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?
Estoppel
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.
Defending
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.
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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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?
Estoppel
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.
Defending
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.
Conducting Discovery When Sued for Debt Part 3
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Conducting Discovery When Sued for Debt Part 1
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Conducting Discovery when Sued for Debt Part 2
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