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Why debt collectors or original creditors will negotiate with you
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Things you Should Know before you Settle
Things You Should Know before You Settle with the Debt Collector
If you’re being sued by a debt collector, you’re probably worried–of course you are–but think twice before settling the case just to make it go away. Sometimes that can be a very bad idea, and if you will hang in there and fight a little bit, you’ll be in much better shape.
A Few Basic Facts about Settling Debt Cases
The lawyers for the debt collector never worry about losing a suit – they always assume they will win. And has nothing to do with the evidence, because they rarely have any idea of what the evidence is or what they could prove if they have to. Their confidence comes from two things: they don’t worry about losing a case because they have many of them and they’re cheap. And they don’t think you – a non-lawyer – have much of a chance against them anyway. So going to court and claiming they’ll win (if you try to negotiate) is nothing to them at all – and it should mean nothing to you, either.
So what do the lawyers for the debt collector fear? They fear wasting time – or spending it at all. That’s why they never do more than glance at your case before you show up. They have the business down to spending just a very few minutes per case.
They can do this because they do lots of cases at the same time and because most people give up or default.
So in Order to Settle in Any Meaningful Way
In order for you to get them to take you seriously, you will need to do a little work – and you will need to make them do a little work. Before that happens, they might knock off 20-30% of what the case is seeking if you ask (or they might not), but they won’t do serious negotiation. To settle, you have to file an answer and begin to defend yourself. Once you file an Answer and serve them some discovery, they start noticing you, and after that the chances of settling just get better and better.
And so do your chances of winning outright.
So hang tough for a bit and do a few things – they’re easy to do and not really scary. And if you want to settle eventually you can be sure that you will have made that easier and better. Or keep fighting and see if you can make them give up.
Tip 1 Uncommon Common Sense
Tip 1: Standing up for yourself isn’t hard – it’s just different
And it gets easier
You probably wouldn’t believe how often I get asked the question: “is it hard to defend yourself from the debt collectors?”
Or maybe you would.
If you’re being sued or harassed by a debt collector, one of the very first decisions you face is whether or not to defend yourself. And it is tempting to walk away, no doubt. So what you want to know is, how hard is it not to run away, but to stay and fight?
And luckily, it isn’t really hard.
One Step at a Time
I’ve started a lot of things in my time that if I’d had any idea how much work they would involve I probably never would have started in the first place. Fighting debt collectors is probably not going to be one of these things for you. But what makes it possible even to do the truly difficult things in life is simply to concentrate on the one step in front of you. As a debt defendant you will have a series of these steps. That’s what lawsuits are – a series of things to do, like steps. How many steps it will actually take, no one can say. What I can say, with certainty, is that if you are reasonably smart and willing to work a little bit, you can do every single step. One at a time.
Debt law isn’t rocket science.
You’re going to need to file an Answer or Motion to Dismiss. Could you do that if you set aside ten hours to do it? Yes. Using our litigation materials, it will take you half an hour to draft an answer, and you can do it yourself without our litigation materials in a somewhat longer time.
You’re going to need to draft “discovery,” which is the formal way you ask the other side what they have to use against you – what could hurt or help you. Could you do that? Yes, you could. Our materials make it relatively easy, but again you can do this on your own.
You may need to file or respond to a motion. Or more than one motion. Can you do it? Certainly you can.
And so it goes. You need to develop a broad strategic plan and then take a series of very manageable steps to get there. You may or may not need to take them all – again, only the debt collector really knows how far it will take things – but you can take every necessary step from being served with the suit through trial if necessary. Each step is relatively simple.
The Difficulty is in your Mind
What is “hard” about standing up for yourself is not the actual standing up or doing what needs to be done. What is hard is to do something different than you have done. Debt troubles are usually not an accident. They are usually the result of certain actions that you or someone took (or failed to take). They are often the result of certain habits. And these habits often accompany a habit of not “taking charge.”
Habits can be hard to break, but anyone can do it if they’re determined enough, right?
Standing up for yourself is “taking charge.” It’s just a different mind-set. Easy as pie – and hard as the devil! I won’t kid you – if you are going to defend yourself you must be willing to start to make the shift from “letting things happen to you” to “taking charge.” It isn’t “hard,” in the sense of physical labor or even intellectual challenge, but it does require paying attention to things you haven’t paid attention to before. And it requires looking at something you’d probably rather not look at, right?
It does require “growth.”
This growth is why people who do stand up for themselves and beat the debt collectors feel so good about doing it. Even more than the money, maybe, standing up for yourself and growing into that sort of person is deeply satisfying and – yes – liberating. You will never be sorry if you take on the debt collectors. Any work you do on it will be “good” work. You’ll know that right from the very beginning, and you’ll get to like it more and more, probably.
The difficulty is just in changing. It’s like stepping through a wall that isn’t really there. So if you’re going to do this, start today to look out for yourself. And watch for the next tip tomorrow.
Tip 4 of Uncommon Common Sense
Tip Four – More about Time
In yesterday’s tip, I discussed managing case time. In today’s message we speak about part of why that matters so much, and why time can be one of your best advantages — if you make the debt collector’s lawyer spend a lot of it.
The Way Lawyers Value Time
I have often talked about the way lawyers value time. In debt cases there are two primary ways lawyers look at their time. First and most simplistically, they value their time according to their hourly rate. Most debt lawyers charge somewhere between $75 and $250 per hour of time, depending on their experience and “rank” in their firm and community. This is probably a lot more than you would value your time, and that gives you an ability to spend much more time on the case than they do.
The other, more realistic way lawyers look at their time is in relation to “opportunity costs,” or what they’re losing by chasing you. For more of a discussion on this topic, check out my article Understanding Opportunity Costs. I also consider this topic in detail in the Debt Defense Litigation Manual. In brief, however, consider that a typical debt lawyer might represent a few clients in cases against 100 people. If the lawyer can obtain judgments of $5,000 per case in 90 of those cases by default, those judgments total $450,000.00. If they can collect even a small percentage of those cases, a 15% attorney’s fee is going to be around, say, $75,000. For an hour or two of attorney time.
As crazy as that may seem, it is what they expect – and usually manage.
In order to take advantage of the lawyer’s need to make a lot of money for their time, you will need to spend your time making the lawyer do actual legal work. You can do this simply by defending yourself, by filing motions, and contesting the things they do. But I am not suggesting that you do things that “waste” time. Rather, the debt collectors have certain habits you can take advantage of. One of these is that they tend to be quite careless in their pleadings, and they often forget to put things into their lawsuits that are necessary to state a real claim against you. If you attack this, you force the lawyer to defend what he did and create something new.
Another, even better, example, is the way that debt collection lawyers ALWAYS object to every question you put forth in discovery. This stops most people, but for you, it will be a perfect opportunity to question the lawyer about what she means, argue with the lawyer about whether the objection is valid (they often are not, because they are “boilerplate” objections used regardless of what you asked in your discovery), and to file a motion to compel. All these things require the lawyer to spend time on a case without increasing the value of the case.
The Value of YOUR Time
If you look at the spending time, you have to consider how much money you could get by doing something else than defending yourself and comparing that to how much money you will save by beating the debt collector. Suppose you’re being sued for $5,000. How many hours would you work or be willing to work to make $5,000? Whatever your answer to that question, there’s probably plenty of reason to work hard protecting yourself. While the lawyer only gets between 15 and 25% of the value of the case, you will save ALL the value for yourself, so even if you valued your time at exactly the same as the lawyer does, it will still make sense for you to spend five times as much time as they do.
A Game of Nerves
The difference in monetary value of your time is actually a large advantage for a pro se defendant. The lawyer suing you on behalf of the debt collector is always watching the clock and needs to be “making” at least the billing rate all the time. You only need a small fraction of that to justify the actions you take, and this means that you should plan to use a lot of time to learn and implement your defense.
But to use a lot of time, you must have a lot of time, and this means that you cannot afford to spend weeks not working on the case. This is definitely a situation where “slow and steady wins the race.” Plan to spend all the time necessary on your case, and then do it.
Tomorrow we will send Tip 5.
Tip 3 of Uncommon Common Sense
Tip 3: Time is Always of the Essence
Everything in law is tied to a due date – a deadline. The rules provide very specific amounts of time for everything you must do, and missing those deadlines, while not always fatal in itself, will usually lead to dire consequences.
On the other hand, the deadlines can seem so far away as to be unlike deadlines at all, so that you are tempted to hang around doing nothing without any regard to time at all.
Time is ALWAYS Limited – You’re Either Gaining Ground or Losing it – All the Time
It is tempting to believe in litigation, as in life, that time is unlimited – that there will always be time to do the things you need to do. And the truth in law, at least, is that if you know how to do things and you are willing to take extreme action at some given points in time, it is possible to stave off disaster most of the time.
Rising to the serious occasions that come up while ignoring developing problems most of the rest of the time is very stressful, and you are likely to try to rely on someone else to do something for you on very short notice. If you are defending yourself pro se – that is, without a lawyer – you simply do not know enough about the law to be able to afford to operate “by the seat of the pants” in this way. You don’t know what it takes to do most of the tasks set before you, and you don’t know how long it will take. Therefore, you have to start long before you feel like you’re running out of time.
I often receive messages from people with a court date a day or two away, or a response to a significant motion due in a day or two. I cannot respond to many of these messages. If you had money you could hire a lawyer and trade money for time, to an extent. For most of the people reading this, however, that is simply not going to be an option. You’re trying to trade your time for money.
So what do you do? What do you do in order to stay on top of the deadlines?
First, of course, you must know how much time you are allowed by the rules to do each step. We are going to discuss that tomorrow. Today, however, I just want to emphasize something we all know all the time, and yet we ignore most of the time: time passes. If you want to win your case, you have to use the time you’ve got carefully – even when it appears that you have more than you need.
Staying On Track
The main trick of having “enough” time in litigation is knowing exactly how much time you have to do any given task. And then you must give yourself that time to do what it takes. Since you won’t be experienced in the law, you won’t be able to predict very accurately how much time things will take. Therefore you must start immediately when things come up and not stop until you’re finished.
The Time Allowed for Tasks will be Revealed in One of Two Places
There are two sources of time limits for the things that come up in your case: the Rules of Civil Procedure, and the court itself (your judge).
Time in the Rules of Civil Procedure
The Rules of Civil Procedure give you a certain amount of time for everything that happens in a case. You’ll either find this in the specific rule applying to whatever you’re doing, or in more general rules. Discovery – interrogatories, requests for documents, and requests for admissions – and Motions for Summary Judgment all have their own specific rules, and these rules will include how much time there is for response. For other motions, more generally, there’s usually a “notice” rule which will require that you give (or be given) a certain amount of time after a motion is filed before the motion can be argued. This is the time for response.
Court Scheduling Orders
Another main way time is determined is simply by the judge, usually by means of a “Scheduling Order.” This order will give the parties a certain amount of time to complete some phase of a case – to conduct discovery, for example, or to file a “dispositive” motion (a motion that could end the case). These orders DO NOT NORMALLY alter the amount of time you have for a specific task. If you’ve been given a set of interrogatories, you’ll have the amount of time allowed by the rule to answer, not the end point of the scheduling order. However, if you submit discovery to the other side without enough time for them to answer before the scheduling order ends the discovery process, they may not have to answer at all. Thus you must make sure your answers will be due before the discovery cut-off in the scheduling order.
Leave for Additional Time
Whether you have a iscovery cut-off or need more time for discovery (or need them to answer quicker), the solution is to ask the court for a special order that does what you need. Remember that you’re asking for something special, and such a motion would need to be justified.
Your Problem is Not Someone Else’s Crisis
I often receive messages from people with a court date a day or two away, or a response to a significant motion due in a day or two. I cannot respond to many of these messages. If you had money you could hire a lawyer and trade money for time, to an extent. For most of the people reading this, however, that is simply not going to be an option. Remember the saying, “your deadline is not my crisis.” Most people already have too much to do to take on some massive problem of yours on short notice. You must remember this.
So what do you do? You have to stay on track as much as possible every step of the way.
Tomorrow we’ll discuss the “other side” of time – the way you can use time pressure to weaken the debt collector’s resolve to keep suing you. Do that enough, and they’ll drop the case.
See you then.
Never Make Part Payments
Never Make a Partial Payment
For a free copy of this article in pdf form, click here: Never Make a Partial Payment
The Set-Up
Suppose you get called by a debt collector about a debt that you might want to pay. That is, you think it’s legitimate, you think the company calling you may be legitimate (subject, always, to proof!), and for other reasons you’re inclined to pay. But you don’t have enough money. “Not a problem!” says the debt collector. “You owe us $2,500, but why don’t you just make a payment of $75 tonight? Then you can pay the rest whenever you can afford it.”
Should you do it?
What you should do
This is a made-up situation, of course, but some variation of it occurs many times every day all over the country. The collector is either nice, and you want to help him out by chipping in “just a little” to help his statistics, or the debt collector is mean, and you think that making a payment will be the fastest way to get her off the line.
Of course you know they’re paid to make you feel the way you do, but that doesn’t really matter. There are times when the way you feel trumps whatever you know – and the debt collectors are paid to know about that, too.
The question is, should you make that little payment?
To Pay or Not to Pay
The question you need to answer first is NOT whether you want to pay. The first question you must ask yourself is whether you can see exactly how you will be able to pay – and not just the payment you’re being asked to make, but all the rest of it. The debt is $2,500. Can you see how you would pay all of that? Can you think of terms that would actually work – as you can see at the moment and without hoping for something surprising and unusual happening?
To be frank, most people being contacted by a debt collector on a bill they thought they should pay can’t see a way to pay it. If that’s you, you should not pay any part of it.
If you can see a way to pay the debt and believe you should, and if the debt collector will agree – in writing – to the terms you think are necessary, THEN you can ask whether you think it’s the right thing for you to do. Often people may conclude it is, for a variety of reasons, and if this is you, then make the deal and whatever payments you agree to. We’re not here to tell you not to pay legitimate debts – only to make sure the debt collectors don’t crucify you.
Why Should You Act as we Suggest?
You should ask the questions in the way we suggest, and act according to the answers you come up with because making a payment is not a legally neutral act. It has major legal consequences.
Making Payment CAN Admit the Debt
We tell people all the time that one of the biggest difficulties debt collectors have is establishing by legitimate evidence that you owe them the debt. Can you see how making a payment seems like admitting you do? The debt collectors will argue that it is an admission, and some courts will buy that argument. Your argument that you only made the payment to make the debt collector feel better or to get them off the phone will cut no legal mustard because that is not a rational thing to do. The courts will hold you to a standard of reasonability, often, that ignores either your compassion or fear or desire for peace and quiet. Paying someone you don’t owe isn’t rational, and there’s a good chance the court will view your payment as admitting you do owe.
Making Payments WILL Restart the Statute of Limitations
One thing most courts agree is that making any payment at all will restart the statute of limitations. That is, if the debt is four years old and the statute of limitations is set to run out next month, your payment of any amount will give them four more years to harass and possibly sue you. And the fact that you paid them will almost guarantee that they’ll use the opportunity since they know you’ll roll over.
I have argued that making a partial payment that does not “cure the breach” (isn’t enough to say you haven’t broken the contract) should not restart the statute of limitations because the breach still dates back to the time you failed to make payment. I think that makes sense, but as far as I know, no court has ever agreed. Every decision I’ve seen on the issue has held that any payment starts the clock running from the very beginning again.
And this is a large part of why debt collectors are so eager to get you to make a payment. It’s also why I emphasize that in asking whether you can afford to pay, I refer to the entire debt. Making a partial payment is a commitment to paying the whole thing whether you mean it that way or not.
Never Make a Partial Payment
All the above factors suggest that, for almost every person being contacted by a debt collector, making a partial payment is a terrible idea. If you are that rare “other person” and can afford to pay the whole thing – and want to – then it’s fine if you do. Most people should steer far clear of the temptation. You can hang up on an angry caller and even make them stop calling. And the nice caller will find her victim somewhere else. Don’t let it be you.
Don’t Talk to Debt Collectors
When should you talk to a debt collector? And why shouldn’t you talk with them otherwise?
You Should Only Talk to them If you Have a Good, and Immediate, Reason to Do so
As a recent commenter pointed out, debt collectors are often “not nice.” But whether they are nice or not, their job is to take your money away and give it to their company. That means that, personality aside, their interests are against yours, and you should never mistake politeness with being on the same side. Likewise, you shouldn’t polite discourtesy for power or anything other than what it is. In this video we review the basic rule of communications with debt collectors: it is rarely a good idea.
Hang up when you’ve said what you need to say
Once you have said what you need to say to the debt collector, if anything, you should hang up.
There are too many bad things that can happen for you to stay on without a good reason. You could make admissions that damage your case (if they get around to suing you), you could give them information they could use to take your money if they sue you and win.
Remember that what lawyers usually hate more than anything is a lack of definite information. Every time you open your mouth and speak to a debt collector, you’re giving some lawyer what he or she needs to decide to sue you. And even telling them you don’t have any money may not be helpful because that could tell them it would be easy to beat you in court.
Less is definitely more when it comes to talking with debt collectors.
Should you settle or fight with debt collectors
If you’re being sued by a debt collector and just received the “summons” (your notice to appear in court), you may be tempted to call the company and make a deal or not to go to court at all. People do this because they’re afraid, feel guilty, or think they can protect their money or credit reports if they are “reasonable” with the debt collector. It’s usually a mistake.
Let’s take these “reasons” one at a time.
FEAR
As you will see, there is little to fear if you stand up for yourself.
The Good
With a little help, you have a good chance to win the lawsuit even if it goes to trial. But whether or not you could actually win the suit, you may be able to raise the debt-collector’s cost of suing you to the point where it gives up long before the case goes to trial anyway. As one person put it:
Today I received in the mail an offer of “Stipulation for dismissal with prejudice,” which basically states the plaintiff will dismiss their complaint if I dismiss my counterclaim. It’s a done deal. Your litigation materials were clear, vital, and necessary tools for me to win…
Frank
And if your fear is that the debt collector will suddenly take your bank accounts or garnish your wages, then you should know that they cannot do that without a judgment, which they can only get by formally winning the lawsuit against you and getting a judgment.
The Bad
If you look at the “Petition” (the suit itself), you will see either that it does not seek attorney’s fees at all, or that it seeks about 15% of the overall amount for fees. The debt collector is seeking this amount whether or not you fight, and if you do fight, the amount will hardly ever go up. That’s true with all the other amounts being sought, too. Chances are, the suit is already asking for the most you could lose. Therefore you have little or nothing to lose by fighting.
And since you won’t have to pay the debt collector anything if you win, and you have a good chance of winning if you fight-if you know what you’re doing- then you have everything to win.
The Ugly
The debt collectors love to get people to sign “consent judgments.” That judgment means they could take the money in your bank accounts and start garnishing your wages if you miss a single payment. If you fight and win, there will be no judgment against you, and even if you lose or settle, chances are it won’t happen for many months. And usually the debt collectors will make a better deal with you later on than they will at the beginning. Again, you have little to lose, and much to gain, by fighting.
GUILT
Many people feel guilty about not paying the bill they’re being sued for if it looks anything like a bill they know they didn’t pay. Most people want to pay their bills. They want to do the “right thing.”
Remember that you never borrowed anything from the company that’s actually suing you, and they never did anything for you. The company you borrowed from sold the debt to debt collectors, usually for a very small fraction of the face amount. Therefore, giving the debt collector money does not help the people you actually borrowed from. And the people you’d be giving your money may or may not actually own the debt. Lots of people have been sued by people who didn’t even own the debt.
Debt collectors are scavengers who feed off the troubles of people having hard times. If you have some extra money, couldn’t you think of a better way to spend it?
CREDIT HISTORY
You may think that making a deal with the credit card company will help your credit score or make another creditor look on you more kindly. Unfortunately, this is probably not true. By the time the debt goes to the debt collector, most of the damage has already been done to your credit report. Just about the only bad thing left that could happen is a judgment. And most people who settle with the debt collector give it a judgment.
CONCLUSION
In reality settling is usually the worst thing you could do to your credit history. We think you should fight. But even if you do want to settle, the Debt Defense System will tell you how to do so without harming your credit history more than necessary.