needs to prove its right to sue you. The Report shows you what questions to ask in discovery to get proof of the problem, how to show it to the court, and give you case authority for the position you are going to take. The bottom line, though, is that the debt collector will often fail to prove actual ownership of the debt. Without that, it has no right to sue you.
Debt buyers buy debts from other people who created and kept all the records of the debt. They almost never get what they would need to introduce these records in court properly. We explain the rule against hearsay in the report and show why the debt collectors’ efforts to avoid that rule not only should not work but actually probably amount to a violation of the Fair Debt Collection Practices Act (FDCPA). We give you cases and arguments, and we show you how to get what you need to prove your case.
No Contract
Debt collectors rarely bother to get the credit card contract or application for which they are suing you. They say they don’t have to, but…
We’ll show you why they usually do need to have that proof. Again, we give you the case law and show you how to find the debt collector’s weaknesses through discovery. And we also show you how to deal with the most common way debt collectors try to avoid the huge problem not having a contract can often bring: the “Account Stated” claim.
As we’ve said, almost all debt collection cases share these weaknesses, and you can usually kill their case with the information in this report. You will need to do some research to make it just right, and you will definitely need to understand the arguments, but this report will take you a long, long way towards beating any case brought by a debt collector.
Your Legal Leg Up is dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. Lawsuits have a number of points where specific action is called or, and we have products to help you deal with most of these situations. We also have memberships that give you access to more materials and better training, and also provide a regular opportunity to ask questions and get answers in real-time. You can use this time to find out what the debt collectors are trying to do and what you might do in response, and you can get guidance on the issues that matter and how to think about and address them.
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How hard is it to defend yourself from the debt collectors?
You would think that wouldn’t be a very difficult question to answer, given that the business is largely automated and conducted by people who all want one thing: your money. And yet the answer can vary because all litigation is a fight, and how hard you will have to fight depends on a number of factors you can’t know ahead of time.
Still, with that said, the difficulty is mostly psychological. It can be scary at first, but if you do the things that need to be done one at a time, it isn’t that hard. And you have a great chance to win.
The first, most important factor in determining how hard it will be to fight the debt collectors is probably YOU.
I often say that debt collectors “aren’t the sharpest knives in the drawer” when it comes to legal work. They could be, but they aren’t, because lawyering as a debt collector rarely requires legal expertise beyond a very basic level. For the most part, they file suits and collect judgments – it requires the expertise of a bully walking up and down a beach kicking sand in the face of people who don’t look like they’ll fight back.
The bully’s expertise is in choosing victims and scaring them, not in fighting them, and debt collectors are the same way. The first, most difficult, step is to get up and fight. It doesn’t take that much effort, but it’s the hardest thing you’ll do.
The next biggest question is what kind of debt collector do you have. Many of them have no interest in fighting the case at all. I don’t know what the percentage of debt collectors is who are like this, but it is surprising how many of them will drop the case if all you do is answer the petition. They don’t show up, and the court dismisses their case, just like that.
Most of them have more fight than that, but as I say, you’d be surprised by how many walk away as soon as you answer the petition. They’re only interested in the absolute easiest pickings, and when you answer, you aren’t that. They go away.
The others have some point to which they’ll go. It appears to me that lines typically get drawn near the following events:
Each of these steps is one step further along, of course. What may not be so obvious is that each of these steps involves a decision on their part to spend money and time on your case. It isn’t the fact that time is passing, it’s that you’re making them spend money on your case.
When debt collectors purchase your debt, they do so at a small price, and they can file suit remarkably cheaply – that’s their business. By the time you’ve been served, they’ve “sunk” these costs of doing business into your case. Their goal is not to spend any more, but simply to pick up a default judgment and send it to the people who look for your money or try to harass you into paying it. Low wage earners. It works this way 80 – 90% of the time.
Every time you make the legal department take some action, though, you are making them pay high wage earners, and you are making them pay for something they didn’t expect to pay. AND you are making them pay something that wasn’t already a sunk cost. You are costing “extra.”
They don’t like this, and for good reason. A dollar spent chasing you is much, much less efficient than a dollar chasing the 80-90% who give up. And when they spend NEW money to chase you, they have to worry more about whether they’re going to be able to get the money out of you. It’s one thing to get a judgment, but a different thing to collect it. And they’re very aware of that difference.
Almost all debt collectors have a line beyond which they will not go. The sooner you make them think they’ll have to go past that line, the sooner they will drop the case.
Notice I haven’t even mentioned the possibility that you could win the case. They don’t worry about that much, but if you can make them worry about it, that will push all but a tiny fraction of them to the point where they drop your case. It’s not “weakness” on their part or laziness or any other bad quality. It’s business.
The question is, how hard is it to make them go away? You will have to learn how to do things up to the point they give up. It might be just learning how to answer, and that is very, very easy. It might be putting discovery requests together or pursuing the steps leading to a motion to compel. It might be filing or defending against a motion or two.
No one of these things is all that hard, and you will have time to learn as you go. You’ve probably heard the saying, “inch by inch it’s a cinch.” Well, I don’t know about “cinch” once you get past the answer, but it’s all manageable, and in the greater scheme of things it isn’t hard at all. And it pays you very well, depending on how much they’re suing you for.
So after all, it isn’t hard. You will need to learn enough to defend yourself intelligently at each step. It takes some effort, but mostly it’s the psychological effort to realize that you CAN do this and that you DESERVE to win for yourself. The more you do, the more you will realize these things are true, so you don’t even have to start with much hope of winning.
Eventually you will learn what you need to know. When you do, you’ll know they’ll never be able to push you around again.
Your Legal Leg Up 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.
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Get a copy of this article in PDF form here: A4V article
You may have heard of one of the magic-word fads going around lately, the “Accept for Value” response to bills. As you will see, it supposedly invokes certain very specific formulae to accomplish something that would seem to be impossible to anyone using common sense. As with most of the “magic word” fads, this one will get you in big trouble if you try it. Don’t.
I have had a chance to look at several accept for value videos and sites. They’re a little cagey, and it isn’t clear whether there is one main source and theory or whether there may be variations with slight differences. Often enough, of course, one person comes up with an idea, and then a lot of people copy it, adding bells and whistles both as sales gimmicks and also to differentiate themselves from the competition. That appears to be the case with the accept for value “movement.”
In any event, I’ll discuss them as if they’re one idea – if you encounter something a little different, look for the fundamental similarities and don’t get too hung up on specific words.
The idea behind “accepting for value” defies common sense. It appears to be based on a belief that everything is free – or “already paid for,” which is the same thing. Naturally, there’s a conspiracy keeping people from knowing this or from using their free resources, and the advocates of acceptance for value are the only ones who know the trick of how to do it. They say. It involves some special forms and formulas we’ll be discussing.
Before getting deeply into the mechanics and theory of the “accept for value” idea, consider: if you were creating a law that you wanted to apply to everyone, would you write it in secret code that only a few people could understand?
Of course not. Now, not all laws are crystal clear (in fact, really none of them are), but they are designed to be known or knowable to everyone – because otherwise how could you expect people to obey them? And laws are meant to be obeyed, mostly. Whenever someone tells you there are “secret laws” or secret forms or language to use to obtain some publically available thing, you should instantly be deeply skeptical. It’s almost always a scam.
If everybody had an account, and the money was already there for everyone to get whatever they wanted, wouldn’t it make sense that politicians would LOVE to tell you about it? Some bad-guy bankers might not want it, since they couldn’t screw you out of money, but most politicians would love to tell you about it.
And if everything is free, why would the bad-guy bankers even want your money? If everything is free, what’s the point of being rich? This theory will only appeal to those who are so desperate they are willing to believe just about anything.
Okay, let’s move on to the way acceptance for value is supposed to be done. To accept something for value, you apparently have to follow a specific formula:
It’s not clear whether anyone has ever gone to jail for trying the scheme, but it seems pretty risky to make any reference to government entities. Any suggestion that they will be the ones paying would be flirting with trouble for sure.
It would appear that the form used is intended to call to mind the form of a check, with your social security number being the account number. I believe one Youtuber said that was the idea, and that’s consistent with the main theory behind this idea, which is that when anyone is born, the government (or federal reserve, or whatever) creates a bank account in your name.
In some videos, they say to send the bill with the stuff written on it to some government agency, in some they don’t mention this, but regardless, when you do what you’re supposed to do, the debt is discharged. It’s paid by the government!
One Youtuber compared it to playing a game of Monopoly where each player starts off with a certain amount of money as part of the game. It’s automatically created and given to you when you join the game. Your using the magic formula is the way you access your game money.
The problem is, this is not a game, and the real world does not work that way. You don’t start off with money, and things are not free.
When I make things for people to use, it takes effort, and I want to get paid for that effort. When you go to work, you want to get paid. Can you imagine the outrage you would feel if, at the end of the week, your boss simply handed you a slip saying that your work had been accepted for value?
A company doing that would soon be out of business.
If you start returning bills with “accepted for value” written on them instead of including payment, you may find yourself out of business as well. This is such basic common sense, and so plainly obvious, that it takes a lot of theory to gloss it over. And the accept for value idea has a lot of theory.
The problem is, the theory doesn’t work.
It all goes back, they say, to House Joint Resolution 192, June 5, 1933, Public Law 73-10, the law that “stole the people’s gold” – but made up for it by making everything free. As one person put it, “Your house is already paid for; your car is already paid for. You just don’t know it.”
Joint Resolution 192 goes back to the early 1920s and the aftermath of World War I. One thing about war is it is very expensive and tremendously destructive, right? Prior to World War I, most governments in the world were on a gold standard, meaning that if one country bought more stuff from another country, they settled the difference by paying gold.
During World War I, the governments ran out of gold, though, and started paying with their currencies. These, too, were theoretically backed by gold, and in 1920, if you wanted, you could go to the bank and exchange a dollar bill for a specific fraction of an ounce of gold. At the end of World War I, however, the governments owed large debts to businesses and other governments. They didn’t really want to pay them, of course, because who wants to pay a debt?
What governments can do about that is print more money.
If I owe you a dollar but have a good printing press, I can just print up a new dollar to give you. Costs me practically nothing, right?
Well, Germany did that in 1920 in order to pay some of the reparations it owed for World War I, and the value of a German mark went from maybe 2 per dollar to over a billion per dollar and that was just before they stopped counting. It was cheaper to burn paper money than it was to buy logs for heat.
That was pretty extreme, but all the governments of the world, just about, had some lesser variation of the problem, and they were all printing up money as fast as they could go.
Creditors don’t like lending money that is worth a lot and getting back money (in debt repayment) that is worth much less, so they began putting what were called “gold clauses” in their contracts. These attached the amount of money being lent to a more objective standard, the price of gold (for example). So they might say, “in exchange for $25,000, which is currently the equivalent of 50 ounces of gold, borrower agrees to make 100 payments of the equivalent of ½ ounce of gold” (along with other terms, of course). That way, the lender would get back the same value it had lent.
In a way it was fair, right? To make you pay back the same value as you had borrowed? But the problem was that so many people, and governments, couldn’t do that. So they passed a series of laws forbidding that (called the “gold clause abrogation laws”). Some of the laws prohibited equating debts to amounts of gold and required that they be named only in the local legal tender; other laws made sure that payment could always be made in that legal tender and that nothing else could be required.
You might say it was a huge rip off because it allowed debtors to pay big debts with little value and prevented creditors from protecting themselves.
House Joint Resolution 192 was a gold clause.
Put another way, it was a “legal tender” law which made all debts payable with bank notes rather than gold, and required that they be denominated in dollars rather than expressed as something else. It also underlined the relatively new legal reality that “federal reserve notes” were legal tender (but that’s a story for a different day).
It was indeed a (good) break for people who owed money, and a very bad break for creditors
who knew about inflation and had taken steps to protect themselves from it.
But it didn’t make anything free for anybody.
The story behind the A4V idea is an interesting story about the way government manipulates money and favors one class over another. It’s also an interesting story of the ways the Constitution can develop in ways exactly opposite of the founders intended. But what it isn’t is a story of the government giving away stuff for free to YOU. That’s the fraud the acceptance for value people have added so they can sell it to you. Don’t fall for it, and be assured that no judge ever will.
Using the accepted for value argument will bring you only disaster and loss.
Many debt defendants love the idea of affirmative defenses – they just sound stronger, don’t they? But in the law, they are specific things, and they are not better than general defenses. They’re just different. If you have an affirmative defense, that’s fine, and you probably wouldn’t want to ignore it. But general defenses are really the “bread and butter” of defense.
So what are these two types of defense?
A general defense is one of two things. It CAN mean a general denial of every allegation in the petition. You’re saying, “prove it” to everything. Since the debt collector has the burden of proof, I would suggest you consider this if it is available to you. It’s easy, fast, and comprehensive. But of course your next move is on to discovery and the rest of defense.
Generically, a “general defense” is one where you deny an allegation. So, above, you could file a “general defense” which denies all paragraphs (if your jurisdiction allows this). Or normally you would simply deny all or most of the paragraphs of the plaintiff’s petition. Every denial is a “general defense” that leaves the burden of proof on the plaintiff.
Affirmative defenses are something else. They amount to a statement that, “even if what the plaintiff is true, I don’t owe because …”
One example of this might be a settlement – suppose you entered an agreement to pay and did pay the other side, but they sue you anyway. If so, your general denial will be to deny the allegations of the petition, but then you’ll add an affirmative defense: On x day, the parties entered into settlement discussions and formed an agreement. Defendant fully performed this agreement on y day, paying z dollars for a “complete settlement of all claims.” See, attached (a copy of the agreement).
Thus, the facts that you have alleged amount to a complete defense to the action (known as “accord and satisfaction). And note that the facts are pleaded with “particularity” (in detail), and the defendant has the burden of proof of these things.
Other examples of affirmative defenses include collateral estoppel, res judicata, unclean hands, statute of limitations, and laches. There could be others. In each case the defendant would bear the burden of pleading the facts constituting the defense and proving them at trial. Since a general denial leaves the burden of proof on the plaintiff, they’re usually more important.
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