There are a lot of “unfortunate” or downright crazy ideas out there in the internet world. Too many, actually, for us to keep up with in terms of warning you specifically about each one. We would urge you to use your common sense in evaluating the things people say. Remember that the law is a practical system developed over hundreds of years to deal with practical problems. Remember, too, that the legal system is a sort of battlefield between the rich and the “masses” – to put it in currently political terms, between the 1% and the 99% – and that the 99% don’t win that many of the battles. That means you should be extremely skeptical of “shocking” or “secret” ways to beat the debt collectors (who are of the 1%).
Myths that Can Really Hurt People in Debt
You have tools at your disposal – they’re the basic tools of litigation. You have a very good chance to win if you will use those tools because of the way the system is designed and used. It’s designed to cause people to default and to profit quickly and easily from those who do and, by and large, to get rid of suits against people who do not default. That should make you doubly and triply suspicious of any system, by anybody, that might lead to your defaulting. Anything that makes you default plays right into the hands of the debt collectors.
With all that said, here are a few of the wilder ideas that I have seen lately:
“Strawman” Theory
“Sovereign Man” Theory
Rejecting Service of Process on any Basis
Other Dangerous Myths in Debt Defense and Negotiation
Because any negotiation is about persuasion, and persuasion can result from a mixture of things from threats, inducements, or simply friendliness, debt negotiation either before or during (or even after) litigation will include various arguments regarding legal rights as well as other things.
But not all arguments are equal.
For the most part, you want to make arguments that are reasonable. That isn’t to say that there aren’t times when sheer energy or aggressiveness (as discussed above in the section on personalities) will win – like playing a game of “chicken,” in which it’s just a question of which person is willing to be more reckless, but in general, business between creditors and debtors is not done that way. That is because, beyond a certain point, legal rights will control things, and in commercial law those legal rights are usually pretty clear.
In general, any actual belief (as opposed, for example, to a stated position taken purely for negotiation purposes) that there is some special or secret way “out” of debt that does not take into account economic and practical reality is a dangerous myth for people in debt. Our economic and legal systems were not created by geeks. They have developed over the past 800 years by people working for a living – or living off of the work of others – and a bunch of lawyers resolving literally millions of conflicts. Does it seem remotely likely, therefore, that something impractical and mystical will give you a magical “loophole” out of all your troubles? Not on your life.
With that in mind, let’s discuss a few of the loopy ideas that seem to have gotten some respect out there.
1. You Must Have a Contract with the Collector in Order to Have Debt
There are many people out there on the internet saying that there must be a “contract” in order for there to be a debt. In the first place, this is simply not a true statement of the law, as anybody with a speeding ticket can say. A contract is not necessary for a debt to exist.
In the second place, contracts can arise in many ways, not all of which involve documents signed by both parties, which is what the people talking about the “requirement” of a contract actually mean. A typical law school example of contract is a challenge: “if you lose 50 pounds, I’ll pay you $1,000” or some variation on this “if you do X then I will do Y” idea. Most of the time, these things do create a contract when either side does what the agreement calls for. (These are called “unilateral contracts.”)
What must happen for there to be a contract is for there to be an offer and an acceptance. Where both sides give up something or do something for one another (or say they will), and even something like losing weight or walking across a bridge in exchange for money or something else can satisfy that requirement, and the “contract” will be implied in the law. Using a credit card after receiving an offer certainly creates an obligation to repay – remember, the law was not created by nerds: it was created by business people to make business work. You may hear the phrase “meeting of the minds,” as a necessity for a contract, but this is not a literal necessity; it’s a question of reasonable interpretation.
And in the third place, contracts can be “transferred” or “assigned.” That simply means that, in general, the obligation to pay somebody can be sold or given away, and the person receiving it can collect on it. In reality, this sort of movement of debt obligations is largely responsible for our country’s prosperity (or addiction to consumerism, if you look at it that way), since this allows for the freer flow of money and goods to people who can use them. In any event, it is a fundamental part of our economic system. Do you seriously believe it could be toppled as easily as denying that money can be owed without an agreement between the suer and the sued? If you think so and act or negotiate based upon that belief, you will soon have a judgment to worry about in addition to everything else. Be realistic.
2. Debt is not Debt because Money is not Money
There has long been a theory that because the constitution said that money was to be gold or silver, and the Federal Reserve creates money out of a banking process that relies on debt to bring what we call money into existence, that debt is somehow not debt. This argument is made in many different ways. Some argue that because Federal Reserve Notes are created out of debt, they are somehow “paid off” as soon as you buy something. Others say that there is simply no such a thing as money any more, and therefore nobody owes anybody anything. We have also heard some weird argument about Social Security numbers creating automatic bank accounts, although how this would relate to a credit card debt isn’t clear.
However the argument is made (and we have some sympathy for the argument that the founders intended to and did put a gold and silver as money requirement into the constitution), it’s a pipe dream now. The Supreme Court has “read” the gold and silver requirement out of the constitution, and in any event the actual existence of debt does not require the existence of money. This whole argument about not owing anything for valuable things you have received is a fantasy. We believe that if you even state it as a position to your counterparty or the court, you will damage your credibility and seen as a flake.
3. There Must be a “Conflict” for the Court to Obtain Jurisdiction
Again, this is simply not so, as the argument is made, although it is true in theory.
The inventors of this idea seem to have taken it from the constitutional requirement that there be a “controversy” for a court to have jurisdiction. But the fact that a debt collector wants money that you do not pay (it doesn’t matter whether you “want” to or “refuse” to pay or not) is plenty enough controversy to establish that aspect of jurisdiction. Do you seriously think this hasn’t been addressed in 800 years of law? That it waited until the invention of Youtube for someone to figure this out? No.
This is another idea that will hurt you in the eyes of the counterparty. And to be specific, not only will the other person discount your words, but it is likely that he or she will believe you are weaker as an opponent. This means that taking this position makes litigation more likely, and you will lose that litigation if you take this position in the lawsuit.
4. You Must “Consent” to the Court’s Jurisdiction
One of the dumbest ideas I’ve heard recently is that you must somehow consent to the court’s jurisdiction over you in order for it to have power over you. Again, this is simply not so, as any captured bank robber could tell you. Jurisdiction does not depend on the agreement of the people trying to avoid their debts. One of the darling notions of democracy may be that people who are governed must “consent” to be governed, but this is hardly true in any literal way at all. In fact, jurisdiction depends on the power of the governing body. If you try not to pay debts and to keep the police from taking stuff when a court says they can, you will be put in jail. Consent to jurisdiction is implied by your having certain minimum contacts with it, and it is certainly not a matter to which you could revoke or deny that consent if sued.
Everybody actually knows this, it’s just that people create elaborate fantasies that they dress up and sell to people (sometimes themselves) who are desperate to avoid problems. If you are talking about or considering negotiating your debts, this is not you – you are attempting to solve, rather than avoid, your problems.
It is equally true that “refusing” the “benefits or burdens of the court’s jurisdiction,” whether you write it at a 45 degree angle or not (!) simply has no effect in the law other than to distract you and make it less likely that you will defend yourself. Don’t try to use any of these hare-brained schemes as negotiating points, as they will simply mark you as a loser in the eyes of your counterparty. Complete silence would probably be far better.
Start from Reality
If you are facing debt problems, pretending that there is some magical solution to them, some way to wave a wand or recite a few words and have the debts go away, is just dangerous thinking. If you follow any of the paths listed above, you will probably ignore the things that actually work and get yourself into a truly terrible place very quickly. Be realistic and practical. Don’t believe people who try to sell you moonshine. And above all, don’t try to sell this nonsense to the people trying to get money from you when you are negotiating. You will lose their respect if you do, and this will negatively affect your ability to make a deal.
You will find a lot of materials throughout this site that will help you develop a true and accurate understanding of your situation. You have some real advantages in your situation, whether you are negotiating or in a lawsuit. They want your money, and they have to follow some pretty tough rules if you make them. Our articles, videos and products are designed to help you do that. It doesn’t always sound easy – and it isn’t always easy – but it works if you will put in the work.
Adversarial Systems
Winning in Debt Litigation – Play the Game for Keeps
Most of us spend most of our time in various sorts of cooperation. We help each other, or at least we try to do what is morally right. In litigation, however, the system is not cooperative and not hierachical. Instead, it is adversary. Litigation is an adversarial system – that means you put aside all the questions about why you’re playing and try to win. If sports, the saying is that “the best team or person wins.” The legal system is designed the same way – the idea is that in a generally fair contest the best case will win. That means you fight hard.
And if you win, you deserve the victory. It helps to be fired up a little bit – then you can do the things that will eventually make you unstoppable. If you are having any trouble getting motivated, you should also look at Debt Collection is a Social Justice Issue.
Four Dangerous Myths
There are a lot of “unfortunate” or downright crazy ideas out there in the internet world. Too many, actually, for us to keep up with in terms of warning you specifically about each one. We would urge you to use your common sense in evaluating the things people say. Remember that the law is a practical system developed over hundreds of years to deal with practical problems. Remember, too, that the legal system is a sort of battlefield between the rich and the “masses” – to put it in currently political terms, between the 1% and the 99% – and that the 99% don’t win that many of the battles. That means you should be extremely skeptical of “shocking” or “secret” ways to beat the debt collectors (who are of the 1%).
Myths that Can Really Hurt People in Debt
You have tools at your disposal – they’re the basic tools of litigation. You have a very good chance to win if you will use those tools because of the way the system is designed and used. It’s designed to cause people to default and to profit quickly and easily from those who do and, by and large, to get rid of suits against people who do not default. That should make you doubly and triply suspicious of any system, by anybody, that might lead to your defaulting. Anything that makes you default plays right into the hands of the debt collectors.
With all that said, here are a few of the wilder ideas that I have seen lately:
“Strawman” Theory
“Sovereign Man” Theory
Rejecting Service of Process on any Basis
Other Dangerous Myths in Debt Defense and Negotiation
Because any negotiation is about persuasion, and persuasion can result from a mixture of things from threats, inducements, or simply friendliness, debt negotiation either before or during (or even after) litigation will include various arguments regarding legal rights as well as other things.
But not all arguments are equal.
For the most part, you want to make arguments that are reasonable. That isn’t to say that there aren’t times when sheer energy or aggressiveness (as discussed above in the section on personalities) will win – like playing a game of “chicken,” in which it’s just a question of which person is willing to be more reckless, but in general, business between creditors and debtors is not done that way. That is because, beyond a certain point, legal rights will control things, and in commercial law those legal rights are usually pretty clear.
In general, any actual belief (as opposed, for example, to a stated position taken purely for negotiation purposes) that there is some special or secret way “out” of debt that does not take into account economic and practical reality is a dangerous myth for people in debt. Our economic and legal systems were not created by geeks. They have developed over the past 800 years by people working for a living – or living off of the work of others – and a bunch of lawyers resolving literally millions of conflicts. Does it seem remotely likely, therefore, that something impractical and mystical will give you a magical “loophole” out of all your troubles? Not on your life.
With that in mind, let’s discuss a few of the loopy ideas that seem to have gotten some respect out there.
1. You Must Have a Contract with the Collector in Order to Have Debt
There are many people out there on the internet saying that there must be a “contract” in order for there to be a debt. In the first place, this is simply not a true statement of the law, as anybody with a speeding ticket can say. A contract is not necessary for a debt to exist.
In the second place, contracts can arise in many ways, not all of which involve documents signed by both parties, which is what the people talking about the “requirement” of a contract actually mean. A typical law school example of contract is a challenge: “if you lose 50 pounds, I’ll pay you $1,000” or some variation on this “if you do X then I will do Y” idea. Most of the time, these things do create a contract when either side does what the agreement calls for. (These are called “unilateral contracts.”)
What must happen for there to be a contract is for there to be an offer and an acceptance. Where both sides give up something or do something for one another (or say they will), and even something like losing weight or walking across a bridge in exchange for money or something else can satisfy that requirement, and the “contract” will be implied in the law. Using a credit card after receiving an offer certainly creates an obligation to repay – remember, the law was not created by nerds: it was created by business people to make business work. You may hear the phrase “meeting of the minds,” as a necessity for a contract, but this is not a literal necessity; it’s a question of reasonable interpretation.
And in the third place, contracts can be “transferred” or “assigned.” That simply means that, in general, the obligation to pay somebody can be sold or given away, and the person receiving it can collect on it. In reality, this sort of movement of debt obligations is largely responsible for our country’s prosperity (or addiction to consumerism, if you look at it that way), since this allows for the freer flow of money and goods to people who can use them. In any event, it is a fundamental part of our economic system. Do you seriously believe it could be toppled as easily as denying that money can be owed without an agreement between the suer and the sued? If you think so and act or negotiate based upon that belief, you will soon have a judgment to worry about in addition to everything else. Be realistic.
2. Debt is not Debt because Money is not Money
There has long been a theory that because the constitution said that money was to be gold or silver, and the Federal Reserve creates money out of a banking process that relies on debt to bring what we call money into existence, that debt is somehow not debt. This argument is made in many different ways. Some argue that because Federal Reserve Notes are created out of debt, they are somehow “paid off” as soon as you buy something. Others say that there is simply no such a thing as money any more, and therefore nobody owes anybody anything. We have also heard some weird argument about Social Security numbers creating automatic bank accounts, although how this would relate to a credit card debt isn’t clear.
However the argument is made (and we have some sympathy for the argument that the founders intended to and did put a gold and silver as money requirement into the constitution), it’s a pipe dream now. The Supreme Court has “read” the gold and silver requirement out of the constitution, and in any event the actual existence of debt does not require the existence of money. This whole argument about not owing anything for valuable things you have received is a fantasy. We believe that if you even state it as a position to your counterparty or the court, you will damage your credibility and seen as a flake.
3. There Must be a “Conflict” for the Court to Obtain Jurisdiction
Again, this is simply not so, as the argument is made, although it is true in theory.
The inventors of this idea seem to have taken it from the constitutional requirement that there be a “controversy” for a court to have jurisdiction. But the fact that a debt collector wants money that you do not pay (it doesn’t matter whether you “want” to or “refuse” to pay or not) is plenty enough controversy to establish that aspect of jurisdiction. Do you seriously think this hasn’t been addressed in 800 years of law? That it waited until the invention of Youtube for someone to figure this out? No.
This is another idea that will hurt you in the eyes of the counterparty. And to be specific, not only will the other person discount your words, but it is likely that he or she will believe you are weaker as an opponent. This means that taking this position makes litigation more likely, and you will lose that litigation if you take this position in the lawsuit.
4. You Must “Consent” to the Court’s Jurisdiction
One of the dumbest ideas I’ve heard recently is that you must somehow consent to the court’s jurisdiction over you in order for it to have power over you. Again, this is simply not so, as any captured bank robber could tell you. Jurisdiction does not depend on the agreement of the people trying to avoid their debts. One of the darling notions of democracy may be that people who are governed must “consent” to be governed, but this is hardly true in any literal way at all. In fact, jurisdiction depends on the power of the governing body. If you try not to pay debts and to keep the police from taking stuff when a court says they can, you will be put in jail. Consent to jurisdiction is implied by your having certain minimum contacts with it, and it is certainly not a matter to which you could revoke or deny that consent if sued.
Everybody actually knows this, it’s just that people create elaborate fantasies that they dress up and sell to people (sometimes themselves) who are desperate to avoid problems. If you are talking about or considering negotiating your debts, this is not you – you are attempting to solve, rather than avoid, your problems.
It is equally true that “refusing” the “benefits or burdens of the court’s jurisdiction,” whether you write it at a 45 degree angle or not (!) simply has no effect in the law other than to distract you and make it less likely that you will defend yourself. Don’t try to use any of these hare-brained schemes as negotiating points, as they will simply mark you as a loser in the eyes of your counterparty. Complete silence would probably be far better.
Start from Reality
If you are facing debt problems, pretending that there is some magical solution to them, some way to wave a wand or recite a few words and have the debts go away, is just dangerous thinking. If you follow any of the paths listed above, you will probably ignore the things that actually work and get yourself into a truly terrible place very quickly. Be realistic and practical. Don’t believe people who try to sell you moonshine. And above all, don’t try to sell this nonsense to the people trying to get money from you when you are negotiating. You will lose their respect if you do, and this will negatively affect your ability to make a deal.
You will find a lot of materials throughout this site that will help you develop a true and accurate understanding of your situation. You have some real advantages in your situation, whether you are negotiating or in a lawsuit. They want your money, and they have to follow some pretty tough rules if you make them. Our articles, videos and products are designed to help you do that. It doesn’t always sound easy – and it isn’t always easy – but it works if you will put in the work.
Debt Collectors Don’t Care
Debt collectors have one concern, and they only want one thing: your money. Beyond that, they don’t want to help you deal with your problems – they have no interest in those except as a way to persuade you to send them money.
And at least in most cases, professional debt collectors don’t much want to hurt you, either – although there are some sadists.
You’ll do better looking at them in the same way. You need to handle them in order to succeed, but you don’t get anything for trying to make them feel bad. In fact, that desire in itself might be a hook that lets them hurt you.
Debt collection is a social justice issue. But the first step in fighting it is to keep them from getting any of YOUR money.
Robo-signing and Automated Suits
How Debt Collectors Can File so Many Suits
Debt collectors frequently file lawsuits based on little more than a “computer tape” containing some very basic information about the alleged debtor and debt. A computer program files the suit. This means that if you are being sued, there’s a good chance you will win if you defend yourself. This article shows you some of the debt collectors’ weaknesses.
Automated Debt Collection Causing Suits without Merit to be Filed
As anyone who visits our site or reads any of our writings can attest, we often point out that debt collectors frequently file lawsuits based on little more than a digital file containing some very basic information about the alleged debtor and debt. The New York Times recently confirmed that essential insight in their article, “Automated Debt Collection.”
One Law Firm – 80,000 Law Suits per Year
In the article, the Times points to a firm named Cohen & Slamowitz, a Woodbury, N.Y., firm that specializes in debt collection. The firm has been filing roughly 80,000 lawsuits a year.
With just 14 lawyers on staff, that works out to more than 5,700 cases per lawyer. That in turn works out to filing about two cases per hour, every hour of a 365 day year. Of course, this leaves the lawyers no time at all to do anything else on the suit.
Computer Software Files the Suits!
How is it possible? Cohen & Slamowitz relies on computer software to help prepare its cases, and the lawyers merely process the paperwork. As the Times article points out, typically, a debt buyer sends a law firm an electronic database that contains various data about consumers, including name, home address, the outstanding balance, the date of default and whether interest is still accruing on the account.
Once the data is obtained by a law firm, software like Collection-Master from a company called Commercial Legal Software can “take a file and run it through the entire legal system automatically,” including sending out collection letters, summonses and lawsuits, said Nicholas D. Arcaro, vice president for sales and marketing at the company. Although legal ethics requires a lawyer to perform an independent analysis to make reasonably certain a case is well-founded in law and fact, there is little time for such niceties when you’re filing two suits per hour every hour of the year.
Something Rotten in Denmark
The Federal Trade Commission has also weighed in, saying the system for resolving disputes over consumer debts was broken and in need of “significant reforms.” The agency urged states to adopt measures to make it more likely that consumers would show up in court to defend themselves; currently, most do not, resulting in default judgments. A court judgment gives debt buyers the ability to collect on the debt through actions like wage or property garnishment.
“We are pushing very hard to make certain that debt collectors have sufficient substantiation, particularly when a consumer challenges the debt,” said David Vladeck, director of the commission’s Bureau of Consumer Protection. Of course, this documentation does not exist in many cases.
This website provides people being sued for debt all the information they need to take action to protect themselves. If more people used it, they could probably force the debt collectors to change their business practices.
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.
Easy Way Out of Debt
Is there a “Silver Bullet” to Debt Collectors?
In mythology, one of the few effective ways to kill magical creatures is with silver, and so a “silver bullet” is a semi-magical response to stop something bad. Is there a silver bullet approach to the debt collectors? Is there something you can do, with little effort, that will just make them go away? There seems to be a cottage industry of people selling that sort of easy one-size-fits-all solution.
The debt collectors make their living off that kind of thinking.
There are NO Free Lunches in this world, but you have a great chance
You have to stay away from magical thinking if you want to have a chance when the debt collectors sue you. Fortunately, theirs is a business that is set up like a factory, and if you put in a little effort, you can find and do the things that work. They do take some effort, and they won’t always win, but there are things that make you much more likely to win than to lose. And once they see you’re ready to stick to it, they may very well walk away from the whole thing.
After all, they make their money off people who don’t fight or don’t know what they’re doing. We help you do both, and your chance of winning is very, very good.
As we often say, around 90 percent of people being sued for debt do not defend themselves. Consider what that means: it means that it’s really more expensive for a debt collector to find out whether it has a good case against you – much less to build it and beat you in court if you fight – than just to bring cases and dismiss them if things get tough. And that’s exactly what most debt collectors do. Therefore, rather than look for words to scare the debt collector away, it makes sense to build a tough defense that makes them work hard to try to beat you.
Do the things that give yourself a chance to win and the things that make it tough for them to beat you. Then you probably will win if they don’t walk away first.
Payday Loans – 100 Days to Debt Slavery
What is Debt Settlement?
What Is Debt Settlement and Negotiation?
If you are being contacted by debt collectors for original creditors or debt buyers, there are things you can do to protect yourself. You may want to negotiate with them effectively so that you can pay them and minimize damage to your credit report or reduce the chance of their suing you, or you may just want to make them leave you alone.
Whatever you want, though, there are legal protections and tools you can use to move things forward and avoid hurting yourself in the future.
Know Who Is Trying to Get Your Money
It starts with knowing who is contacting you and what they want – and what they can or might do to you if they do not get it. Likewise, it is good to know what you can do to them, depending on how things develop. There’s an old saying that almost all lawsuits settle after negotiations, but that negotiations always occur “in the shadow of the law.” That is, what you will have to do after settlement has a lot to do with what they could make you do after trial. Thus there is a lot of information here designed for people suing and being sued – that’s how you know where the shadow of the law falls.
Credit card companies are different than other large companies or small businesses, and both are different than debt buyers. Talking to a bill collector inside an original creditor is different than talking to one outside the company, and it is yet another thing if you are contacted by someone on behalf of a debt buyer. It sometimes even makes a difference whether they call you first, or vice-versa. These are all important things to keep in mind. And there are many others. We have materials on the site that will help you understand how these things can affect your negotiations, and we have products that will make it easier for you to do what you need.
Debt Settlement – Not “One Size Fits All”
Many debt settlement companies attempt to force creditors to the negotiating tables by withholding payments. This is not always a good idea. There are also other alternatives, and we discuss some of those and ways you can act to minimize the damage to your credit report by negotiating with creditors, where possible, before that damage has occurred.
If you are negotiating, you will want to act in your strategic best interest, and our materials are designed to help you do that.
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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