“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.
Introduction
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.
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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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.
Introduction
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.
Conducting Discovery in Debt Cases
This video discusses the things you need to know – and how you find them – as you begin the discovery process. Things like interrogatories, requests for production and requests for admissions, and even depositions. These are the things you need in order to prove that the debt collector doesn’t have a case.
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Denying Requests for Admission
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Preparing for Deposition Part 1
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