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Ending the Debt Nightmare Pt 3

This was originally part of a promotional series. In that series we discuss the way people often run into debt trouble. It starts with some difficulty – often medical bills or a lost job (or both, obviously). Then is spirals out of control because the bills don’t stop coming even if you’re having trouble paying them.

The banks are often only too willing to lend to people having trouble paying debts. In fact, they target people like that because one of their main sources of income is the exorbitant fees they charge for anything that goes wrong.

And then the debt collectors get involved…

Ending the Debt Nightmare Part 3

Sued for Debt – What’s Reasonable to Want out of Settlement

What’s Reasonable to Want and How do you Get it?

If you’re being sued for debt and have at least some money, you may be thinking about settling the case. What’s reasonable to pay? What’s reasonable to want in return for your money? And how do you go about it all?

These are questions that came up in a recent case evaluation. The answers are dynamic, but in a general way they point to some useful ideas.

Settlement Happens When Both Parties Agree they Can’t Do Better

In lawsuits, and perhaps all of life, you take actions you think will give you the best possible outcome. That’s a simple idea, but what it means is that if a company is suing you, they will settle if and only if they think it will give them a better outcome than pursuing the case to trial. In evaluating their case they look at “risk” (of losing) and cost (to pursue the case). When they file the suit, they fully expect to win the case either by default or within a few short weeks without having to spend any significant effort on it. Their only concern is whether you’ll be able to pay, but they do have a serious concern about this issue and will likely either settle for less than they demanded. But not much less.

If you want a better settlement, you’re going to have to take actions to change the way they view the suit.

Look at the Overall Case

Not all lawsuits or claims for money are created equal. If the plaintiff is a debt buyer (and not an original creditor), they will very likely have some or all of the weaknesses we mention in our Three Weaknesses Report. That is, they probably cannot win the case if you fight it intelligently. But they don’t expect many people to fight at all, and of those who do fight, they don’t expect many to know what they’re doing.

That means that when they file suit they completely discount all risk of losing, and they expect costs to be minimal. You need to change those opinions, and if you fight you can change their opinions about both of those things… eventually.

If the plaintiff is an original creditor, there is still a chance they’ll have the three weaknesses. But again they will completely discount any risk of losing. And remember, the lawyers bringing these cases scarcely if at all look at the cases – they have no real idea of what they have. They base their lack of concern over losing on the fact that so few people fight the cases.It’s a waste of money, they figure, to spend even one minute per case looking at the file when almost none of them will actually be disputed.

Again, you can change that by fighting. In discovery you can find out whether they have what they need – and at a minimum you will be adding to their risk (since they’ll have to start spending money to pursue the case, and they’re worried about whether they’ll get it back).

Therefore, it almost always makes sense to start fighting – and to do as good a job at it as possible – whether you have a debt buyer or original creditor, and whether or not you want to settle or try to win.

When it’s Time to Talk Settlement

After a while, you may be able to get the other side to take settlement more seriously.  When you do, what can you reasonable expect from them? Well, in short, that all depends on just how worried they are about their risk of losing and the cost of continuing. If they’re very worried, you could get them to clear whatever credit damage they have done to you, take little or no money to walk away, and give you a dismissal with prejudice.

If they’re not worried, you won’t get much from them. Simple as that.

Factors to Consider in your Favor

Some things that could help your case – you’ve shown them that:

  • They need, but don’t have, a contract with your signature
  • They cannot get records of the debt into evidence
  • They cannot prove they own the debt
  • The case is going to require a significant amount of attorney time to complete
  • The case will not be resolved for a long time
  • They know you know these things

Factors that Could Hurt Your Case

There are some things you can do to make settlement more difficult. And understand, the better your chances of winning are, the more likely they are to settle, so these factors should be considered damaging to your chance of winning at trial.

  • You have admitted to them you owe the debt
  • You have paid the debt collector money
  • You have told the debt collector where you work or bank
  • The trial has been set for a date not far away
  • You have not conducted any discovery

Do you see how all of these things lower their risks or uncertainty regarding getting money from you?

Note that one thing that is NOT a factor is how much they paid for the debt (if they’re debt buyers).  They probably did not pay much, and this might have a small effect on the amount of money they insist on, but their rights are measured by the amount of the original debt. And they will push for the most they can get according to the factors we mentioned above. How much they paid for the debt makes almost no difference. Whether they have “written off” the debt is an accounting matter that also has no impact on your negotiations or the case in general.

Conclusion

If you can do a lot of the things that help you and avoid most of the things that hurt you, you have a very good chance of winning at trial. The better your chance of winning is, the better a settlement you could get if you settle. It all starts with knowing what you’re doing as soon as you can (and of course that’s what our membership is for).

We often say there are no free lunches, and that most definitely extends to settling lawsuits. They will only settle with you and give you what you want because they think that is better than the alternative of continuing to fight. Don’t expect them to settle as a favor to you or from the goodness of their hearts. It just doesn’t work that way.

You Will Probably Win if you Fight Debt Collectors

If you are being harassed or sued by the debt collectors, there’s no need to give up. You have an excellent chance to win, and it isn’t that hard to defend yourself.

 

Defending Yourself against Debt Collectors Isn’t That Hard

 

Your Legal Leg Up is designed to help ordinary people defend themselves from debt collectors. The problems occur in three main ways. First, before there is litigation, there is usually some sort of harassment – it would be easier and cheaper for the debt collector to scare you into paying if possible. At the same time, it might be possible to get the debt collector settle the issue with you without having to go to court. Thus we help people with debt settlement.

If debt settlement doesn’t work, or if the collector proceeds to a lawsuit without any chance to try to negotiate, you’ll need to defend yourself in litigation. That’s where we got our start, and we have lots of materials that will help you defend yourself. Keep in mind that debt collectors handle everything in bulk. That means they can be very efficient at parts of their lawsuit, but much less so at others. So our materials and approach are designed to exploit that problem. That makes litigation much more expensive and less profitable for the debt collector and maximize your chance of winning, too. That’s why most of our members win their cases.

Even after your lawsuit – or sometimes they don’t even sue – you will probably have damage to your credit report. Thus we help people repair and reconstruct their credit reports. This is a multi-step program that works at eliminating bad information on your credit report while generating new good information.

We have memberships aimed at each of these areas of the debt law. Find the right one for you and let us help you.

Preparing for Mediation Pro Se

Mediation is “rigged” against pro se defendants in debt law cases. Why do I say that? Is there some evil force at play? No…

The mediator might be trying his hardest to be fair and honest, but even so the process is rigged. To understand why, let’s first go back to who the mediator is.

A mediator is usually (but not absolutely always) a lawyer.  That is useful and appropriate in general because you generally want someone who knows how the legal process works and what you might encounter, in general, if you went to court. At the least it will almost certainly be someone who spends a lot of time in court or with lawyers and is impressed with lawyers.

Often the parties are given a list of “approved” mediators by the court. You’d have to get permission to get someone else. In some situations the parties are completely free to find their own mediator.

And I gather that in some situations a mediator is just assigned by the court automatically, and you don’t get to choose.

Mediation is Rigged

Whatever way it works, the lawyer has an advantage. The mediators have a reputation, and the lawyers can find out what that reputation is far more easily than you can. They won’t use a mediator who has a reputation of pushing too hard against them.

And the mediators know that, of course. You see, the debt collection lawyers are “constant.” They handle many, many of these cases, and if one of them decides never to use a mediator…well, that could be a lot of money to the mediator. If you decide against a mediator or don’t like him or her after going through the process, your options are extremely limited. Your opinion simply doesn’t matter as much to the mediator. And that’s true of everything in the whole process.

Lawyers Trust Lawyers

Next, have you ever heard the saying that “everything looks like a nail to someone who is good with a hammer?” That will apply to mediation. As I said, you can pretty much expect the mediator to be a lawyer or at least an ex-lawyer. Lawyers tend to respect, trust and understand other lawyers.

The mediator might like and respect you and be warm and friendly and all that. But when the chips are down, the mediator will tend to trust and believe the lawyer more than you. And he or she will also expect you to lose the case if it goes to trial, no matter what the evidence shows, because of this sympathy to the lawyer for the debt collector.

No matter what the evidence shows.

And this is true even if the mediator doesn’t specially trust or respect collection lawyers. We all know that debt collection isn’t rocket science, but lawyers come basically from the same caste, and they expect other lawyers to be able to beat non-lawyers.

Your Advantages Could Get Forgotten

The mediator will get paid regardless of whether you settle, and regardless of who wins. That reduces the amount of attention the mediator must spend on your central advantage: the price of litigation.

Further, the mediator will almost certainly not know much about debt law or the debt collection business. That means the mediator will tend to undervalue your second main advantage, the Rules of Evidence! If you have my materials (you should!), you will probably know far more about the relevant law and the “facts of life” than the mediator does. That’s because lawyers tend to take sides in their lives. I would never have represented a debt collection company, and debt collector lawyers rarely defend against debt collectors. So no debt collection attorney from either side would be likely to be truly impartial.

And most other lawyers don’t know much about debt collection at all. Thus the mediator’s tendency to trust and believe the debt collector is magnified in importance.

Mediation Can be Intimidating

Finally, let’s consider the mediation process itself. It’s a chance for one-on-one combat (so to speak) between the parties without the rules of evidence being so important. (And the rules of evidence are another of your biggest advantages). The debt collection lawyer will act like he can prove everything –no sweat. The mediator will believe that. Both will exert pressure on you to “realize” how strong the debt collector’s case is. You will feel lonely and outnumbered. The debt collector’s lawyer feels no risk in this situation –it’s just a job to him—whereas the personal stakes are much higher for you.

What You Must Remember

Through it all, you have to remember, cling tenaciously to the facts that… most debt collections lawyers do not have the evidence they need to win their case and cannot get it cheaply enough to go to trial against you and make money. What have they actually shown you? Can they pull up and show you and the mediator an affidavit from the original creditor that proves that they, the debt collector, actually own the debt, how much it is, that you owe it and didn’t pay? Can they prove that you owe the money? How? Remember that if they want to introduce any account information from the original creditor they’ve got to have either a witness or an affidavit. Can they get it cheaply enough to justify the expense? Not likely! You may have to remind the mediator of these facts—many times.

Don’t Forget Collection Risk

Also, you have to remember their “collection risk.” How likely are they going to be able to collect the money from you? If you didn’t pay (and if you owed) it was probably because you couldn’t afford to pay. Just because they manage to get a judgment, if they do and over your strenuous efforts in court and before, that doesn’t mean, by a long shot, that they’ll get their money.

Your Advantages

Your main tasks in mediation are to remember these facts. AND to remember not to provide them any information or material that could help them get past these problems. If you say you could pay, or if you admit the account was yours…you make their job in court much easier.

Also, remember your advantage: if they have a lawyer or two present, the clock is running, and someone is paying and not very happy about that. Time is on your side in mediation as elsewhere. Remember the Litigation materials and what your advantages are. If you can withstand the fear and temptation to give up, you’ll be in very good shape and can settle (or not) according to what is really in your best interests.

Talking with Debt Collectors

If you have debt troubles at all, you’re probably going to be getting calls from debt collectors. Should you answer them and speak to the debt collectors? If so, what should you say? Usually you should not say anything at all, but if you have something you need to say, say it and then hang up.

Most of the Time, Silence Is Golden

Most of the time you should not be talking to debt collectors unless you have a specific, well-defined reason to do so. Otherwise, you can end up making their life a lot easier – and yours a lot harder.

There is almost no reason to talk to a debt collector. If you HAVE all the money they want, and you want to pay it, then it would make sense to negotiate. If you think you have enough to make a deal, you might also negotiate, but you should remember not to admit anything. YOU CAN ALWAYS NEGOTIATE A SETTLEMENT WITHOUT ADMITTING THAT YOU OWE THE MONEY.  People ask me that all the time – and yet everybody knows that companies settle lawsuits all the time without admitting they did anything wrong. You can do it because the assertion of a claim, or the threat (or existence) of a lawsuit is a threat. You settle to make that threat go away.

If you don’t have enough money to make a deal for at least 70% of the debt, it’s usually a bad idea to attempt to negotiate beyond a very preliminary stage. The person you’re talking to doesn’t have authority to make such a deal. So you can say you might pay 10% of the debt, but it would make no sense in attempting to negotiate beyond that. You will need to talk to someone higher in authority. You could ask to speak to that person.

Beyond that, anything you say will likely just be wasting your energy and time and may lead to other trouble. Remember that your dispute, in order to force verification, needs to be in writing, so you can tell the debt collector you dispute the debt but don’t forget the dispute letter.

Negotiation and Settlement of Debt

This article talks about an important piece of the bad debt puzzle: debt negotiation and settlement.  Ideally this can occur without litigation – but you must be aware that if you decide not to pay someone what you owe – or they think you owe – you could get sued.

 

Pretty much everybody knows what debt negotiation is, at least in theory. It goes like this. Obviously there’s somebody who says you owe a bunch of money, you negotiate, and you end up paying either less than or none of what you supposedly owe. That’s the view from a mile up.  Sweet, isn’t it?

It sounds like free money, but it really isn’t. If you think of it as an opportunity for something free, you will not be able to do it – you’ll be left wondering what went wrong as your financial security goes out the window. Instead, debt negotiation and settlement is a cross between a hard-nosed, back-room negotiation and a game of “chicken.”

So What Are You Negotiating? What Are You Settling?

You know, it’s interesting that people rarely ask what debt negotiation is all about – what are you “giving up?” What are they getting in return for the large amounts of debt you hope for them to give up? Suppose you owe a credit card company $20,000 and you have been making the minimum payments most of the time – but sometimes you can’t, so they have hit you with a bunch of fees, and you’re watching the debt pile up at an incredible rate. What do they get if they agree to take a single payment of $1,500?

It feels like you’re stuck – there may be no way you can make payments that would significantly reduce that debt. So what do you have to negotiate with? A whole lot of “nothing.”

You have risk and the difficulty of collection. In other words, you have the fact that unless you agree to pay and really try to do it, they will likely get nothing at all – or will get much less than they could.

That doesn’t sound like much, does it? And yet it is much more powerful than you might suppose. Anybody you owe a lot of money to is feeling the pinch. Even a large credit card bank, which doesn’t need your money for its survival by any means, is watching that debt mount and realizing that every time it gets higher, you get less likely to pay it. At the bottom of your options may be the possibility of bankruptcy, but they know that long before that you will simply stop paying and dare them to sue you.

You Often Get their Attention by Stopping Paying them

In essence, that it what makes debt negotiation work. You stop paying them and dare them to sue you – and then you offer to pay them again, only much less. Sounds crazy, doesn’t it? But it works if you take it seriously and don’t think of it as some sort of gold mine or a way to “get away” with something.  Instead, think of it as a significant part of a serious turn-around in your life. It has several costs – you should have no doubt about that, and it is something you do when there are no better choices available. There’s a chance that withholding payments will result in your being sued, and it almost certainly will result in at least a temporary trashing of your credit report. How you manage these risks and costs will determine, more than anything else, how well you do in negotiation.

There are ways to make it work much better than others, though. There are things you can do to manage your risks of being sued, and when the negotiations actually begin, a few techniques that can help. The main thing about debt negotiation and settlement, however, is that it, like other kinds of negotiation, is much less about negotiation than positioning. People only give you what you want because they believe it is the best outcome for them, too – the question is, how to do you give them that feeling when you’re asking to pay ten cents on the dollar of debt? And how do you make the risks to yourself “acceptable?”

How you answer those questions will determine how good a deal you get from your creditors.

 

What is Debt Settlement?

What Is Debt Settlement and Negotiation?

If you are being contacted by debt collectors for original creditors or debt buyers, there are things you can do to protect yourself. You may want to negotiate with them effectively so that you can pay them and minimize damage to your credit report or reduce the chance of their suing you, or you may just want to make them leave you alone.

Whatever you want, though, there are legal protections and tools you can use to move things forward and avoid hurting yourself in the future.

Know Who Is Trying to Get Your Money

It starts with knowing who is contacting you and what they want – and what they can or might do to you if they do not get it. Likewise, it is good to know what you can do to them, depending on how things develop. There’s an old saying that almost all lawsuits settle after negotiations, but that negotiations always occur “in the shadow of the law.” That is, what you will have to do after settlement has a lot to do with what they could make you do after trial. Thus there is a lot of information here designed for people suing and being sued – that’s how you know where the shadow of the law falls.

Credit card companies are different than other large companies or small businesses, and both are different than debt buyers. Talking to a bill collector inside an original creditor is different than talking to one outside the company, and it is yet another thing if you are contacted by someone on behalf of a debt buyer. It sometimes even makes a difference whether they call you first, or vice-versa. These are all important things to keep in mind. And there are many others. We have materials on the site that will help you understand how these things can affect your negotiations, and we have products that will make it easier for you to do what you need.

Debt Settlement – Not “One Size Fits All”

Many debt settlement companies attempt to force creditors to the negotiating tables by withholding payments. This is not always a good idea. There are also other alternatives, and we discuss some of those and ways you can act to minimize the damage to your credit report by negotiating with creditors, where possible, before that damage has occurred.

If you are negotiating, you will want to act in your strategic best interest, and our materials are designed to help you do that.

What Debt Negotiation is

This article talks about an important piece of the bad debt puzzle: debt negotiation and settlement.

 

Pretty much everybody knows what debt negotiation is, at least in theory. It goes like this. Obviously there’s somebody who says you owe a bunch of money, you negotiate, and you end up paying either less than or none of what you supposedly owe. That’s the view from a mile up.  Sweet, isn’t it?

It sounds like free money, but it really isn’t. If you think of it as an opportunity for something free, you will not be able to do it – you’ll be left wondering what went wrong as your financial security goes out the window. Instead, debt negotiation and settlement is a cross between a hard-nosed, back-room negotiation and a game of “chicken.”

So What Are You Negotiating? What Are You Settling?

You know, it’s interesting that people rarely ask what debt negotiation is all about – what are you “giving up?” What are they getting in return for the large amounts of debt you hope for them to give up? Suppose you owe a credit card company $20,000 and you have been making the minimum payments most of the time – but sometimes you can’t, so they have hit you with a bunch of fees, and you’re watching the debt pile up at an incredible rate. What do they get if they agree to take a single payment of $1,500?

It feels like you’re stuck – there may be no way you can make payments that would significantly reduce that debt. So what do you have to negotiate with? A whole lot of “nothing.”

You have risk and the difficulty of collection. In other words, you have the fact that unless you agree to pay and really try to do it, they will likely get nothing at all – or will get much less than they could.

That doesn’t sound like much, does it? And yet it is much more powerful than you might suppose. Anybody you owe a lot of money to is feeling the pinch. Even a large credit card bank, which doesn’t need your money for its survival by any means, is watching that debt mount and realizing that every time it gets higher, you get less likely to pay it. At the bottom of your options may be the possibility of bankruptcy, but they know that long before that you will simply stop paying and dare them to sue you.

You Often Get their Attention by Stopping Paying them

In essence, that it what makes debt negotiation work. You stop paying them and dare them to sue you – and then you offer to pay them again, only much less. Sounds crazy, doesn’t it? But it works if you take it seriously and don’t think of it as some sort of gold mine or a way to “get away” with something.  Instead, think of it as a significant part of a serious turn-around in your life. It has several costs – you should have no doubt about that, and it is something you do when there are no better choices available. There’s a chance that withholding payments will result in your being sued, and it almost certainly will result in at least a temporary trashing of your credit report. How you manage these risks and costs will determine, more than anything else, how well you do in negotiation.

There are ways to make it work much better than others, though. There are things you can do to manage your risks of being sued, and when the negotiations actually begin, a few techniques that can help. The main thing about debt negotiation and settlement, however, is that it, like other kinds of negotiation, is much less about negotiation than positioning. People only give you what you want because they believe it is the best outcome for them, too – the question is, how to do you give them that feeling when you’re asking to pay ten cents on the dollar of debt? And how do you make the risks to yourself “acceptable?”

How you answer those questions will determine how good a deal you get from your creditors.

 

Why debt collectors or original creditors will negotiate with you

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Negotiate for yourself or use a service?

One question we have often gotten is whether you should negotiate for yourself or hire someone else to do it. We will address that question more extensively below, but in general, debt negotiation companies do not have any secret tools or special access to get you better results than you could get for yourself. They can’t get you better results than you could get yourself, although in rare situations you might find a gifted negotiator who is simply better at it than you are, of course.

But usually, as a matter of fact, you will probably be able to get a better result than a debt negotiator because it’s your debt and you care more about it than a negotiator would. Also, you will have power to take, or to threaten to take, actions that a hired negotiator would not have the power to take — i.e., you could threaten to file suit, defend their suit, or declare bankruptcy (just to mention three examples) that a hired negotiator would probably not be able to say. Most of debt negotiation involves not backing down and the effective use of time – along with not giving away too much and building up your actual rights. You’re in a better position to do that for yourself than a debt settlement negotiator could ever be.

The main advantage of a debt negotiator would be one of convenience or, more likely, as a cost of being afraid. Consider the deal the debt negotiator offers: they’ll want a percentage of what they save you. You can figure out how much that will be. Are you willing to pay someone else $5,000 to make twenty minutes of telephone calls for you that you could make because you’re uncomfortable making those calls? It’s a high price to pay.