How and Why
to Make a Counterclaim When Sued for Debt
There's a great deal to say about counterclaims in debt law cases, and I suggest you look closely at the text of the Fair Debt Collection Practices Act (FDCPA) itself as you consider what, if any, counterclaims you will bring. In this article, though, I simply want to tell you why counterclaims are so important.
In most jurisdictions, a plaintiff (the person bringing the lawsuit) is allowed to drop the case (that's called "dismissing") virtually at any time it wants to. This isn't true of federal court, where you have to get permission, but in most state courts it seems to be true. And debt cases are pretty much always brought in state courts.
That means that if you work hard and develop a winning case, the debt collector could just dismiss the case.
That's just what we want it to do, of course.
However, if the debt collector simply dismisses your case, it could also sue you again later or sell the debt to someone else who would sue you later, and that means you would still be vulnerable to debt collectors. It would also mean you could receive more annoying calls and letters, and would have to put credit repair on hold. Making them dismiss - under any circumstances - is a victory, but you need the case dismissed “with prejudice” to keep it from coming back.
So how do you keep them from dismissing the suit and refiling the suit later? You do this by filing a counterclaim against them. A plaintiff can dismiss its own lawsuit, but not your claim against it. So if they want to dismiss the case against you either because your claims are good or because they don't want to spend the money chasing you, they either have to settle the case with you, or they're still left defending against your counterclaim. They never do that, because then they'd be bound to lose money one way or another. They'd either have to pay you or their lawyers (or both), -- without the chance of collecting anything from you. That's the worst of all worlds for them, and they won't do it. Instead, they'll settle the whole case with you.
So a counterclaim gives you power over the plaintiff and lets you keep it around till they agree to destroy (or "extinguish") the debt. And then not only can you rest easy about the debt, but you can also begin the process or rebuilding your credit report.
Sometimes your counterclaim can be worth a lot more than their lawsuit against you was in the first place.
Actually, it is not rare at all for a debt defendant's counterclaim to be worth more than the claim brought by the debt collector, and this is so for several reasons. First, as I often point out, debt collectors generally bring their claims without any real evidence in their possession - and without the ability to get the evidence cheaply enough to be worth doing. That means that the debt collectors' claims against defendants will, eventually, be worthless if you just keep fighting enough.
On the other hand, a counterclaim under the FDCPA is usually the result of either something the debt collector did as part of bringing its lawsuit (i.e., bogus notice of right to seek verification, false or deceptive affidavit, etc.) or (by definition) of some other part of the debt collection practice - usually some action involving you personally. Where the violation is part of the lawsuit, there is simply no evidentiary issue at all. The facts are in the file - put their by the debt collector and its lawyers. And where the counterclaim involves some other action against you personally, you should be able to testify. Thus you will rarely have an evidence issue - the hurdle which usually kills debt cases.
Our Debt Defense System is the first step in understanding the process and beginning to develop and put into practice a strategy of defense.
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