You’re being sued as a result of things that are either happening now – or happened some time in the past. But things DO change. You will want to fix things eventually and move on to a better future. Here’s how you can get that started – starting while you’re still in litigation.
Life after Debt Litigation
You probably know that I am a big believer in the importance of filing a counterclaim. As I mention in the featured question section this month, 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. If you do not have a counterclaim, the debt collector is free to drop the case at will in most jurisdictions. Your counterclaim prevents this.
There is also another reason relating to your life after litigation: Repairing your credit after the lawsuit.
Holding the Collector in the Suit
Our Life after Litigation section here is related to the featured question: “How do you keep the debt collector from just dropping the case and selling your debt to someone else?”
If you’ve read my articles or watched some of my videos, you probably know that I am a big believer in filing a counterclaim. As I mention in the featured question section, 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.
Protect Your Credit Report
There is also another reason relating to your life after litigation. Let’s consider your credit report. You may not know it, but when a creditor or debt collector sells your debt to someone else, it should report that information on your credit report. That way, if the next company down the line reports you, it is clear that they are doing so on a debt that someone else previously owned. And this in turn prevents one “bad debt” from looking like several apparent bad debts. After reporting you initially and up to the point of charge off, the original creditor should not be adding information to your file. That is the right of the next person who obtains the debt. Another way of putting this is that only the person to whom the debt is currently owed has a right to report information about that debt.
Why is this important?
It’s important because if you force the debt collector to settle a debt as a dismissal “with prejudice,” you terminate the debt collector’s right to collect. You also end its right to report the debt as a debt. That is because it, and any subsequent owner of the debt, is bound by what is known as “res judicata” (or more commonly now called “collateral estoppel”). Basically what that means is that once a court has ruled on the validity of the debt – that ruling will apply no matter who later owns the debt.
What do you do with that?
Fair Credit Reporting Act
You may have heard of the Fair Credit Reporting Act, 15 U.S.C. Sec. 1681. This was a law initially designed to limit and reduce the abuses of the credit reporting agencies, which were running roughshod over consumer rights. In particular, the credit agencies would report false or disputed information which was damaging people in very real ways – and then ignore repeated requests to correct that information. The FCRA was an attempt to assert some kind of control over them. I will address this issue more fully some other time, but the law divides the reporting community into two groups: the agencies and “information suppliers.”
Debt Collectors Are Often Information Suppliers
The people who report debts to the credit reporting agencies are “information suppliers,” and while they have a legal duty to report that information truthfully, that duty is initially enforceable only by certain government agencies. In plain English – you can’t sue them for reporting information falsely. And, naturally, that is exactly what’s happening when you are falsely trashed in your report. But you do have a right.
Your Right against Information Suppliers
Your right against information suppliers is located in 15 U.S.C. Sec. 1681s-2(b). What this part of the law says is that:
1. In general
After receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall –
(A) conduct an investigation with respect to the disputed information;’
(B) review all relevant information provided by the consumer reporting agency pursuant to section 1681i(a)(2) of this title;
(C) report the results of the investigation to the consumer reporting agency; and
(D) If the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis.
Your Rights under the FCRA
What this means in a practical sense is that if you win at trial and get the debt collector’s case dismissed, or if you force it to settle where its claims are dropped “with prejudice,” then you should consider following up with a request to the reporting agencies for your credit report. If the debt collector has reported you as owing, or if the original creditor has not reported the debt as sold, then you may want to file a dispute. It is the filing of the dispute that allows you to sue the information supplier for providing false information to the credit reporting agencies.
How it Works
Suppose you go through the litigation process and get the case dismissed with prejudice. Your next move might be to request a credit report from all the credit reporting agencies. Debt collectors do not necessarily provide information to all the agencies, and perhaps they provide different information to different agencies. In any event, get your report from each of them. Please check out this month’s scam report before you do this, however.
When you get the reports, you must read them carefully – do they reflect that the debt was sold? Has the debt collector filed reports saying that you still owe? If the answer to either or both of these questions is “yes,” then you can write to the credit reporting agency requesting that it reinvestigate and stating very specifically that you “dispute” the report and the debt. Don’t be coy about this – you get no points for style here – you need to dispute the report and insist on a correction.
This dispute is what triggers the responsibility of the credit reporting agency to conduct a reasonable “reinvestigation.” As part of this reinvestigation, the agency must ask the information supplier to investigate the information it is supplying. If the information supplier provides false information at this point, you can sue it under the Fair Credit Reporting Act as well as under “common law” (state law) theories like defamation. And this is where collateral estoppel comes back into play – because if they claim you owe the money even though they have dismissed the case with prejudice, they would be “estopped” from arguing that they were telling the truth if you sued them for defamation or false reports under the FCRA.
Sue the Credit Reporting Agencies?
I’ve never suggested that nonlawyers try to sue the credit reporting agencies. They’re hard to find and serve, hard to figure out and, at least at the last report I got, almost never give up. If you decide to go after the credit reporting agencies, you should strongly consider hiring a lawyer.
How to Amend Your Answer
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Your Rights under the Fair Credit Reporting Act
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Repairing Credit after Debt Litigation
You’re being sued as a result of things that are either happening now – or happened some time in the past. But things DO change. You will want to fix things eventually and move on to a better future. Here’s how you can get that started – starting while you’re still in litigation.
Life after Debt Litigation
You probably know that I am a big believer in the importance of filing a counterclaim. As I mention in the featured question section this month, 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. If you do not have a counterclaim, the debt collector is free to drop the case at will in most jurisdictions. Your counterclaim prevents this.
There is also another reason relating to your life after litigation: Repairing your credit after the lawsuit.
Holding the Collector in the Suit
Our Life after Litigation section here is related to the featured question: “How do you keep the debt collector from just dropping the case and selling your debt to someone else?”
If you’ve read my articles or watched some of my videos, you probably know that I am a big believer in filing a counterclaim. As I mention in the featured question section, 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.
Protect Your Credit Report
There is also another reason relating to your life after litigation. Let’s consider your credit report. You may not know it, but when a creditor or debt collector sells your debt to someone else, it should report that information on your credit report. That way, if the next company down the line reports you, it is clear that they are doing so on a debt that someone else previously owned. And this in turn prevents one “bad debt” from looking like several apparent bad debts. After reporting you initially and up to the point of charge off, the original creditor should not be adding information to your file. That is the right of the next person who obtains the debt. Another way of putting this is that only the person to whom the debt is currently owed has a right to report information about that debt.
Why is this important?
It’s important because if you force the debt collector to settle a debt as a dismissal “with prejudice,” you terminate the debt collector’s right to collect. You also end its right to report the debt as a debt. That is because it, and any subsequent owner of the debt, is bound by what is known as “res judicata” (or more commonly now called “collateral estoppel”). Basically what that means is that once a court has ruled on the validity of the debt – that ruling will apply no matter who later owns the debt.
What do you do with that?
Fair Credit Reporting Act
You may have heard of the Fair Credit Reporting Act, 15 U.S.C. Sec. 1681. This was a law initially designed to limit and reduce the abuses of the credit reporting agencies, which were running roughshod over consumer rights. In particular, the credit agencies would report false or disputed information which was damaging people in very real ways – and then ignore repeated requests to correct that information. The FCRA was an attempt to assert some kind of control over them. I will address this issue more fully some other time, but the law divides the reporting community into two groups: the agencies and “information suppliers.”
Debt Collectors Are Often Information Suppliers
The people who report debts to the credit reporting agencies are “information suppliers,” and while they have a legal duty to report that information truthfully, that duty is initially enforceable only by certain government agencies. In plain English – you can’t sue them for reporting information falsely. And, naturally, that is exactly what’s happening when you are falsely trashed in your report. But you do have a right.
Your Right against Information Suppliers
Your right against information suppliers is located in 15 U.S.C. Sec. 1681s-2(b). What this part of the law says is that:
1. In general
After receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall –
(A) conduct an investigation with respect to the disputed information;’
(B) review all relevant information provided by the consumer reporting agency pursuant to section 1681i(a)(2) of this title;
(C) report the results of the investigation to the consumer reporting agency; and
(D) If the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis.
Your Rights under the FCRA
What this means in a practical sense is that if you win at trial and get the debt collector’s case dismissed, or if you force it to settle where its claims are dropped “with prejudice,” then you should consider following up with a request to the reporting agencies for your credit report. If the debt collector has reported you as owing, or if the original creditor has not reported the debt as sold, then you may want to file a dispute. It is the filing of the dispute that allows you to sue the information supplier for providing false information to the credit reporting agencies.
How it Works
Suppose you go through the litigation process and get the case dismissed with prejudice. Your next move might be to request a credit report from all the credit reporting agencies. Debt collectors do not necessarily provide information to all the agencies, and perhaps they provide different information to different agencies. In any event, get your report from each of them. Please check out this month’s scam report before you do this, however.
When you get the reports, you must read them carefully – do they reflect that the debt was sold? Has the debt collector filed reports saying that you still owe? If the answer to either or both of these questions is “yes,” then you can write to the credit reporting agency requesting that it reinvestigate and stating very specifically that you “dispute” the report and the debt. Don’t be coy about this – you get no points for style here – you need to dispute the report and insist on a correction.
This dispute is what triggers the responsibility of the credit reporting agency to conduct a reasonable “reinvestigation.” As part of this reinvestigation, the agency must ask the information supplier to investigate the information it is supplying. If the information supplier provides false information at this point, you can sue it under the Fair Credit Reporting Act as well as under “common law” (state law) theories like defamation. And this is where collateral estoppel comes back into play – because if they claim you owe the money even though they have dismissed the case with prejudice, they would be “estopped” from arguing that they were telling the truth if you sued them for defamation or false reports under the FCRA.
Sue the Credit Reporting Agencies?
I’ve never suggested that nonlawyers try to sue the credit reporting agencies. They’re hard to find and serve, hard to figure out and, at least at the last report I got, almost never give up. If you decide to go after the credit reporting agencies, you should strongly consider hiring a lawyer.
Conducting Discovery – Part 3
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Conducting Discovery – part 1
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Conducting Discovery – part 2
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Overcoming Default Judgments in Debt Cases
This is a companion to the video, “Procedure for Moving to Vacate Default Judgments.” This video explains why you should try to vacate (remove) a default judgment against you and generally how to go about doing it. The second video goes into a little more detail on that and tells you specifically what documents you will need to file and what they should contain. If you have defaulted on a debt suit and want to try to reopen it (to prevent collection), check out our product: Motion to Vacate Pack. For a more comprehensive understanding of the debt law and defense, you need our Debt Defense System.
We categorize this video under “collection” because often the way people discover there’s been a default judgment is that there is some action to garnish wages or collect on the judgment. If that’s your situation, it isn’t too late. To prevent the collection/garnishment, you will need to get the judgment against you vacated (eliminated). And the very first step in doing that is finding out what happened. To do that, you will go to the court, look up the judgment, get the file on it, and look in the file to see what happened.
It gets a little more complicated than that after you find out what happened, but there are actions you can take, and our job is to help you figure out which and to do them.
Motion to Vacate or Set Aside
If you missed the time for filing your Answer or showing up in court – even by just a few minutes, there is probably a default order or judgment against you. You will need to get that order vacated or “set aside,” the legalese for “removed.” You need the court’s initial judgment to go away, in other words, so you can start over and defend yourself from the debt collectors. You ask the court to do that by filing a Motion to Vacate. There are two parts to every motion to vacate – the part that explains and seeks to excuse your failure to answer, and the part that shows the court that you have some sort of defense to the suit.
There are two conflicting policies behind vacating default judgments: the policy in favor of hearing every case “on the merits” (rather than letting the case be decided by a “technicality”) and the policy in favor of “finality,” which is just a way of saying that when a court has decided something it likes for things to end. When you’re a “little guy,” the courts are more interested in finality than they are for bigger economic players.
At the same time, the debt collector will fight hard to keep its default judgment – that gives it a chance to raid your bank accounts or wages at practically zero cost rather than allowing you to defend. Thus while you have a very good chance to get the default judgment removed, the motion is a little tricky, and time is of the essence, meaning that any delay in filing the motion could cause you to lose it.
The Motion to Vacate or Set Aside Default Judgment Packet consists of 9 Documents:
Although this is not “cut and paste” you will find this document, along with the directions, just what you need to file your Motion to Vacate and to get started defending yourself so you can keep the debt collectors from garnishing your wages or raiding your bank account.
Rule against Hearsay Evidence
The Rule against Hearsay is as close to a silver bullet as you get in debt litigation. I’ve often said that debt collectors don’t have and can’t get (cost effectively) what they need to beat you. The rule against hearsay is the rule that lets you keep the records they do have out of evidence.
A Critical Definition
Hearsay is an out of court statement offered for the truth of whatever was said. That is, a statement that was made (or written, usually in debt cases) somewhere other than a courtroom, under oath.
For example, if you testified that “Mr. Smith said the dog was white,” this would be hearsay if you wanted the jury to believe the dog was white. That’s because in order to believe that, the jury would have to believe Mr. Smith – and he hasn’t testified under oath in the presence of the jury.
If you testified that “Mr. Smith said the dog was white” would not be hearsay if you wanted to prove that Mr. Smith could talk, though, because in that case the jury could evaluate your statement that he did talk and would not need to form a belief as to whether the statement was correct.
In debt collection cases, the debt collectors often seek to use affidavits or business records that say the debt was a certain amount, that certain procedures were followed, etc. But these are only helpful if you believe the records – and thus the records are hearsay. To keep the judge from allowing the records to count, you must object to their admission. And you will probably have to be prepared to argue they aren’t subject to the “business records exception.”
Business Records Exception
The Rule against Hearsay is as close to a silver bullet as you are going to get in debt litigation, but the debt collector will try to get in their often bogus records using what’s called the “business records exception.” You need to understand this rule and prepare to defend against it. In this video we discuss this rule of evidence.
This should be obvious, but it’s easy to forget things in the rush of trial or argument. In order to argue the rule against hearsay or the business records exception, you must know those rules for your state. You should also have a copy of a court decision stating the rule (and ruling the way you want it to) WITH YOU at the argument or trial. You want to be able to hand the judge the case and point to specific language in it highlighted in bright yellow ink. That way there can be no mistakes.
Otherwise, mistakes are easy to make, and it’s easy to ignore the arguments of pro se defendants.