The Debt Collector Cometh- Defenses to Collection Lawsuits You Didn’t Know You Had

Law Office Of

Joseph A. Velez

480.710.5079

Real Estate & Business Law Attorney

The Law Office of Joseph Velez

Commercial Real Estate & Business Law Attorney

Scottsdale Financial Center

7272 E. Indian School Rd., Suite 111

Scottsdale, Arizona 85251

480.710.5079

Mistake #1: Failure to respond to the lawsuit. This is the worst mistake of all (and the most common) because it literally allows the creditor to obtain an uncontested default judgment against you without even having to prove its case.

Mistake #2: Failing to properly answer the collection lawsuit. The danger is that you might “admit” something that may not in fact be correct, and thus severely limit your legal defenses. Another example is by inadvertently adding your spouse to a suit that initially only named you.  If only you were named in the lawsuit and not your spouse, in most cases the creditor would not be able to collect against the community property; in Arizona both your’s and your spouse’s wages are generally deemed community property. Thus, if only you were sued, you would inadvertently harm your case injecting your spouse in the matter (say, by filing an answer to the lawsuit on her behalf). The creditor would then be able to collect against community property - not to mention you would have a very angry wife.

Mistake #3: Failure to raise proper legal defenses to the collection action. Many of these collection suits are filed without sufficient documentation. However, if these deficiencies are not pointed out to the court, say because you did not bother to defend against the lawsuit or you merely were unaware, then the court is likely to just rubber stamp the judgment. Yet another key consumer defense is often the statute of limitations. Also, if the collector’s cause of action is based on a written contract, then an essential element of the collector’s case must be proof of a binding written contract. It is not enough to point to some monthly statements with an interest rate disclosure. It is surprising how often these debt collectors cannot provide any written agreements or contracts.

Mistake #4: Ignoring the collectors request for admissions. Often the collector doesn’t actually have the evidence to prove its case. To solve this, they send Requests for Admissions to the debtor, asking him to either admit or deny that he owes the debt, or that the debtor agreed to certain finance charges and interest costs. All too often, the debtor does not answer these questions, which are then deemed admissions - thus establishing the collector’s legal case.

Mistake #5: Failure to appeal an adverse ruling or ask for more time to respond. It’s true, court’s do seem to bend over backwards to accommodate unrepresented litigants. Especially when it comes to requesting more time to respond to lawsuits, or for other discovery requests. This extra time would allow the debtor to get the advise and counsel he needs to properly respond. Also, many rulings (and they’re typically adverse for the unrepresented consumer debtor) usually have short appeal deadlines (some may only be 14 days), which would require immediate action. And once these deadlines expire, the case becomes more difficult, if not impossible, to defend.

Mistake #6: Not removing their names from bank accounts that hold someone else’s money (such as accounts with funds owned by an an elderly parent or child). Failing to do this exposes innocent persons to bank garnishments. If the owner of the funds needs the consumer debtor to manage the account, a power of attorney should be used or the account should be clearly designated as a trust.

Mistake #7: Failure to consult with an experienced attorney. Consumers fare much better in court when they obtain legal representation. Many collection companies will agree to settle on very favorable terms once they realize that the consumer has legal representation. Nevertheless, whether or not an attorney takes your case, at minimum they can help formulate a strategy, offer basic advise concerning legal defenses, counsel the client on the impact of post judgment collections. Moreover, the attorney can often be effective in negotiating the amount sought by the creditor.

Conclusion: Collection actions are serious and should not be ignored. I’ve outlined only some of the legal defenses that can be raised when sued on a debt. Moreover, many of these defenses are also available to small business owners on business debts.

Beware of that knock on the door - it could be someone far scarier than a Halloween trick or treater. If you’re behind six months or more on a credit card, it could be the process server looking to serve you - this is Surprise #1.  Due to our stubbornly sluggish economic recovery and persistent joblessness, debt collection lawsuits are on the rise significantly. The number of these suits filed nationwide by debt collectors are staggering. However, you maybe able to legally beat these collectors (and get out from owing the debt) solely because the collection companies who file them have made numerous legal blunders - this is Surprise #2. In spite of this, most people lose these suits. Why, you ask? Shockingly, it’s because the debtors who have been sued take a “head in the sand” approach and never respond to the suit, thus allowing the collection company to take an easy victory against them by getting a default judgment - this is Surprise #3. The end result of this ill advised capitulation is a deep gash to your credit score, garnished wages and bank accounts, and possibly even loss of property due to the collection efforts of the creditor after the default judgment entered - in other words, financial heartache. What consumer debtors need to realize is that they probably have valid legal defenses to the lawsuits and judgments filed against them, which if raised properly and timely, could lead to either a complete defense to the lawsuit or alternatively, to a settlement on favorable terms. What follows are the top seven (7) mistakes committed by consumer-debtors:

Our law office represents clients throughout the Phoenix, Arizona area including the cities of Scottsdale, Maricopa, Mesa, Surprise, Paradise Valley, Avondale, Gilbert, Chandler, Glendale, Florence, New River, Fountain Hills, Peoria, Surprise, Queen Creek, Tempe, Sun City, Apache Junction, and Casa Grande. We serve the counties of Maricopa, Yavapai, Gila, Pinal, La Paz, Yuma, and Pima County.

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

One hour initial office consultation fee is $295 for the matters discussed above.