Getting served with a debt collection lawsuit is one of the more upsetting things that can happen to you. When a process server hands a summons and complaint to you (or to someone you live with who can accept service), it means a debt collector is dragging you into the legal system.
And while getting served with a debt collection lawsuit is not fun, it is not the end of the world. In fact, that summons and complaint—legal process—provides rights to both parties to the case. Which means as a defendant in a debt collection lawsuit, you now have access to tools to defend yourself.
Let’s take a look at the first few parts of a lawsuit to try to dispel the fear and misunderstanding.
This article is a list of defenses that do not work. If you would rather find out what you should do, click over to “Served By a Debt Collector? What To Do Next.”
Most debt collection lawsuits are handled by overworked and unsympathetic debt collection attorneys. With that in mind, focus on your best defenses to the lawsuit. Here are some of the weaker defenses, which you should avoid.
The foreclosure mess got messier over a month ago, when GMAC, Bank of America, and others were caught faking (essentially) affidavits supporting their foreclosure lawsuits. The irony of banks acting irresponsibly with their finances was not lost on the media. Of course, robo-signing, as it was soon termed, was already commonplace in another kind of business: debt buyers.
Do you think debt collectors should be required to verify they have the correct debtor and the correct amount of the debt before filing a lawsuit against an alleged debtor?
A loaded question, to be sure, but here were the results:
A. Yes. 95.8% (5644)
B. No. 1.8% (108)
C. Undecided/No opinion. 2.4% (142)
Not much room for spin, there.
North Star Capital Acquisition, a Minnesota debt buyer, threatened one of my clients, called him repeatedly, and used profanity in several of the phone calls. For example: “You can do anything you f**cking want, but we are going to get this money from you one way or another.”
Shortly after we filed the Fair Debt Collection Practices Act lawsuit, North Star offered to settle for statutory damages, plus attorney fees and costs. Interestingly, North Star offered $500 as a “default” for attorney fees and costs. I find this amusing, since North Star’s law firm, Messerli & Kramer, regularly demands well over $1,000 in attorney fees for collection lawsuits it drafts by the hundreds. (North Star paid our actual fees in the end.)
Here are some of the key allegations from the lawsuit:
Some debt buyers take more extreme measures. Thomas Labeaux, owner of Debt Equities, apparently trapped a consumer in her driveway, pretending he was a sheriff and threatening to take her newborn into protective custody if she did not pay a debt.
95% of those lawsuits probably go unanswered, so the debt collectors end up with a judgment for the debt plus interest (and possibly other—unlawful—charges) plus attorney fees and costs. Then, they find the debtors’ bank accounts and employers and start collecting by garnishing wages, seizing funds from bank accounts, and worse.
If you are a tenant, the system works roughly the same, although landlords do not usually have quite so many people to sue.
So what do you do if you find out someone is suing you?
Minnesota Representative Joe Mullery and Senator Ron Latz recently introduced a bill that would prevent debt buyers from filing a lawsuit without the ability to prove they have the right to collect a debt.
Why the need for the rule? Debt buyers and collectors file tens of thousands of lawsuits against Minnesota consumers every year, and probably serve at least as many that never get filed. But debt buyers should lose most of their lawsuits, if challenged.