Posts

Wishful Thinking – Dreaded Enemy of People in Debt

There is a tendency among being drowning in debt to wish for a magic bullet or some other sudden, easy remedy. Or otherwise to take no action and hope the debt goes away. This path could lead to financial destruction.I am now not paying credit cards as I am swamped with debt, and the minimum payments are killing me. I have been told the banks only gave me debt, not money, and are guilty of conversion by selling my personal information. I have been told the banks are committing fraud, coercion, unjust enrichment and violation of FCRA section 619. Do I owe anybody any money?

Magical Thinking Does Not Solve Debt

I get variations on this type of question fairly frequently. Someone has told the person contacting me that either there is no debt because the person only applied for a credit card but did not sign a contract, or, more esoterically, that there is no longer any money in the U.S. and thus there can be no debt. That argument has its academic basis in the fact that the United States left the gold standard and has allowed the Federal Reserve to issue “currency” in the form of “Federal Reserve Notes.” But it has its true basis in wishful or magical thinking. It would be so nice to wave a wand or speak some powerful words that would make the debt collectors go away.

Fighting is the only way to make them go away.

Contractual Agreement?

To handle the more basic objection first, it is true that a contract is an “agreement” between two parties, but it is not true that the agreement must be signed by both parties. An agreement can be inferred where the parties act as if there is an agreement. For example, if I offer to pay you $100 to walk on your hands across the street, and you do so, then your action has consummated a “unilateral” contract, and I am legally bound to pay you the $100. Likewise, if you apply for a credit card and I accept your application and issue a card to you, and then you use it to make a purchase, your use of the card establishes an obligation to pay back the debt under the contractual terms stated in the application. As far as I know, no modern court has ever held otherwise. Of course, a debt collector might have a difficult time finding the application and proving the terms of the debt-in my opinion a more fruitful line of attack.

Debt collectors often do things which are legally wrong, but these are either defenses or counterclaims you can make against them. Or you can bring suit yourself. The key to remember, though, is that the law is almost never self-enforcing. The mere existence of defenses or claims does not do anything for you-you must assert and prove them in order for them to do you any good.

Gold Is Money

What about the constitutional directive that all money be gold and silver, does this get you off the hook for credit card debt? The argument goes that only “debt” (which Federal Reserve notes signify) has been transferred, rather than money. But the gold and silver provision of the constitution was “written out” of the law by the Supreme Court long ago. That decision was not, in my opinion, a great moment for the Court or the American people, but it has never been revisited. It probably won’t be revisited, either, at least until the U.S. currency is nearing or at the point of collapse. Then Federal Reserve currency won’t seem so central to American commercial life, and a far-seeing Court might, under radical conditions, take a new look at the question.

But even then I suspect that the argument that no money was paid will not fly, and that is because Federal Reserve notes do have at least some “value.” If I offer to pay you 100 clam shells in exchange for something from you, a contract is formed. If I breach it, I would owe you the “value” of the 100 clam shells, normally, or under certain circumstances the shells themselves. Although Federal Reserve notes certainly do not have the value they once had in the market, this has only been to the advantage of people who owe money rather than others. Ironically, about the time anybody would revisit the question of whether federal reserve notes can be used as “money,” they will be approaching worthlessness. Then the biggest disaster a debtor could face would be to have to pay back in something of more enduring value.

Federal Reserve Notes Have Value

A Federal Reserve note is basically an “IOU” by the Federal Reserve, a private institution. The Fed gives currency (these days mostly electronically) to the banks in return for some sort of assets or a promise to pay it back, and that is the way money is created. The banks then lend out the money and it “circulates.” In contract law, debt is normally freely transferable. So not only can federal reserve notes be used as currency, but other forms of “commercial paper” or even private IOUs can also be used to buy things. They aren’t money and won’t necessarily be honored at “face value,” but they can certainly be used to pay debts. This would establish a contract even if it left the value of the obligation uncertain.

No Silver Bullets to Debt

And that leads to the central problem with the various “silver bullet” arguments which try to kill a person’s debt based on technicalities. The judicial system is far more practical than many suppose, and it would not ultimately (after the appeals process-individual judges sometimes do almost anything) make a ruling that would destroy the American commercial system. And this is appropriate in a democracy, since the courts should interpret laws rather than make them. A commercial system which has grown up over many, many years by responding to practical needs and which every legislative action has either taken for granted or actually bolstered, should not be stricken down in an instant by a court opinion.

What to Do

Fortunately, a person being harassed by debt collectors need not hope for such a silver bullet. Most debt collectors have a lot of trouble trying to prove the debts they are trying to collect for much more practical reasons. Often the records no longer exist or cannot be legally introduced as evidence. If you fight back, you can either prove they cannot make their case, or take the fun and profit out of it for them so they drop the case and leave you alone. Tackling just the monster attacking you is probably going to be enough for most people. Watch out for people trying to sell you more.

Making excuses loses cases

No Free Lunches, Ever

For a free copy of this article in pdf form, click here: Making Excuses

There is, in the world, what some people call the “iron law of cause and effect.” What this means is that, for every action, something always happens as a result. No matter why it happened, if it does happen, there are consequences. In plain English, you say it this way: There are no free lunches, ever.

In reality, all of life is like this, even when we don’t think about it.

We pretend the iron law of cause and effect does not apply to us all the time. If we’re late, we apologize, and that’s usually enough to get past the other person’s anger or hurt feelings. If we apologize sincerely enough or give enough good reasons for something we did, it seems like we get away with it. But it isn’t called the “iron law” for nothing. Even if the other person excuses us, he or she thinks we are less dependable. And even if the other person doesn’t think that, we think of it ourselves. We know it. No free lunches.

Sincerity vs. Integrity

Sincerity means not intending to do harm – trying to do the right thing. Integrity means not doing harm, and doing the right thing. Naturally, it is much, much harder to have integrity than to be sincere.

Defending yourself pro se requires integrity.

Substantive Law of Debt

If a debt collector can prove (or if you don’t make them prove) that you borrowed money and didn’t pay it back, it will be entitled to a judgment against you. It’s as simple as that, no ifs, ands or buts. There are events that can destroy the debt – showing payment, that it was based on fraud, or settlement to name a few. But if the debt isn’t destroyed, no amount of sincerity (desire to pay or legitimate inability to pay) will get you off the hook. You will still owe the money, and the judge will still give the debt collector its judgment if it proves its case.

It’s surprising how often people get mad at debt collectors for trying to collect debts they (the people involved) owe but can’t afford to pay. They often feel like the debt collector has done them wrong to think they should pay. But remember this: just because the debt collector has a ton of money and you’re poor, that doesn’t mean they won’t get a judgment against you. Don’t think that way. And a judgment gives them the power to take from you. They will use that power.

Instead, fight and make them prove their case if they can. Require them to prove the debt and their right to it. Luckily, they aren’t so good at that, and if you fight, you have an excellent chance to win – that’s why we’re here, after all.

Excuses in Litigation

We’ve been talking about the substantive law of debt, which is almost absolute. It’s a little murkier in litigation, where excuses CAN make a difference – sometimes. If you make a mistake in doing something, or if you fail to do something you should have done, this can sometimes be excused. If you do make a mistake, you should certainly try to get it excused. The sincerity of your excuse will matter then, so make it good and say it with feeling. And you might get away with it.

But even if you do “get away with it,” every mistake has consequences. As a pro se defendant, you work mighty hard to get the judge to take you and your words seriously. You want the judge to apply the law fairly and consistently – that’s really all you need in most debt cases to win. Any time you ask the judge for something special or make some kind of excuse, you will hurt your chances of that. And all too often, the court will not give you the break it probably should.

Always work your hardest and do your very best to understand the law and rules of your court. As much as possible, you NEVER want to ask the judge for anything she isn’t supposed to do. If possible, you never want to ask the judge to excuse some failure or to cut you any sort of unusual break.

And to get your best, you must give your best. Never make excuses for yourself, and never accept them from yourself. It’s impossible to be perfect, but try not to make any mistakes you don’t have to make. And that is not a “platitude” or boring old saying – it’s encouragement to you to work very hard. The only way to avoid making mistakes is by figuring out things ahead of time and always going the extra mile. You can get away with less in some parts of your life, but you often cannot in litigation.

We have a rule at Your Legal Leg Up. When you’re faced with a question (which happens almost constantly), you must ask yourself whether it’s possible to get a clear, certain answer. If that isn’t clear, then find out – with certainty – whether it is possible to get a clear, certain answer. If it is, FIND that answer. Nothing less will do when certainty is possible. If it is NOT possible, then find out with certainty all the things that matter in determining the issue. You understand? Wherever it is possible to know a thing, you must know it. Never ever guess when you could know.

That’s the difference between sincerity and integrity in debt defense.

Research is Key

Maybe it sounds easy to find certainty when it’s there. If it sounds easy to you, you probably haven’t been working on your case very long, or you’ve been taking shortcuts without even realizing it. You would be amazed, maybe, at how often people do take shortcuts. It is a rare teleconference where someone doesn’t admit to not knowing something they need to know but don’t. And they always have a good reason for it, too. It’s hard – but remember the iron rule of cause and effect. You know something or you don’t; you know you’re doing what you should, or you’re guessing and hoping either that you are or that it won’t matter. And it always matters.

Do your research and find out for sure the things you need to know. Then do the work and make sure you’re doing the thing you must do.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.