Debt Law – Law of the Jungle

I’ve had many customers and clients who were hampered by all sorts of beliefs—from guilt or doubt to a misguided sense of fair play—when it came to defending themselves from debt collection law suits. When it comes to litigation, though, remember that you are in a contest rather than a search for truth. It’s the “Law of the Jungle.”

I find that pro se litigants make two big mistakes. They think that the court will somehow look after them to make sure things are right and fair. And they believe that the normal rules of human decency and responsibility apply to litigation.

The Role of the Trial Court

There are two types of courts that relate to debt litigation: trial court and appeals courts. A trial court is a “court of justice,” meaning that there is, in the abstract at least, a search for justice at a trial. But you must bear in mind that the judge, even in trial court, is more like a referee than a participant. The court’s job is, very basically, to enforce the rules and maintain order in the courtroom. But unlike a referee, the judge only whistles fouls when asked to do so. The judge has very little inclination or responsibility to initiate a call—you have to ask for it either by objection or motion. The judge has very little responsibility to insure any sort of fair play in other than the broadest sense, and none at all to try to even out the balance of power between two parties to a lawsuit.

Just as the lion eats a careless gazelle without interference from the game warden, so debt collectors prey on the unwary defendants in court.

The Role of the Appeals Courts

And there is even less help from the courts of appeals, in general. Appellate courts are “courts of error,” meaning they review the decisions of the trial court and, on occasion, correct mistakes.

Life in the “Jungle”

Much of litigation is contested outside of the court and even out of the court’s attention. Most cases are won or lost during the discovery phase, where the parties ask each other for documents and other information. If one side is particularly uncooperative in this process, then the court can be asked to intervene through a “motion to compel,” but the court will never intervene without being asked—and shown why it should intervene.

Normal Rules of Behavior

Collection people talk a good game about paying what you owe or doing the right thing, but you should not be fooled. As I have pointed out many times, the Federal Trade Commission caught one debt collector it said made 80% of its money from people who never owed the debt, and collectors do not routinely check to see if their lawsuits are good or just or anything. They file them and win if they can without regard to what anybody actually owes. They often don’t know if you really owe them the money or not, and because the junk debt buyers buy and sell debt without informing you of their actions, you can’t know either without making them prove it in court.

All you have to do is defend yourself to see how very little most collection lawyers allow their behavior to be controlled by normal ideals of decency and cooperation. Don’t be fooled by their talk.

It Isn’t All Bad News

The inactivity of the court and impersonality of the debt collectors isn’t all bad news for someone being sued for debt. It does mean certain things, though. It means that informed action will work for you, while faith in the court system or other side to look out for you will not. It means you could be being sued for a debt you don’t owe even if you think you do. It means that the debt collectors will almost certainly test your resolve and willingness to fight by not cooperating with you during part or all of the discovery, and you must take decisive and vigorous action to enforce your rights. And it means that cooperating, being “reasonable” or easygoing, or any of the niceties of debate may not pay off for you. The debt collector (usually) doesn’t know or care whether you “really” owe it the money; they care whether or not they can make you pay it.

Counterclaims and Collateral Estoppel

How Counterclaims and Collateral Estoppel Protect You

The featured question this month is, “How do you keep the debt collector from just dropping the case and selling your debt to someone else?”

You probably know that I am a big believer in filing a counterclaim. Having a counterclaim gives you some very important control over the lawsuit itself and whether you get sued or harassed again by the same, or a different debt collector. In this article we’re going to review the reasons this is so important. In the “Life after Litigation” segment we discuss one very important way you can use a dismissal “with prejudice” to begin to repair your credit.

Plaintiff’s Right to Dismiss Case

In most jurisdictions (although not the federal courts), a plaintiff is free to dismiss a lawsuit “without prejudice” to its right to refile the suit later. In Missouri, that right extends all the way up until the jury is in place – possibly until the first evidence is presented. Up until that time, a plaintiff can go into the filing room, or hand to the judge, a dismissal – no explanation required, and nothing anybody can do about it. In federal court, at least, a party must request leave to dismiss, and the judges don’t like that kind of game. But the right is extensive anyway. However it happens, though, if the plaintiff drops the case without prejudice it is free to go back to phoning you, trashing your credit report, and eventually even suing you again. Or it could sell the debt to someone else who will do all that.

Collateral Estoppel

If you get the suit dismissed with prejudice, on the other hand, all that changes thanks to a doctrine called “collateral estoppel.” Collateral estoppel says that once a court has determined an issue between two parties, neither they, nor anyone “in privity” with them can ask the court to look at the issue again. And privity basically means that that another person’s right is derived from the person who was in court – that is, they bought the right one way or another. So getting a judgment of “with prejudice” effectively ends the cycle of selling your debt to people who will harass you.

How Counterclaims Help

A counterclaim is your key to making sure you can do this. As I have said before, this is so because while a plaintiff may be free to dismiss its own claim against you, it certainly cannot dismiss your claim against it. If a debt collector sues you, the lawyer is usually going to get paid a percentage of the take and handles the counterclaim as an “incidental” to the main litigation. (Even that might be an ethical violation, as lawyers are not allowed to defend cases on a “contingency” basis in any jurisdiction I know about, and handling a defense as an incidental raises the possibility that the lawyer might not get paid for defending the case if he loses the main case, but will get paid if he wins it – sounds like a contingency to me.)

In any event, if the debt collector drops the main case, then the lawyer is representing the debt collector for free. Except that we all know that there’s no free lunch, and if there is a long-term relationship between the collector and lawyer, that too could be regarded as a contingency. Or else the lawyer is stuck representing the debt collector for free – something no lawyer likes to do.

It also means that while the debt collector no longer stands to make a profit from the lawsuit, it does risk losing and getting a judgment against it for money. And it means it is wasting time and money on the case in general. What would you do in that situation, if you had a claim you were no longer interested in pursuing against a person who could defend herself?

Most likely you’d bargain, and most likely you’d offer the other side to dismiss with prejudice if they’d do the same. If you happen to be an aggressive defendant, and specially if you’ve already gotten a summary judgment of some sort, you might want to make them give you some money to sweeten the deal for you.


Sue the Debt Collector

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Identity Theft Affidavits – Part 2

Identity Theft Affidavits – Debt Collector Dirty Trick, Part 2

Sometimes debt collectors will attach an “identity theft affidavit” to their discovery and request that you fill it out and file it with authorities – or return it to the debt collector so that it can file with the authorities. I believe this practice violates the Fair Debt Collection Practices Act (FDCPA) and makes both the debt collector and its attorney liable to you under the Act. This is Part 2 of this article – for part one click here.

Attorney and Client Liability

In most situations the attorney representing a debt collector is, himself or herself, a debt collector in his own right. This is just a pragmatic reality – debt collection firms specialize so they can handle the huge number of cases they file cheaply. An action taken on behalf of a debt collector by a lawyer is also an action by a debt collector under ordinary principles of “agency,” where someone acting on someone else’s behalf takes on their character and authority. Similarly, the debt collector is responsible for the actions of its agents (lawyers) made in an attempt to collect the debt. Under most circumstances, therefore, you could sue them both.

Should You Sue them Both?

I have discussed whether or not to sue a collection attorney before, and my conclusion was that caution would be appropriate. Normally you can apply enough pressure to a debt collector to cause it to drop your suit (eventually) simply by counterclaiming against it. In this situation, however, my conclusion is weighted towards suing the lawyer, too. The practice is probably unethical on the part of the lawyer, and the threat that creates is substantial. Likewise, because of the extremity of the offense – involving deception and bullying in a way which seems to implicate the entire legal process – the threat to the lawyer and debt collector is more likely, in my opinion, to outweigh the disadvantages of getting the lawyer “more motivated.”

And of course the whole thing drives a conflict of interest wedge between the lawyer and debt collector, which should require them to have separate representation in your counterclaim. That multiplies their costs, of course, many times over. To some extent that’s true in any counterclaim based on some action undertaken by the lawyer, but in this situation I believe the deceptive action taken by the lawyer is so subversive and underhanded – so outright dastardly – that the argument for suing the lawyer (and the debt collector, too, of course) is much stronger than usual.

Verification Ignored

What to Do if They Don’t Verify

One Gold Member who is being sued by a debt collector told me he had sought verification and then, prior to providing it, the debt collector had filed suit against him. What would be the right step to take in that situation? Is the debt collector somehow “estopped” (prevented) from filing suit? Or what action should the debt defendant take?


It is clear that the debt collector should not be allowed to sue  you without responding to a verification request – one way to describe that is to say it should be “estopped” from doing so. Estoppel is not actually what you need here, though. For a description of the purpose and uses of estoppel, read Estoppel, Claim and Issue Preclusion. Here you need to move for “stay or dismissal,” or to “enjoin” them from continuing.  Moving for stay or dismissal is probably the way to go: You ask for verification, and they file suit without verifying, and you just move to dismiss on the grounds that the FDCPA does not permit further action until verification has occurred. You ask the court to “stay” (halt) the suit until verification has taken place, or to dismiss it altogether as an action prohibited by law.

This would be a motion to dismiss – best filed even before answering the petition, but it should be effective even if you’ve already answered since the FDCPA requires them to verify before taking further action. I have not seen cases addressing this point, but it would seem to be a substantive limitation on their right to sue. If, however, the court were to see the limitation as comparable to a statute of limitations, it might also rule that it could be waived by answering the petition. The argument against that is that such an interpretation would severely undermine the effectiveness of the statute, which is designed to help less sophisticated consumers and seem to encourage debt collectors to try to get away with violating the Act.

Another way you could consider is a suit to enjoin. The thing about a suit to enjoin is that it should be brought in a different court – preferably one of higher jurisdiction. So, for example, you could file a Suit to Enjoin in federal court asking the federal court to “enjoin” (prohibit) any further action in the state court. You could maybe do the same thing in a circuit court about an action brought in small claims court (although I’m not totally sure about this). If you live in one state and are sued on a debt in another one, you could file a suit to enjoin in your home state based on the argument that the FDCPA requires lawsuits to be brought in the home jurisdiction of the debtor. When a motion to dismiss is available, though, a suit to enjoin is probably more expensive and difficult than it’s worth. However – if the state is typically not granting such motions, you might go to federal court to get a fairer reading of the statute.

What If Your Motion to Dismiss is Denied?

If you file a motion to dismiss and the judge denies it, you have two options – or three, actually. You can  seek review (but not by way of appeal), you can move on and hope to appeal later, and/or you can file a counterclaim along with your Answer. I suggest immediate review, although this does have some challenges.

Filing a Writ

Every court is overseen or “reviewed” by some court. Sometimes small claims courts or “magistrate courts” are reviewed by a circuit court (court of full jurisdiction), but other times they are reviewed by courts of appeal – that’s something you need to find out very early in your case. Circuit courts are always reviewed by courts of appeal. If you file a motion to dismiss, and it gets denied, you would need to seek review of the ruling by the appropriate court. But in any event this will not be by “appeal” if the case is still going because cases are only appealed after they become “final.” Instead, you will file what, in Missouri, is called a “Writ of Prohibition.”

Writs of prohibition are designed to allow the court of appeals to review a ruling in the trial court before the case is final – because if you have to wait that long, the whole point of the ruling would be negated. You file a motion to dismiss, of course, because you do not want to have to litigate – but that obvious need would not ordinarily be enough to get the writ granted. In this case, however, the whole point of the FDCPA section requiring verification is to prevent the debt collector from being able to inflict the costs and risks of litigation on people where they haven’t verified the debt. Failing to dismiss the case for lack of having verified totally subverts that purpose of the statute.

Waiting and Appealing

As I point out above, if you wait and appeal, the whole point of the FDCPA rule will have been subverted – it is designed to spare courts and individuals the cost and time of litigation. If you wait to appeal the denial of your motion, you run an extreme risk, in my opinion, of the court of appeals deciding that there is nothing they can do to help you. By the time the case is appealed, the plaintiff will already have had to prove ownership of the debt – and that would certainly satisfy the requirements of verification. The appellate court would be extremely reluctant to negate all the work of the trial court on such a technicality – to force them to go back, have the debt collector “officially” verify the debt and then do it all over again. Your chance of getting the court to do that are almost zero.

If instead of filing a motion to dismiss in the state court you file a lawsuit to enjoin in the federal court, your only choice might be to seek appeal – but the court would be less likely to refuse to hear the appeal on the grounds that the other action had gone forward.

Filing a Counterclaim

Whether or not you seek to have the case dismissed or enjoined, you could bring a claim for damages under the FDCPA against the debt collector for violating the law. I believe this claim would be independent of your right to prevent the suit against you. You would be stating a claim under the FDCPA for an unfair debt collection practice as specifically designated by the Act. And this claim would be good even if you did manage to get the case against you dismissed.


Whatever your choice, you must be aware that if the debt collector files suit, nothing good will happen automatically. You must defend yourself. This means either moving to dismiss the suit or answering and pursuing your defenses.

Is Defending Yourself Hard?

Are Debt Collectors Hard to Beat?

Considering that I direct many of my marketing efforts towards people who are regular people and not necessarily doctors and lawyers, it is surprising how often I do not get asked the question: Is It Hard? Is it hard to represent yourself in court against the debt collectors?

Well, is it? Here’s a good lawyerly answer: “Yes…and no.”

Or maybe I should say, “No…and yes.”

I wouldn’t say (although I have heard others say it) that a trained monkey could be a lawyer. But anybody reading this could defend himself or herself in court in a debt collection case. This particular type of law is not that hard. And there are two main reasons for that: the law is relatively simple, and the actual cases are dominated by a few simple questions that do not involve subtle determinations of who is telling the truth.

Debt Law

The law regarding debt is ancient and well-established. Debt is as old as the law itself, and with very few variations, the law provides a remedy if the creditor can show that the money is owed. The law concerning debt collection and collectors, on the other hand, does involve slightly more complexity. But not much more, and the standard of behavior is generally considered from the point of view of an “unsophisticated” consumer. That means fewer loopholes and less arguing about whether the words spoken have some meaning that an average person wouldn’t know.

Debt Cases

And on the other hand, the facts in debt law are simple: can they provide the evidence in a form recognizable by the courts? Do they have the actual, original documents? And do they have people with actual knowledge of what they say and why? And often the debt collectors, because they purchased the debts from someone else, do not have these documents, and they never have the actual knowledge. So then the question becomes: can they find the people who do have that knowledge and get their testimony without the whole suit becoming unprofitable.

And the answer is that they usually cannot.

So debt cases generally involve simple questions of evidence. They are easy that way, and a non-lawyer has almost as good a chance at winning as a lawyer. So what’s hard about it?

The challenge to representing yourself is more psychological. Undoubtedly you have to be brave.

You have to be brave enough to tell yourself that you are worth defending even if you don’t have much, or any money. Brave enough to see that today’s financial disaster could give way to a much brighter tomorrow if you can stand up for yourself. Brave enough to see yourself in a new place, enjoying life

as you may not have done for a while. And brave enough to look at something that’s probably completely new and take the time to figure it out instead of panicking.

That does take some real courage.

But with a little help, a little guidance, and a little background information, anybody can do it. It’s only hard because it’s unfamiliar. But those who do it find that the world has changed more than they ever thought possible.

Mailbox Rule – Counting Time in Litigation

You Add Time to the Due Date when the U.S. Mail is Used

In most courts, if a party sends material to the other side by mail rather than in-person delivery, and that thing requires action by a certain deadline, then time will automatically be added according to the rules of civil procedure. That is called the “mailbox rule.” This video discusses the mailbox rule and how days are counted in litigation. It answers fascinating questions like, what happens if the due date falls on a weekend or holiday?

One of the most basic facts you should know – that I frequently get asked – is when the days start counting. If you are served on Monday, day one of the count is Tuesday in every jurisdiction of which I am aware. Watch this video to understand the way time is counted. It can be important!

Failing to Respond to Requests for Admission

You Need to Fix This Fast

As you know if you’ve read any of my materials on the subject, when you fail to respond to any (or a set of) Requests for Admissions, they are, in most states, automatically “deemed” admitted. That means that if you do not take some action to change that, they will be considered proven and beyond dispute.

There is no need to file a motion to compel or any of the preliminary negotiation that might involve when it comes to requests for admissions. Fail to deny a request for an admission and it is considered admitted automatically. That means you can’t deny it later – either in response to a motion for summary judgment or at trial.

Debt Collectors Looking for a Quick, Cheap Victory

Naturally, debt collectors love requests for admissions because a little carelessness on your part can lead to a quick victory for them. They normally request that you admit that every single part of your answer, and all your denials of their allegations, are not true. Fail to respond and it looks like you have admitted your entire case was just a lie. They just wait a day or two after the time has passed and then file a motion for summary judgment.

What can you do about that? Well, if the time has passed for filing responses to the requests, you cannot simply serve denials on the other side and expect them to mean anything. They do not. Rather, you must ask the court’s permission “leave” to file them “out of time.” Your argument is that your state (and every one does) has a strong policy in favor of determining cases “on the merits” according to actual justice. Your failure to answer the requests is a mere technicality – you were not meaning to subvert or disrespect the legal process – and therefore you should be allowed to file your responses now. And of course you attach your responses to that motion.

Time Really Counts

The less late you are, the better your chance – and really you should win it almost every time.

One thing the debt collectors do to try to stack the deck against you is to file their motion for summary judgment as quick as they can. Then they will argue that they have been “prejudiced” by your attempting to take back all your admissions. That is, they will say, they have spent vast amounts of time and effort on their motion in the innocent belief that you had admitted everything. Well, it never worked for me when the shoe was on the other foot, but these are rich plaintiffs dealing with, in general, poor and disfavored defendants. And the shoe never really does go on the other foot in that situation, does it? Speaking realistically.

Your Case against the Debt Collector Rides on it

So you will have to work harder to get the admissions withdrawn. Remember that if you fail to do so, your case is basically over – you will have admitted everything against you. In a way, the extremity of their requests – and the blatant opportunism that implies – is your best argument. But there’s something else you can do to make your chances much better. Debt collectors file these cases by the dozens, and requests for admissions are their standard second step. And their standard third step? … filing motions for summary judgment. Chances are therefore very, very good that your debt collector will have file one or more (most likely) motions for summary judgment in exactly similar situations, making the same arguments. In fact, the motion for summary judgment will probably be standardized, too. You’ll see that only a few words were changed. You need to find at least one of those, because that will be proof that they did not spend any significant time on their motion for summary judgment, and their claim that they did is (going to be obviously) a lie.

Specific Action

Technically, what you would do here is Missouri (but I don’t know for your jurisdiction) is file a Motion for Leave to File Responses to Requests for Admissions out of Time, file the denials with them as an attachment, and file a Memorandum in Opposition to the Motion for Summary Judgment based on the facts deemed and declared admitted by the debt collector being “mooted” by your denials. Because if you denied their requests for admissions, their motion for summary judgment will no longer have any basis at all.

Equitable Defense – Unclean Hands

“Unclean Hands” in Debt Litigation

How does the equitable doctrine of “unclean hands” show up in debt litigation? Can you use it in your defense? Yes… sometimes. And it might be used against you, too – although rarely with effect. The basic idea behind unclean hands is that the party with the dirty hands did something specifically that would make court intervention on his or her behalf wrong. This often, but not always, translates into some action related to the claim in question that either profits the person bringing suit or prejudices the other’s right or ability to defend unfairly.


Like laches, the doctrine of “unclean hands” it is an equitable doctrine that has its roots in English history. And like laches, it is rarely considered, but potentially useful, in defending debt litigation.

What are “Unclean Hands?

Unclean hands are hands (figuratively speaking) soiled by some sort of wrongdoing. If your hands are “unclean,” you may not ask the court to assist you because the court is supposed to maintain a higher integrity and will not be a party to immorality or injustice.

The doctrine of unclean hands as we know it got its start in England. In English law, the law was long considered a sort of absolute, and if you could comply with the absolute words of a statute (law), you could invoke the remedy of the law regardless of how the legal wrong had occurred. Over time, the courts became aware that simple adherence to the law could sometimes lead to serious injustice, and “equity” was born. That was the idea that the court could take a look at the overall situation and should not allow itself to be a pawn in someone’s immoral game even if that game fell within the letter of the law.

Considering the difficulty of applying “morality” uniformly or predictably in as large a country as ours, courts have striven to define uncleanliness more tightly, and this has tended to merge the concepts of law and equity considerably. But there are differences.

Unclean Hands in Modern Law

The most obvious application of “unclean hands” is the well-established notion that the court will not enforce an illegal contract. The Mafia would not be able to sue a hitman for damages for failing to carry out an assassination, for example. Their remedies, if any, would be strictly “extrajudicial”–not necessarily an advantage for the incompetent hitman.

Unclean Hands in Debt Law

The doctrine of unclean hands comes up often in foreclosure law, as a party is supposedly not entitled to profit from a wrong it caused itself. Suppose you have a mortgage you’re paying which includes an escrow for taxes, for example. This is very common, and the mortgage provides that the bank will, according to certain formulas, determine that escrow and add an appropriate amount to the loan payment amount. Mortgage agreements often also provide that partial payments need not be accepted by a bank and that there is no “legal” defense to foreclosure for failure to make payments as required by contract.

If the bank wrongly increases the escrow by miscalculating the taxes, it could raise the payments due to a level beyond your ability to pay. If you then continued making the correct payments, the bank might refuse to accept those payments and put you into foreclosure. Unclean hands might be the doctrine that could stop that foreclosure: the bank itself caused the inability to make payments. Because the courts have not always applied the doctrine, Congress stepped up with various laws (e.g., the Truth in Lending Act, among others) to add to consumers’ protection.

Unclean Hands in Credit Card Debt Law

Another possible application of the doctrine  might be the ways the banks apply what is called the “universal default” provision which they so often sneak into credit card applications. According to the universal default provision, a default in payment to one creditor can be, but does not have to be, considered a default on all creditors. In other words, if you are disputing a bill with one credit card and allow it to go into default, that default might trigger default in another, unrelated credit card. When that happens, the second bank might raise its interest rates from 9% to 30%. In theory this is to cover for the increased risk of default of a troubled debtor, but in reality it is intended, as so many aspects of the credit card agreements are, to profiteer from somebody’s mistake,

At some point, a court might consider that sort of exploitation “unclean” and deny a bank the use of the courts to carry it out. Because the doctrine might also equally apply to many of the fees and charges the banks heap onto delinquent accounts, a debt defendant should always consider adding the unclean hands defense. And this would be especially true where a debt collector’s illegal actions, for example a communication to an employer, actually hampered the consumer’s ability to make the payments supposedly owed.

For More Equitable Doctrines

Click here to read about what equitable doctrines are – estoppel, issue or claim preclusion (court doctrines that prevent you from relitigating issues you either have, or should have, argued in front of court) and how they might apply to your case.