What is debt defense law?
Debt defense law is the body of law that makes up national, state and local laws and regulations with respect to the manner in which consumers can defend against debt collection. Typically, creditors are limited in their ability to collect on debts owed from consumers. Under the law, there are strict procedures and requirements which must be followed by the creditor in order for the debt collection to be legal and enforceable. If a creditor, or debt collection agency, violates these procedures and requirements either in the initial contact or during the collection process, the consumer has rights that if enforced can give them an edge in protecting themselves from unlawful debt collection practices.
The Fair Debt Collection Practices Act (FDCPA) is the umbrella law that protects consumers from debt collection harassment. It is not always clear cut as to whether the FDCPA , or any other debt collection law, applies under certain circumstances. For example, is the debt collection agency a "debt collector" as defined by the FDCPA? What actions of the creditor or debt collection agency constitute harassment and harassment under what specific law? The use of "robo-calls" or harassing phone calls to a consumer to the involvement of trick and deceitful practices using "debt validation" to trick consumers into affirming the debt owed. When answers are not clear or disputed, experienced debt defense attorneys have the answers your need in order to ensure that your legal rights are protected.
Common strategies used in debt defense law
Debt defense law employs various strategies to keep clients safe from aggressive debt collection agencies. An aggressive creditor may use every tool at its disposal to collect on a debt. If a creditor violates one law, they may use another tool to collect the debt. Therefore, effective debt defense must be multifaceted in order to protect consumers at every stage of the process. For example, statute of limitations, improper service of process and lack of documentation are all strategies that consumers can use to mount a defense in court.
The statute of limitations places a time limit on the ability to collect money owed to creditors. A creditor has only a certain amount of time to collect the debt before it cannot be sent to court. However, a creditor may avoid this statute of limitations by using repeated letters or calls to collect the debt. For example, suppose a creditor calls in 2008 and secures a payment plan with a consumer. In an effort to wait for the consumer to default on the payment plan, the creditor waits 10 years before sending the account to collections. The creditor is likely to claim that the statute of limitations runs out after 2 to 6 years, depending on the type of debt. However, the court may hold that the creditor did not allow enough time to pass for the statute of limitations to apply because they constantly contacted the consumer from 2008 to 2018. The court may also hold that the statute of limitations does not apply to the consumer because they never fully paid the debt in the first place.
In Georgia, improper service of process occurs when a creditor approaches the court to collect on a debt without serving proper notice of the court case to the consumer. Imagine that you owe money for a car that you drive regularly. You move your car throughout the day so creditors could not possibly know where to serve you with court papers. One day, a collector attempts to serve you through the back seat of the car while you are driving. This collector uses a third party to serve you in an improper manner. When you are eventually served in the rightful manner, you have no idea what the case is about for several days. In such a case, the consumer may not have had due notice of the case and may be able to seek compensation.
Most jurisdictions require creditors to provide a signed copy of the credit agreement to consumers. If the creditor fails to provide the contract, the court may place the case on hold until the creditor provides the document. For example, suppose a homeowner defaults on their mortgage payment. The mortgage company must provide proof of the mortgage agreement to move forward with the case. In response, the creditor may provide the mortgage document 3 years after the case began. However, since the creditor was tardy in producing the document, the court may choose to stop the case.
What a debt defense attorney does
A debt defense attorney is specialized legal counsel hired to protect the rights of the individual or business being sued for the alleged debt. These attorneys generally have experience in consumer and/or business-law-related issues. A skilled debt relief attorney will be familiar with federal, state, and even local laws that affect a particular debt-related claim. Hiring a debt defense attorney who understands the complexities of dealing with creditors is vital for anyone sued for debt collection due to credit card accounts, accounts receivable, student loans, and similar matters.
When creditors begin their attempt to collect a debt, they are following federal and state laws that give them authority to demand payment of the amounts alleged to be owed. If a debtor does not pay, he or she may be taken to court, where the creditor has the responsibility to prove that the debtor owes money to the company. If the creditor has sufficient evidence, and they win the suit, then the judge or jury decides how much the debtor must pay and under what terms.
A savvy debt defense attorney will look closely at the terms of the initial contract for payments between the debtor and creditor. Similar to mortgage closing terms, this contract is laid out in terms of interest, payment amount, payment period, and fees. Many lawsuits are filed after the debt has been reassigned to a collection agency, and these companies may not have documentation of the original deal between the debtor and the creditor.
Without sufficient paperwork, a court may not rule in favor of the creditor. Most creditors assume that a debt can be established in court based on the records that the company says it has on file, but if the documentation is lacking, a debt defense attorney is prepared to present this information to the court through expert witnesses and other resources. Sometimes, the defendant’s legal counsel is able to obtain a lesser amount due to negotiation or make a deal that settles the case without going to court.
Your rights under the Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) provides consumer debtors with critical protections against unscrupulous, aggressive and often unethical debt collectors. The FDCPA places requirements on the ways creditors can interact with consumers and regulates how they can attempt to collect debts. A consumer who was wronged during the debt collection process may have options to both discharge or restructure the debt and seek compensation for the violations. This is done through a standalone lawsuit against the creditor or debt collector.
To qualify for protection under the FDCPA, the consumer debt must be a "debt," which the FDCPA defines as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." It also regulates communication with third parties that have no relation to the debt collection. 15 U.S.C. § 1692a(5).
The FDCPA specifically prohibits the following actions by debt collectors:
Debt collectors must comply with very strict procedural requirements set forth by the FDCPA. Filing fraudulent or misleading proofs of claim in bankruptcy, for example, has become a common issue. Courts have disallowed this practice in order to protect unsuspecting debtors who believe they owe a given amount to a creditor. Given that creditors and debt collectors are often highly trained in the law, any advantage in the event of improper procedural violations should always be taken whenever possible.
What to do if you have been sued for debt
Once you are served with a lawsuit (or notice of suit by mail), you are on a strict timeframe for responding to that suit. A default judgment can be entered against you if you do not respond to many suits within 30 days. Knowing this, the first steps should be into a courtroom or over the phone with an attorney.
A complaint not only puts the debtor on notice of a lawsuit, but it also acts as a fictitious representation of the ultimate judgment that is filed. In accordance with Commercial & Rsch. Servs., Inc. v. Zeevi, 23 F.Supp.2d 386, 389 (S.D.N.Y. 1998), the complaint must inform a particular defendant of "(1) the transactions giving rise to the action; (2) the nature of the plaintiff’s claims; and (3) the relief sought." When a debtor receives a complaint, he or she should be able to view or discern all the allegations being launched by the creditor. After a suit is commenced, the creditor has an ongoing obligation to update the allegations to ensure they accurately reflect the state of the debt.
Litigation begins when the creditor, or plaintiff, files a complaint or claim with the Court. The creditor is then required to serve the complaint on you (the debtor). Under the Georgia Rules of Civil Procedure, [O.C.G.A. § 9-11-5] a plaintiff may serve court documents by personal delivery to the defendant or the defendant’s Georgia Registered Agent; by mailing it to an address designated by the defendant in the lawsuit; by mailing it to your residence in the State of Georgia or residence listed in the complaint; or by using a third party like a process server .
If you have been personally served with a complaint (generally by a sheriff, but it could be a process server or other authorized agent), you are under 30 days from that date to file an Answer in the court thought the Clerk of Court or through the mail to the plaintiff. If you are served by mail, you are under 30 days from that date to file an Answer. If you miss the 30 day deadline to file an Answer, a default judgment can be entered against you! There are no further notices or mailings of any sort. Under many circumstances the creditor can go to the Court the next day after the 30 day deadline to have the judgment entered against you in the full amount requested in the complaint, plus attorney’s fees and costs.
If you answer the complaint by mail or in person at the courthouse within 30 days then a hearing or settlement conference will be scheduled. At this time, the creditor will expect some form of payment. The intent of reinforcing the timeframe for this step is to ensure its importance. The earlier you begin working to resolve the debt, the better. A common directive at these initial appearances is for both parties to agree upon a payment plan.
If you have recently been sued by a debt collector, it is imperative that you seek legal advice. An attorney can guide you through the litigation process, helping to evaluate defenses, strategies for resolution, and how to avoid a default judgment. Your attorney can also file an answer or an appearance on your behalf and represent you at the initial hearing.
Debt defense mistakes to avoid
Defendants in debt cases are not necessarily experts in the law. This means it can be easy to make small mistakes that can have a large impact later on in the case.
There are several mistakes you should absolutely avoid. They include:
1. You ignore the lawsuit. It is common that defendants fail to file an answer or take other steps to preserve their defenses. "A lot of people think if someone sues them on a credit card, it there is no claim, so they do not respond," says Jeffery Doggett, managing partner of Frost Law Firm, P.C. "But you must respond to lawsuits."
It is important that you contact an experienced lawyer as soon as possible after you get served with the complaint.
2. You miss required court dates. "We never encourage clients to just ignore suits," Doggett says. "Sometimes people think that is the best way out. But if you do that, there is a good chance you’ll have a default judgment entered against you."
3. You don’t get legal help. "We see some people who try to represent themselves initially and don’t file an answer," Doggett explains. "They assume they don’t need one and that’s not true." That’s why it is so important to speak with a lawyer if you have been served with a complaint or a lawsuit.
"Some high level mistakes are similar to civil litigation, but debt collection lawsuits can involve thousands of dollars for the client. So it is worth their time," Doggett says.
One common mistake is not calling the lawyer back. "People change their phone numbers and don’t turn on their voicemail that they’ve moved, so the lawyer can’t get hold of them," he says. Calling them back can have a huge impact. The company suing can withdraw the suit before they take any further action.
4. You don’t respond to your attorney’s or the court’s requests. "Lawyers on these kinds of cases will ask for documents and information to defend you. People need to get them what they need to support their case," Doggett adds.
Real-life case examples of debt defense success
Help from the Consumer Protection Lawyers, a Success Story in a Lawsuit
Here’s a success story to illustrate what can happen in a debt lawsuit. Client gets sued by a company called Cavalry SPV with an Affidavit attached from Portfolio Recovery which is the debt collection company working with Cavalry and trying to collect on the debt. This standard practice for Cavalry, Portfolio will buy up credit card charge-off debt that is 4 or 5 years old and file suits on them. The Affidavit states that Portfolio bought the debt from Citibank and that the "Affiant" has access to their records (Portfolio’s records, not Citibank’s) and that during their review of the records the Affiant reviewed the account that Portfolio had taken from Citibank.
That’s all the Affidavit says; it doesn’t give an account number, balance, anything. How is my client supposed to know that the balances are accurate, that the debt truly belongs to the client or that Portfolio really owns the debt. They have provided no evidence whatsoever as to the ownership, balance, validity of the debt. Nothing. Just an Affidavit. We answered the complaint, denying everything, and sent requests for discovery to Cavalry. We also filed a motion with the court asking for this affidavit to be stricken under a cause of action under the Texas Rules of Evidence saying that although the Affidavit purports to be "a business record of a regularly conducted activity (the Affiant’s review of the records)", it does not meet the definition of a "business record" under the Texas Rules of Evidence because there is no way for the Affiant to swear the document she reviewed was actually created by Citibank, the records custodian . The records could have simply been pulled out of a box of documents. Cavalry ignored our motion to strike. We also filed a motion for summary judgment along with an affidavit from our client stating the money claimed in the lawsuit was not due, that Cavalry did not own the debt and was not entitled to sue. Summary judgment went unopposed, so it was granted by the court. The Defendant won and the court awarded attorney fees! And we never even had to go to trial. I think this would have been a case to win at trial as well, but there are many other debt cases coming through where the defendant cannot even appear in court only to receive a default judgment. The defendant might have even been able to win if they had appeared and testified. I write this to let the reader know it is possible to get paid if you win your case. Also note that even though you may win and the Judge can award you what you ask for in your pleadings and/or petition, they are not bound by your Request for Relief if you did not formally plead it. A Judge is able to award any relief that was requested during the case and not just what was requested in the pleadings. The case here would have been dismissed with prejudice with the court’s costs and attorney fees awarded to the defendant.