Debt Defense

Collection lawsuits filed by banks or other third party debt collectors seem to be at an all-time high these days. In fact, so many such actions have been filed that Courts, such as in Orange County and Los Angeles, have devoted entire departments to hearing only collection actions. 

Being sued by a debt collector or creditor for a debt can cause extreme stress given most consumer’s lack of familiarity with the Courts. The important thing to keep in mind; however, is that you do have options and can afford an attorney to assist you in navigating this unfamiliar territory.

WHAT DO I DO IF I HAVE BEEN SUED FOR A DEBT?

Most importantly, make sure to calendar your deadline to file a response with the Court which is thirty days from the date you were actually served with the Complaint.  “Served” generally means that a process server handed you the Complaint and other documents associated with the filing such as the summons.  Please keep in mind that the date the Complaint was filed does not govern when your response needs to be filed with the Court.  An example of a Summons from a Collection Action is below:

  

The date of electronic filing is the date that often confuses consumers:

 

Your duty to respond has nothing to do with this date.  Some collectors will serve you within days of the filing while others might take months.  As such, the only date that you need to keep in mind when deciding what to do in response to a collection action is the date that you actually were served with the lawsuit.

CAN I AFFORD AN ATTORNEY TO FIGHT THE COLLECTION ACTION?

Yes, you can afford an attorney to fight the collection action on your behalf.  The attorney’s compensation in these types of cases is often a flat fee that takes into account your financial situation as opposed to an hourly charge.

WHAT DISCOVERY SHOULD I DO?

Discovery for any type of lawsuit can be complicated.  On its most basic level for collection actions, be sure to investigate at least two things: (1) does the third party debt collector have standing to sue you in the first place; and, (2) whether the amount you have been sued for is correct.

Verifying the amount of the collection can be accomplished through review of the billing statements.  These should explain what debts were incurred, what payments were made, and what interest and/or penalties were added when payments were no longer made.

For third party debt collectors, it is also important to determine whether they had the right to sue you in the first place.  This can be determined by asking documents such as the bill of sale, forward flow agreement, or purchase agreement.

DO COLLECTION ACTION CASES GO TO TRIAL?

Collection actions regularly go to trial.  Such trials are usually performed as “bench trials” where a judge hears the evidence and makes the ultimate ruling as opposed to a jury trial.  The trials are often given an hour of court time but can take as little as ten or fifteen minutes. 

 

To begin the trial, the plaintiff will provide witnesses from the debt collector with the goal of showing that they had standing to bring the lawsuit and to establish the amount owed for is accurate.  The defendant is free to offer evidentiary objections during this process and also the opportunity to present their own witnesses to establish any available defenses.

WHAT ARE MY OPTIONS WHEN I HAVE BEEN SUED FOR A DEBT?

As with any lawsuit, you have three options when served with a collection action. You can (1) do nothing; (2) try to settle; or, (3) FIGHT IT.

OPTION 1: Do Nothing (Please do not choose this option!)

The Plaintiff that has sued you is hoping that you do nothing in response to being sued for a debt.  Some estimates even show that this occurs in response to 95% of the Collection Actions filed in the State of California.  Doing nothing; however, will result in the plaintiff obtaining a default judgment against you.

What is a Default Judgment?

A Default Judgment occurs when a defendant fails to file a responsive pleading within thirty days of being served.  This judgment provides the plaintiff with incredibly powerful and involuntary means of collection such as bank levies; wage garnishments; and putting a lien on your property.

Keep in mind that a Default Judgment is valid for ten years, can be renewed with the Court, and may also be reported to your credit report.  While doing nothing may seem like your only option now based upon present circumstances, a default judgment can have long lasting implications and cause major disruptions in your life down the road.

What if there is a default judgment and i have not been served?

A Default Judgment is a ministerial action entered by the Clerk of Court upon request by the Plaintiff if no responsive pleading has been timely filed.  The Clerk of Court does not review the underlying claims for validity or conduct an investigation regarding service, nor are they required to do so.

This system allows banks or debt collectors to benefit from what has become known as “sewer service.” This phrase arose when it came to light that some process servers would swear that they served the defendant when they actually threw the lawsuit into the sewer.

Even with this conduct being known, a process server continues to have the presumption that service was valid.  This means that a consumer cannot simply dispute service through a “he said, she said” argument. To challenge service, you must be able to show some sort of evidence establishing that you were not actually served with the lawsuit. Perhaps you were at work when they are claiming to have personally served you at your home; or did not live at that address at the time of the alleged service; or were on vacation when you were supposedly served at your home.  If you can show that you were not validly served, it may be worth exploring a Motion to Set Aside the Default Judgment.

OPTION 2: Try to Settle

Another option is to simply pick up the telephone and call the Plaintiff’s counsel.  You likely will not be able to speak with the attorney that filed the lawsuit but will connect to someone from their office.  Explain to this individual your current financial circumstances in order to determine if you can resolve the collection matter without further litigation efforts.  These pre litigation settlement demands with unrepresented consumers typically require a lump sum payment of 80% of the debt.  If this is something you wish to accept, please be sure to obtain a written settlement agreement from the Plaintiff prior making any payments.

OPTION 3: FIGHT IT!

Finally, you can fight the case either on your own or with an attorney.  Please know that you can afford an attorney to fight the collection action and it is an option worth considering.  Attorneys that actually defend these types of cases understand that you have already been sued for unpaid bills and structure payment arrangements around this issue. 

Obtaining representation will help reduce the stress and anxiety associated with litigation.  It will also ensure that the fight is being taken to the collector’s counsel on your behalf instead of you simply being in response mode.

If you choose to proceed by representing yourself, a good resource is often your County Court’s Self-Help Department if it has one.  Many helpful forms for this type of litigation, including a general denial, have been prepared by the Judicial Branch of California and are available at http://www.courts.ca.gov/home.htm.

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