It is very helpful to have a counterclaim if you’re being sued by a debt collector. In this article we’ll discuss a few mechanics – things that are obvious to lawyers but might not be so obvious to people representing themselves.
What is a Counterclaim?
First of all, what is a counterclaim? Very simply, a counterclaim is a lawsuit you file in the same court against someone who is already suing you. That is, it is any lawsuit you file, whether or not it is related to the suit the other person filed.
The theory is that if two people are already in court for any reason, they may as well get everything done at the same time, but there are certain exceptions in cases where hearing the cases together would be too confusing, or the like. Many counterclaims do not have to be brought – you can wait till the first case is over and then (if time hasn’t run out) bring your case separately as an original suit. On the other hand, sometimes possible claims are so closely related that you are not allowed to wait: these are called “mandatory” counterclaims, and if you fail to bring a mandatory counterclaim as part of the first lawsuit you will lose the right. A classic example of mandatory counterclaims would be claims by both people in a car crash against each other – waiting and filing separately would be a big waste of court time and might also lead to contradictory judgments.
For debt defense, though, you might think of it as a defensive countermeasure. As in judo, they’ve been attacking you, and now you’re going to use what they’ve done against them.
Claims under the Fair Debt Collection Practices Act (FDCPA) can be brought as counterclaims, but they are not mandatory. You could, if you wanted to, bring a claim under the FDCPA in federal court – or even another state court – while a lawsuit against you for the debt was still underway. As a practical matter, when I was still practicing, I never did that, but you could do it.
Sources of Counterclaims
The FDCPA is the most logical source of counterclaims when you are being sued by debt collectors, for several reasons.
For one thing, the law is very broad. Anything that is an “unfair” debt collection practice is illegal under the FDCPA. Although several things are specified in the Act, many other things have been found to violate the law. That allows you to be a little creative.
Secondly, the FDCPA does not require any sort of “intent” to harm you. All you have to do is show that the debt collector did what you say is illegal. And you don’t actually have to have been hurt by what the debt collector did. That means that the unfair collection practice you claim they did does not have to have fooled you or hurt you at all.
In fraud cases, to give an example of a different kind of law, you have to prove that the person you claim defrauded you meant to do it (intent) and that it somehow harmed you (they did fool you, and you lost money). This makes claims under the FDCPA much easier than most other lawsuits. Finally, there is the question of evidence. Many FDCPA claims arise out of the debt collector’s lawsuit against you, and this will be part of the record, but all of the claims will be relatively easy to prove. Here are some articles that discuss some possible claims under the FDCPA:
There are other sources of possible counterclaims, however. There is a law in consumer law that provides that any time you would have a claim or defense against the seller, you also have that claim or defense against someone trying to collect the bill.That means that if you were ripped off by a seller, and then a debt collector comes after you, you can sue the debt collector for that fraud. If you do, you will probably have some significant advantages, as the debt collector probably does not have access, much less inexpensive, convenient access, to the witnesses it would need to defend the case. And there are other possible claims – like defamation or possible violations of the Fair Credit Reporting Act.
What You Actually Do
Assuming you decide to bring a counterclaim, what you actually do is attach it to your Answer. That is, you create your Answer, and then at the end you add allegations that would support your counterclaim. The materials in my Litigation Manual provide you samples of these.
Talking with Debt Collectors
If you have debt troubles at all, you’re probably going to be getting calls from debt collectors. Should you answer them and speak to the debt collectors? If so, what should you say? Usually you should not say anything at all, but if you have something you need to say, say it and then hang up.
Most of the Time, Silence Is Golden
Most of the time you should not be talking to debt collectors unless you have a specific, well-defined reason to do so. Otherwise, you can end up making their life a lot easier – and yours a lot harder.
There is almost no reason to talk to a debt collector. If you HAVE all the money they want, and you want to pay it, then it would make sense to negotiate. If you think you have enough to make a deal, you might also negotiate, but you should remember not to admit anything. YOU CAN ALWAYS NEGOTIATE A SETTLEMENT WITHOUT ADMITTING THAT YOU OWE THE MONEY. People ask me that all the time – and yet everybody knows that companies settle lawsuits all the time without admitting they did anything wrong. You can do it because the assertion of a claim, or the threat (or existence) of a lawsuit is a threat. You settle to make that threat go away.
If you don’t have enough money to make a deal for at least 70% of the debt, it’s usually a bad idea to attempt to negotiate beyond a very preliminary stage. The person you’re talking to doesn’t have authority to make such a deal. So you can say you might pay 10% of the debt, but it would make no sense in attempting to negotiate beyond that. You will need to talk to someone higher in authority. You could ask to speak to that person.
Beyond that, anything you say will likely just be wasting your energy and time and may lead to other trouble. Remember that your dispute, in order to force verification, needs to be in writing, so you can tell the debt collector you dispute the debt but don’t forget the dispute letter.
Debt and Moral Duty
Should you Pay a Debt Collector?
Should You Ever Give a Debt Collector Money? And What If You Have?
Should you ever give a debt collector money? You could be asking for big trouble if you do.
Giving the debt collectors money can have many bad legal results. It can revive a debt, starting the statute of limitations all over again. And the debt collectors will argue that you admitted the debt if you make a payment. So should you ever make a payment? Rarely. And you should make a part-payment even far less often than that.
Instead, you could make a payment if you have a written agreement AND HAVE IN YOUR POSSESSION at that very moment all the money you agree to pay. If it’s an old debt, agreeing to terms to pay over time is a recipe for disaster.
Defend Yourself – No one Else Will
If you’re being sued, you’re going to have to defend yourself – there’s no magical solution, and you will lose if you ignore the suit. Please don’t think that just because you’ve never heard of this debt or don’t think you owe it for any reason, you will win. Once you’ve been served with a lawsuit, you will lose if you don’t take steps to win it. Nothing is automatic.
And the lawyer on the other side just wants to win as quickly as possible. He or she has very little interest in “doing the right thing.” It’s up to you to protect yourself.
If you are being sued for debt, you must defend yourself. What that means, very simply, is actually proving you don’t owe the money to anyone – or, more likely, that the plaintiff cannot prove you owe it to it. There are simple ways to do this (not necessarily easy), and our job is to help you use those methods.
Anything that promises or appears to be an easy or automatic way to win is probably a mistake or a scam.
No Free Lunches
There are other products out there for people being sued for debt, and some of them will encourage you to invoke magic words like “fractional reserve banking” or other concepts which, though legitimate in their place, will not drive the debt collectors out of your life.
Remember that there are no free lunches for regular people in this world. The judges are not concerned about the U.S. Money supply or system, and they are not concerned about any abstract rights of yours at all. You’ll be lucky if you have a judge who understands what hearsay is and doesn’t want to allow the debt collector to use it. Trust me on this. If this case reaches litigation, you must be prepared to understand the way debt law actually works, tell the judge how it works, and hold the judge to his or her job of making sure the trial is fair.
Luckily you can do all that. If you spend your time invoking the ghost of Andrew Jackson or fighting the monster of Jeckyl Island, claiming that the government sold you somewhere as part of the Social Security program, or other, similar ideas, you will lose the case. Debt collectors have a tough time proving what they must prove to be able to win. Don’t let your desire for a shortcut to victory make you lose.
Do not get fancy when defending
As I have pointed out elsewhere, there are other products out there that will tempt you in various ways. One way is to find a shortcut. Another, equally dangerous thing, is to try to hide behind legalese. You may think you’ve found an excellent phrase, like “I know nothing about what you’re saying and therefore deny…”, but you could be burying yourself under an admission. (In this case, that you “know nothing about…” – the denial is a conclusion with no real impact, but admitting you know nothing? – that’s a fact you’ve just admitted.)
Don’t Try to Hide behind Legalese against Debt Collectors
I have recently had a customer tell me she bought a package that told her to answer requests for admissions with “after reasonable inquiry, defendant cannot either admit or deny… [each request].”
It sounds so much more reasonable, doesn’t it, to say “defendant has no knowledge to admit or deny…” or “after reasonable inquiry defendant cannot either admit or deny…” requests for admissions or allegations in petitions. The problem is, if you cannot admit or deny, and the debt collector alleges, there is nothing in opposition to the debt collector’s allegations. The debt collector just says, “defendant admits that, after reasonable investigation, she cannot deny…”
The standard for judgment on the pleadings is no genuine issue of material fact.
Just deny what you can. And you can deny anything you don’t have to admit in almost every jurisdiction. Don’t get fancy. Hiding behind fancy sounding legalese is, in the final analysis, just hiding. The judge knows it, and the lawyers know it. You know it too – or you wouldn’t try it.
You have very strong arguments to make in terms of law and justice. The debt collector has an extremely tough burden to carry. Your every effort should be to make that burden crystal clear – and to prove that the debt collector cannot do it. Legalese of any sort will simply distract from this sharp, clear mission. A clear, rigorous reading of the facts and law is your friend. Vagueness is your enemy. Products which encourage you to hide behind legalese invite you to disaster.
Answer and Counterclaim
It is very helpful to have a counterclaim if you’re being sued by a debt collector. In this article we’ll discuss a few mechanics – things that are obvious to lawyers but might not be so obvious to people representing themselves.
What is a Counterclaim?
First of all, what is a counterclaim? Very simply, a counterclaim is a lawsuit you file in the same court against someone who is already suing you. That is, it is any lawsuit you file, whether or not it is related to the suit the other person filed.
The theory is that if two people are already in court for any reason, they may as well get everything done at the same time, but there are certain exceptions in cases where hearing the cases together would be too confusing, or the like. Many counterclaims do not have to be brought – you can wait till the first case is over and then (if time hasn’t run out) bring your case separately as an original suit. On the other hand, sometimes possible claims are so closely related that you are not allowed to wait: these are called “mandatory” counterclaims, and if you fail to bring a mandatory counterclaim as part of the first lawsuit you will lose the right. A classic example of mandatory counterclaims would be claims by both people in a car crash against each other – waiting and filing separately would be a big waste of court time and might also lead to contradictory judgments.
For debt defense, though, you might think of it as a defensive countermeasure. As in judo, they’ve been attacking you, and now you’re going to use what they’ve done against them.
Claims under the Fair Debt Collection Practices Act (FDCPA) can be brought as counterclaims, but they are not mandatory. You could, if you wanted to, bring a claim under the FDCPA in federal court – or even another state court – while a lawsuit against you for the debt was still underway. As a practical matter, when I was still practicing, I never did that, but you could do it.
Sources of Counterclaims
The FDCPA is the most logical source of counterclaims when you are being sued by debt collectors, for several reasons.
For one thing, the law is very broad. Anything that is an “unfair” debt collection practice is illegal under the FDCPA. Although several things are specified in the Act, many other things have been found to violate the law. That allows you to be a little creative.
Secondly, the FDCPA does not require any sort of “intent” to harm you. All you have to do is show that the debt collector did what you say is illegal. And you don’t actually have to have been hurt by what the debt collector did. That means that the unfair collection practice you claim they did does not have to have fooled you or hurt you at all.
In fraud cases, to give an example of a different kind of law, you have to prove that the person you claim defrauded you meant to do it (intent) and that it somehow harmed you (they did fool you, and you lost money). This makes claims under the FDCPA much easier than most other lawsuits. Finally, there is the question of evidence. Many FDCPA claims arise out of the debt collector’s lawsuit against you, and this will be part of the record, but all of the claims will be relatively easy to prove. Here are some articles that discuss some possible claims under the FDCPA:
There are other sources of possible counterclaims, however. There is a law in consumer law that provides that any time you would have a claim or defense against the seller, you also have that claim or defense against someone trying to collect the bill.That means that if you were ripped off by a seller, and then a debt collector comes after you, you can sue the debt collector for that fraud. If you do, you will probably have some significant advantages, as the debt collector probably does not have access, much less inexpensive, convenient access, to the witnesses it would need to defend the case. And there are other possible claims – like defamation or possible violations of the Fair Credit Reporting Act.
What You Actually Do
Assuming you decide to bring a counterclaim, what you actually do is attach it to your Answer. That is, you create your Answer, and then at the end you add allegations that would support your counterclaim. The materials in my Litigation Manual provide you samples of these.
Foreclosure Fraud
Foreclosure Fraud – Are They Ripping You Off?
As I have argued a number of times, banks seeking foreclosure have been hampered by the “alphabet derivatives” known as “MBS’s” (mortgage backed securities). Often, banks seeking to foreclose on allegedly defaulted mortgages do not own the title to the property in dispute and cannot find it, and therefore cannot (legitimately) pursue their foreclosure actions. It seems that some lenders may have found a convenient way past this objection: systematic fraud.
Fraud in New York
On August 17, 2010, a federal class action suit was filed on behalf of tens of thousands of New York State homeowners who lost their homes to an alleged foreclosure fraud orchestrated for years by a “foreclosure mill” attorney and major mortgage companies. The case is “Connie Campbell vs. Steven Baum, MERSCORP, Inc, et al.”, Case #10CV3800, filed in the U.S. District Court for the Eastern District of New York. It claims there were various lending and Fair Debt Collection Practices Act (FDCPA) violations and that homeowners paid inflated foreclosure and other fees made up by Mr. Baum on behalf of his clients, the lending institutions.
The alleged foreclosure scheme came to light after the class plaintiff lost her home to a foreclosure filed by Baum for HSBC even though the loan had never been assigned to HSBC. A “Satisfaction of Mortgage” was eventually filed by a company named MERS, showing that HSBC never owned the loan, and the foreclosure complaint should have never been filed in the first place.
Perhaps tens of thousands of New Yorkers alone have been thrown out of their homes into the street through fraudulent foreclosure actions. As investigations have continued, it has become increasingly clear that the foreclosure violations are rampant and nationwide.
Just Who Are the Barbarians at the Gates of Rome?
Some time ago a prominent social commentator likened people opting out of their non-recourse loans to “barbarians at the gates of Rome.” And last year there was a lot of argument about the morality of individuals pursuing this right for which they had negotiated and paid. Supposedly, these people were taking unconscionable advantage of the poor lenders.
As I pointed out at the time, for people to exercise the rights which they negotiated for against well-heeled and sophisticated lenders was hardly a sign of the “break down” of law and order. It was, in fact, simply the legal process working as it should. In this case in favor of the homeowner rather than the banks, for a change. All the morality talk was designed to hoodwink the public into blaming the homeowners rather than the banks, who for years deliberately fostered lax lending practices as a way to inflate prices and increase their profits.
The Sound of Silence
Let’s just say the silence of these self-appointed guardians of morality about the revealed practices of the lenders affecting tens of thousands at least, and possibly many millions of homeowners defrauded and rendered homeless is positively deafening.
Defend against Motions to Dismiss Part 1
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Rebuilding your Life after Economic Disaster
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Scam Report – Free Credit Report Dot Com
Like a lot of scams, this one may not be illegal, but I would argue that FreeCreditReport.com, which advertises “free” credit reporting, is deceptively marketed and designed to take advantage of people who are worried about their credit scores.
The Product: Freecreditreport.com
First, what is the product sold by the company? It is monitoring of your credit report created by Experion, including alerts warning you of new information which might harm your score. Since Experion is just one of the three main credit reporting agencies, and since these agencies may report different information on your report, the product is of very limited utility.
Second, there’s nothing free about this “free” credit reporting “service.” You can sign up for a trial offer of seven days. It costs a buck and gives you pretty much what you could get for free if you followed links provided by the government. Credit agencies are required to give you a free credit report once a year. At the end of the seven-day “trial” period (but the service may be inactive for the first two of those days), if you forget to cancel the service, they’ll be billing you for $16.95 per month until you do cancel.
Why It’s a Scam
I believe that setting up and heavily advertising something as free when it isn’t free is deceptive marketing. A trial period of only seven days – two days of which don’t even work – is clearly designed to trap and rip off people who aren’t on their toes. And it isn’t even free.
Maybe most important of all is the whole service anyway. To suggest that constantly monitoring one credit bureau is enough is false because the credit bureaus can have different information and you would need to check all three. Ironically, it is also true that getting your credit report every month is also much more than you need – you won’t need your report nearly that often if you are in process of repairing your report (as i suggest how to do in this month’s Life after Litigation article). The process moves much more slowly than that.So your actual need of the product is very limited. The service costs far more than it is worth in my opinion.
And finally, the who marketing of the service is designed to create impulse buys. The ads raise the prospect of identity theft or sudden action by credit bureaus and offer FreeCreditReport.com as some sort of solution. It would not in fact help much with either of these problems. Simply knowing that you’ve suffered identity theft or negative credit reports is only the small tip of the iceberg in protecting your rights.