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Attorney Renee C. Walsh

Defending Yourself Against Creditor Lawsuits

In these harsh economic times, debtors having difficulty paying their credit card bills are suffering the collection calls and lawsuit nightmares. In an article entitled ‘How To Deal With Debt Collectors’ I discuss that debtors who want to stop harassing calls should write a letter to the creditors asking that all communication cease or a lawsuit will be filed for violating the federal and state laws on collection practices. This is a follow-up article to discuss how sending out the letter and keeping great records can lead to success in defending a creditor lawsuit. The letter should be sent via certified mail return receipt requested. Once the letter is sent, take great care to document any future calls made to you by the creditor. If the account is turned over to collections, send the letter out to the collection agency as well, and document any future calls to you.

I have represented clients with success with this strategy as for example, the client wrote to the creditor the cease communication letter and the creditor kept calling nonetheless. The creditor would call and discuss the debt with the clients’ family and would call the client at work despite my client having told them that they were disrupting his work environment. The creditor ultimately filed a lawsuit against my client. We filed an answer disputing the debt. We also prepared a complaint to be filed in federal court citing each telephone call as a separate count with statutory damages according to the Fair Debt Collection Practices Act (FDCPA), 15 USC §§1692-1692p, MCL §§ 339.901 et seq., MCL §§ 445.251 et seq. We sent the complaint to the plaintiff attorney indicating that we were enclosing the unsigned complaint which my client intended to have filed. We explained that my client alleged sixteen counts of separate violations of federal and Michigan debt collection practices laws and that each count provided a basis for statutory damages of up to $1000 for federal and $150 for Michigan, as well as attorney fees. We then suggested that in the interest of saving personal and judicial resources, we would abstain from filing the complaint in order to settle the matter of the lawsuit against my client. We offered a 15% lump sum payment and noted that if we were forced to file the complaint, the creditor’s lawsuit would be removed to federal court to be joined with the federal case and that we would seek the maximum statutory damages.

In order to succeed in this strategy documentation is crucial. This documentation is your proof and sword on paper and in court. The time, date, name of the caller, and content of the call should be noted. Any voicemails or other recorded messages should be saved. If the creditor continues to contact you after you have sent the letter out, and they likely will based upon my experience, you have grounds for a lawsuit with both state and federal against the creditor, turning the tables on them and giving you negotiating leverage to settle your debt for pennies on the dollar.

Discussion:

  1. Dear Inquirer:

    You made an inquiry directly to my email. When that happens, I post the inquiry on the website since you were unable to do so.

    In answer to your question, a person in your situation could stay out of court by contacting the opposition and entering into a settlement agreement, by filing for bankruptcy, or by abstaining from attendance at a court hearing. If you choose to attempt a settlement, you could write the opposition a certified letter explaining your financial situation and offering to pay a sum certain that is a lump sum or installment payments. Explain that they are not going to get anything more out of you considering your financial situation (that you have no assets or income from which to collect) and the fact that you may be forced to file bankruptcy. This should give you some leverage.

    If you file for bankruptcy, no creditor may contact you further, all court proceedings would be stalled and under normal circumstances, your debt would be wiped away.

    If you do not attend the court hearings, the creditor will obtain a judgment against you. With a judgment in hand, he can now attempt to collect on the judgment by garnishing your assets / income. If you have no assets or income and continue to keep all assets or income out of your hands, the creditor will have a hard time getting the money from you. See the article on garnishment within the debtor / creditor category.

    It is unclear to me whether you have been sued, that is, whether a complaint has been filed and served upon you. If this is so, typically, when a complaint is filed against a debtor, the debtor will file and serve an Answer denying liability, then enter into settlement negotiations. If an Answer is not filed and served, then the creditor will procure a default judgment and the process will proceed as indicated above in the situation in which you did not attend court hearings.

  2. I was approved for two credit cards from Best Buy, both obtained to purchase a TV in October of 2007. One card was around a $1,000 limit and the other card was around a $500 limit. I had to get two credit cards to afford the total cost of the TV and a warranty. I lost my full time job soon thereafter and fell behind several months on payments. When I got a part-time job in July of 2008, I went to pay off some of the amount on the bigger credit card. The online payment service was suspended. I lost my part-time job soon thereafter thanks to a lay-off, and haven’t made any payments on either credit card. I received one or two letters from the debt collectors and didn’t think I would be sued. Well, it turns out I that I am. I know I’m an idiot for getting myself into this situation, and I know I owe them the money and have to pay it back. I owe $1,818.46 and have have about three weeks to file a written answer with the court and serve a copy on the other party.
    I’ve never been sued before, I’m not sure what to do next, I’m 22 years old and have no idea how big of a mess I’ve gotten myself into. I’d like to avoid court if at all possible so I don’t have to pay their attorney fees, but I’m guessing that it may be too late. Where do I go from here, and is it possible to avoid a court case?

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