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I Only Have Social Security and They’re Suing – What do I do?

What You Should Do if You Only Have Social Security

You will find a lot of material on our site addressing this question. It really boils down to two things: what does it cost to fight? And what does it cost if you lose?

What it Costs if you Lose

The good news is that, if your only asset is Social Security – or comes from Social Security (including age or disability benefits), you are “judgment proof.” That is, they can’t garnish your Social Security benefits. We don’t think that means you should just give up and ignore the suit, but it establishes a limit to the price of losing – it’s a low price.

There are other costs, however, that aren’t so clear. A judgment will hurt your credit report, for example, and this could affect insurance rates, credit eligibility, and even job opportunities. Since it isn’t garnishment, it’s a sort of hidden penalty, but under the wrong circumstances losing a debt suit can hurt you even if they can’t get anything that you own. These are the costs you will want to consider as you decide whether to fight

What Does it Cost to Fight?

We recommend our Litigation Gold Membership, which has a monthly cost, currently $20/month. In addition to that you will need to find a way to do the work associated with pro se defense, and you will need to get to court some to do the things that need to be done. If you are too frail or disabled to do these things, pro se defense won’t be good for you. If you are able to do them you’re in a great spot: it costs little to defend, your chances of winning are excellent, and the price of losing if you don’t win is very small.

You will enjoy our materials, and you will probably also enjoy – eventually – the experience of defending yourself in court. Likewise, the debt lawyer trying to sue you will very possibly go away once the important facts are known. All these things are why a lot of older people do actually defend themselves – the deck is stacked in their favor.

What if you have something more than Social Security?

Well, it depends on how much. What you have is what you could lose, minus state exemptions from collection which are pretty generous. But they have to beat you to get them. Our materials help you fight and win, and you might also find a law firm willing to take the case “pro bono.” That means for free as a part of social service that lawyers often do.

They’re Suing Me for A Lot – Won’t they Fight Harder?

For a copy of this article in pdf form, click here: why amount does not matter

Why the Amount the Debt Collector is Suing You For (Almost) Doesn’t Matter

From a normal consumer’s point of view, the threat posed by a suit for $500 or $1,000 is very, very different from one for $25,000 or $50,000. But the difference in amounts to the debt collector is much less significant than you might think. There are several reasons for this, from the way they view risk to something called “opportunity cost.” We’ll discuss both of those things here.

Our observation is that debt collectors do NOT treat cases for large amounts any differently than they treat cases for small amounts. They follow a set of standard procedures.

Sued by a Debt Collector

If you’re being sued by a debt collector on a debt for $500, the lawsuit itself probably scares you in that it’s pulling you into a hostile and alien world – the world of litigation – where you expect people to frown at you a lot and make you pay. And for most people being sued by debt collectors, $500 is not a negligible amount – actually having to pay it could be a significant hardship. On the other hand, a suit for five or ten thousand dollars is a different, and much scarier, thing. You’d get over a $500 judgment, but you might never be able to pay off $10,000.

There’s a tendency to project. Because ten thousand is such a hurtle for you, you think it’s a large amount of money for a debt collector. You might think they’d do a lot more for this larger amount.

For the most part, however, you’d be wrong in thinking that. This is because of the way they assess the various risks associated with collecting debt.

Risk

Debt collectors look at three primary factors in evaluating their cases. These are risk of losing, price of winning, and chance of collecting. To put it all in terms of “risk,” you might put the factors this way: the risk of losing, what you risk in order to win, and the risk of not collecting what you win.

Risk of Losing

Debt collectors regard the risk of losing a debt suit as negligible. Their business model, which involves bringing suit without ever even looking at the evidence that might support their suit, shows how confident they are. They know most lawsuits they file won’t ever be disputed at all, and the price of losing is trivial to them. They’re dealing in the hundreds of millions of dollars of nominal debt – your suit for $25,000 doesn’t even register as a risk worthy of concern.

Of course the lawyers who will eventually be involved in your suit take a somewhat different view. They don’t want to lose because of their pride and reputation, but at the end of the day the amount at stake is trivial to them, too.

Price of Winning

Debt collectors take the price of winning far more seriously. For one thing, the cost of buying the debt and filing suit are “sunk” costs. That is, they paid that up front as a minimal cost of doing business for any law suit. Every time you do anything that requires them to take action, it’s costing them new money, and it’s not the basic cost of doing business in the courts, it’s money you’re making them pay.

They can see that, and they know the money they spend on your case may be going away for good. Thus our materials aim to emphasize and increase this risk, and we are usually quite successful in doing so. Taking action that increases the cost of winning will have a significant impact on the way the debt collector values your case – it lowers the value of the case in the debt collector’s mind dramatically.

Of course if they’re suing you for $50,000, your actions wouldn’t seem likely to reduce the value of the case very much, right?

Wrong, and that brings us to the final risk factor, chance of collection – or you might call it the risk of not collecting (we often refer to it as “collection risk.”

Collection Risk

Have you heard the expression that if you owe the bank a thousand dollars, they own you, but if you owe them a million dollars you own them? This is related to the collection risk factor. Banks know, and collectors know, that collecting $1,000 is usually possible against an unwilling defendant. But collecting ten thousand? Not going to happen. You probably won’t have it, and if you do, you’ll hide it.

That sets up a dynamic: the more you owe, the greater the collection risk discount. If they’re suing you for $25,000, nobody expects to collect anything like that. They might get a little more from you with a $25,000 judgment than a $1,000 judgment, but not enough to matter.

And there is a good possibility in both high and low dollar cases that they won’t be able to collect a cent.

Thus debt collectors do not consider high dollar cases particularly valuable. They don’t like spending money on them any more than on low dollar cases.

Now look at the larger picture of the world in which debt collectors live.

Opportunity Cost

Opportunity cost is the cost of doing one thing rather than another.

Remember that the amount of debt in the U.S. is essentially unlimited. That means the opportunity for suing (other) people is equally unlimited.

Now remember that debt collectors get judgments approximately 80% of the time by default. That means they can file suit in 100 cases and get 80 judgments in about an hour. If those judgments, conservatively speaking, are for $5,000 apiece, that’s $400,000 in an hour. And these numbers are not only theoretically possible, but I have seen them happen many times.

Now consider your case for $50,000. Even if they thought they could get that – which they almost definitely do not – if they have to spend five hours working for it, they’ll lose perhaps two million dollars in default judgments in that time. Does that sound like a wise business decision?

Of Course They Aren’t Machines

You might think the debt collectors are cold-blooded opportunists, and you might think they would only do what makes them the most money. And usually you’d be right, but they are human, and sometimes other factors work their ways into cases. They won’t always do what you might expect.

But the odds are strongly in your favor, and that means that it makes sense to defend yourself as much in big-dollar cases as little dollar cases.

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.

Memberships

We have quite a few products that will help you with specific issues (you can find them by clicking on the “products” button in the top menu of every page on the site), but most people should consider starting with a membership.

Members get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences. This gives invaluable real-time assistance, answers to questions, help with strategies, and encouragement. You also get the Litigation Manual for free with membership. Find out about memberships by clicking the “About Memberships” link in the menu at the top of any page on the site.

Sign Up for Free Information

You can sign up to receive free information from us by clicking on this link and following the instructions: https://yourlegallegup.com/blog/sign-up-for-free-information/

What you’ll receive if you sign up is a series of several videos and articles spread out over several days, and then you will occasionally hear from us as we add information to the site. We don’t always announce that information, though.

Should I Buy Your Motion for Summary Judgment Pack?

When Do you Need the Motion for Summary Judgment Pack?

If the other side has filed a motion for summary judgment against you and you want to defend only, you should get the Motion for Summary Judgment Defense Pack.

If the other side has filed a motion for summary judgment against you, and you want to defend and also file a motion for summary judgment against them on the same case, you should get the Motion for Summary Judgment Omni Pack.

And if you either want to file a motion for summary judgment against them (without their having filed one against you) you should get the Motion for Summary Judgment (Offense) Pack.

What is a Motion for Summary Judgment?

A motion for summary judgment is an “evidentiary” motion. That is, unlike a motion to dismiss, a motion for summary judgment seeks to determine a set of facts that are “uncontested” or not in dispute and asks the court to rule on how the law applies to them. What makes a judgment “summary” is that it is decided without a trial. A “motion” is the request to the court to issue the judgment.

Either party can file a motion for summary judgment. If the other side files one first, you put your response to theirs, and your own motion together and call it a “cross-motion.” Thus “cross-motion” really only refers to timing. Substantively, you will either be filing a motion for summary judgment against them, defending against their motion for summary judgment, or both.

Establish “Uncontested” Facts

Because disputes in the evidence are supposed to be resolved at trial, motions for summary judgment are supposed to be determined based only on “uncontested” facts. But “uncontested” and “facts” are terms of art, as you will see in the materials.  A fact is not established because you say it is so in the motion. A fact can only be established by evidence properly presented to the court. Likewise, a fact is not “contested” simply because you don’t like it or you say it isn’t so – it’s only contested by the admission of evidence that shows it isn’t so.

Illustration

Let’s make up an example to clarify how these things work. Suppose the debt collector is filing a motion for summary judgment that says you owe $1,000 on an old credit card. They put in an old statement showing you supposedly owe the money and an affidavit by one of their robo-signers that says the statement is “accurate” and that you haven’t paid the bill.

Their Case

That is pretty much exactly what the debt collectors do every time. Their evidence that you owe and haven’t paid is the credit card statement and the affidavit. They’ll say it’s “uncontested,” so what do you do?

Your Defense

You will object to the affidavit and credit card statement for legally powerful reasons (as shown by the summary judgment pack) and you will, if you can, add an affidavit of your own that says, roughly, “I don’t owe them, never owed them, didn’t get a statement, and never had an account with the bank they say this came from.”

Your effective objection SHOULD be enough, because it is up to them to present actual, admissible, evidence in support of their “uncontested facts.” But if you can add an affidavit of your own, the effect is much more powerful. Then you are both attacking their evidence and introducing contradictory evidence of your own.

Warning

Merely claiming in the Response to their Motion that you don’t owe the money would not keep their evidence from being “uncontested.” Understand? You must present evidence and attack the validity of their evidence.

Cross-Motions for Summary Judgment

Now (because of the nature of debt cases), if they can’t win a motion for summary judgment against you, you should almost always be able to win a cross-motion for summary judgment against them. That is, they have the burden of proof on their claim. If they can carry that burden, they will win the case. If they can’t, then they should lose (the whole case) – if you show it and file a cross-motion. Therefore, if they file a motion for summary judgment against you, you will almost always want to get the “Omni” MSJ pack. Filing a cross-motion does involve significantly more work, but if you can do so you might save yourself a lot of trouble later.

Your Motion for Summary Judgment

Suppose they don’t file a motion for summary judgment, but you have gone through discovery and found that the only things they have in support of their claims are an affidavit and the old statement used in the above example? As a matter of fact, that is typical. In that case you should consider filing your own Motion for Summary Judgment.

Motions for summary judgment require significant effort and require you to find out and follow various procedures rigorously.

So they are work.

Why You Should Do It

But if you win, you can cut short the process of the lawsuit and avoid trial. And even if you lose your motion for summary judgment you will be educating the judge to the issues and changing the way the judge and other side look at you. Therefore, we suggest you do it – if you have time after finding out through the discovery process that they don’t have what they need.

At a minimum, working your way through a motion for summary judgment will sharpen you tremendously on the law and facts of the case, and it will very likely result in winning one way or the other. Thus we recommend it if you can do it.

Motions for summary judgment are designed for situations where you can show certain decisive facts.

The Motion for Summary Judgment Pack is NOT…

The MSJ pack is not another way to get what you need to defend the lawsuit. It is material aimed at a specific procedural motion and moment in time. Defending yourself requires a commitment to a process. It could include motions to dismiss, answering the petition, filing a counterclaim, conducting discovery, moving to compel discovery, and various pretrial maneuvers. It rarely requires all of these things, but our Litigation Membership is what you need to prepare for the fight.

We would suggest that you might not ever need the motion for summary judgment pack, but even if you do need that, you will also want the litigation membership. The membership is the glue that holds all the parts of the lawsuit together.

Should I Buy Your Motion to Dismiss Pack?

Short Answer: Only if you need to file a motion to dismiss.

Long Answer – As follows:

When Should One Purchase our Motion to Dismiss Pack?

A lot of people buy our Motion to Dismiss Pack on the theory that they want the case against them to go away. It isn’t as simple as that. The motion to dismiss pack is applicable to situations where (1) you have filed a counterclaim and the debt collector moves to dismiss it, or (2) you have some legal basis for arguing that even if everything the petition against you is considered true the debt collector does not have a right to collect from you.

The first of these possibilities – that you are defending against a motion to dismiss – is obvious. If they want to dismiss, you will probably want to defend against that. Your motion to dismiss their claim is more of the question.

Purpose of Motion to Dismiss

A motion to dismiss is a way to “test the adequacy of the petition.” It is NOT a way to test whether the debt collector has evidence to support its lawsuit. Motions to dismiss are therefore appropriate, most generally, when you have a challenge to the company’s right to sue you in a specific court or in general, or when you have a challenge to the court’s power over you. There are also what are known as “equitable” considerations we will discuss.

The Debt Collector’s Right to Sue You

The main way this comes up is in jurisdictions where they have passed regulations on debt collectors which the collector has not followed. Most typically this is an issue of registering or not. Several states require debt collectors to register in some way before pursuing debt – and debt collectors often ignore those regulations. If yours did, a motion to dismiss on that basis would be a good idea.

Another way the right to sue you comes up – much less frequently – is that the petition fails to allege ownership of the debt. This could happen, for example, where ABC Collectors are suing you on a Citibank credit card. If they allege in the petition that they bought the debt, then you will want to find out what evidence they have, but this is part of the suit and not a motion to dismiss. If they fail to allege why you’re supposed to owe them on a debt apparently owing to Citibank, a motion to dismiss is probably in order.

The Court’s Right to Hear the Case

You may want to challenge the court’s power to hear the case against you. This arises in two ways. First, the suit could be brought somewhere other than the jurisdiction in which you live. You live in X county, and they bring suit in Y county and you never lived there. That would likely deprive the court of jurisdiction over you and constitute a violation of the Fair Debt Collection Practices Act.

The other, more common, reason for this sort of motion to dismiss has to do with service. Were you served correctly? And this question can be rather complicated. For present purposes, we merely say that a motion to dismiss is the appropriate way to challenge the court’s power over you, and this is a motion you would want to file before taking any other action in the suit. If you think you were not served properly, in other words, you will probably want to file a motion to dismiss.

“Equitable” Circumstances

There are certain gray areas that might be appropriate for a motion to dismiss, and these are called “equitable” considerations.

“Equity” is a historical reference to the way courts used to be in England, but for our purposes they refer to something more like moral rightness. If the debt collector waited too long to bring suit, if it did something to prevent you from making payments, or if you settled the case previously and they still sued you might all be examples of equitable defenses. While they DO involve evidence beyond the pleadings (the normal boundary line for motions to dismiss), you could probably bring these things as motions to dismiss. You would also be wise to plead them as “affirmative defenses” in your answer if you file an answer

What Motions to Dismiss are NOT for

You don’t file a motion to dismiss because you aren’t satisfied with attachments to the debt collector’s petition or don’t think they have the proof. Yes, you’ll attack their case – but later, and in another way. You don’t file a motion to dismiss because you just want the case to go away. And you don’t BUY a motion to dismiss pack here as an inexpensive way to defend the case in general. Our motion to dismiss pack is a specific product aimed at a specific situation. If it doesn’t apply to your situation, you will simply want to get the Gold Debt Litigation Membership and start doing the things you need to do to win the case.

They’re Suing Me and My Spouse

What to Do when Collectors Sue both Spouses

It often happens that a debt collector will sue both spouses – either for the debts of one of them, or if they both signed up for the account or made charges on it. Our materials will obviously help in this case, but the question is what you will want to do.

Can One Spouse Represent Both?

In many states and courts (but not a majority), spouses are permitted actually to speak for one another. That is a change from the normal rule that only lawyers are allowed to represent others, but perhaps it is simply a nod in the direction of reality. If you are NOT permitted to speak for your spouse, he or she will be required to sign all pleadings applying to his or her case and, on rare occasions, appear personally. The shy spouse will rarely need to speak in court under any circumstances, but it could happen occasionally.

Possibly Different Interests, but Mostly Identical

The legal positions of the spouses may not be identical. The debt collector may have no right to sue a non-signing spouse. You would want to know this right away, and it is just a question of your state’s law (and your legal research). If there is no right against a non-signing spouse, you should consider moving to dismiss the claim on that basis as quickly as possible. Sometimes winning that motion would take all the fun out of the case for the debt collector – they may not be able to collect anything at all, win or lose, in that situation (again depending on your state law). Even if that is not so, getting one of the parties off the hook is potentially of tremendous benefit.

And filing a motion to do so has the added benefit of costing the debt collector money and time, which normally has its own benefits.

If you can’t get the shy spouse dismissed from the case, you will have two defendants with nearly identical defenses. But each will have a right to conduct discovery, which is an advantage. And while both must technically speak for themselves, as a practical matter the court will not want to hear identical arguments – you will not need to speak often. This should not be a reason to give up.

Both Spouses Should Stay Involved

I always suggest that both spouses should definitely pay attention to the proceedings, however. The shy spouse will often have valuable things to say, and in any event may – occasionally, be called upon to speak for him or herself. From a relationship point of view, defending together seems to be healthy as well. This is not a good area for either “you got us into it, now you can get us out,” or “I can take care of this, babe…” The stakes are too high for both spouses not to be intelligently involved.

They’re Suing me and my Business, Can and Should I Defend?

We get this question a lot because people borrowing money for their businesses usually have to offer personal guarantees. Then if the loan goes sour, someone sues the owner and the business.

Suing Your Corporation

This issue does not normally arise where the business is either a sole proprietorship or a partnership, because these entities are not treated as “separate persons” in the law. When you’re sued as a partnership or sole proprietorship, you’re just being sued individually.

If you own a corporation, on the other hand, it is a separate person, and only lawyers can represent other persons. That means you can defend yourself, but not the corporation. What should you do? This  depends on what you can afford and what is at stake.

Corporation Valuable

If the corporation has assets and is valuable, you probably need to protect it. That means hiring a lawyer to represent it. If you don’t, the debt collector will get a judgment against it by default, and such a judgment could be or become a major nuisance.

Corporation Not Valuable

If the corporation is not particularly valuable and is not going anywhere, you could consider dissolving it if there’s a judgment, so that is less important. The debt collector may try to prove that the corporation is too “thinly capitalized” and is, therefore, just an “alter ego” for you, however. That is something you should take seriously, and again it would suggest hiring a lawyer – at least for advice on what to do about it.

Proving thin capitalization is much more lawyering than most debt collectors are prepared to do, however. They like to use premade forms to establish cases against people who do not defend themselves. Getting the facts to prove thin capitalization is uneconomic for most debt collectors, although of course this doesn’t mean it couldn’t happen in an individual case. Normally it won’t present much risk.

Hiring a Lawyer

If you hire a lawyer to defend the corporation, it is likely that the lawyer could also represent you personally. If you make that choice, which is wise if you have a lawyer well-versed in collection law, then you will simply be putting your fate in the hands of the lawyer. The problem is that most lawyers are NOT well-versed in debt defense, and there is a new financial variable as well, namely that the lawyer must charge for his or her services and recommend a “reasonable” course of action. That likely will lead to a settlement that might not be in your favor.

The Advantages of Self-Representation

The alternative is to let the lawyer represent the corporation while you represent yourself. This leaves you in the case as an involved litigant. As a practical matter, the case against you and the corporation are pretty much identical, and work on one will be work for both. Not all lawyers would willingly be involved in that scenario, but if yours is, you may get the best of both worlds. That is, you can let the lawyer spend “reasonable” amounts of time defending while you spend “unreasonable” amounts of time defending. Or, rather, since the lawyer is charging you $100 per hour or more, if you can work for less than that, time spent could be reasonable for you while unreasonable for the lawyer.

In debt law, unlike most other types of law, self-representation can make very good sense. You will not have the same bias towards settlement the lawyer has, and you will be free to spend more time on the case. This informs your judgment as to the law yet also makes your defense much tougher. We do believe that the risk of inadequate defense (by lawyers) is significant given the financial constraints, and suggest that your remaining knowledgeably involved could be very important.

Self-representation is annoying and time-consuming, and may not be financially efficient, but it would probably increase your chances of success, and there are intangible benefits of winning that are very significant.

Our Materials

Our materials will be of help to you in defending the legal issues involved in the collection. Our resources on legal research will help you with the other issues as well, but we have not addressed the specific issues of corporate law that could come up if your company is being sued. You will find the teleconferences helpful in many ways.