The
Corbett Law Firm LLC
JOHN
E. CORBETT,
ATTORNEY
AT LAW
___________________________________________________________________________________________
303 Walnut Avenue, Evesham, New Jersey, USA 08053-7016
Phone: 1-856-767-0910
Fax: 1-908-847-0369
Email: CorbettLaw@corbettlaw.net
Website:http://www.CorbettLaw.net
MEMORANDUM
|
From:
|
John Corbett
|
|
Subject:
|
Collection
Defense, Debtors Rights, Counterclaims and Other Methods of Agressive Defense
|
You are probably reading
this because you have asked a legal question related to a collection action or
lawsuit in which a demand for payment of money has been made of you. These situations are common and I have written
this to help with the issue of how you can assert your rights and defend such
cases economically and effectively.
Please remember that you are taking a risk if you defend a lawsuit
yourself and you should never elect to do that unless the amount involved is
relatively small, you can afford to lose, and the costs of representation will
outweigh the additional risk. Please
also see the caution at the end. So,
with all that in mind, here is some information and a few tricks-of-the-trade
that your lawyer would know and that you can use too.
- Know and assert your rights under the Fair Debt Collection Practices Act. See §805 through
§808 of the Act for a description of the unfair practices that some
collectors have employed and which are now prohibited. Most collectors comply with the Act,
but if you are dealing with an exception, you can sue. To find one of the specialized law firms
that handle such suits, google “FDCPA”. You will also find a large amount of
other information on the FDCPA from the search engines.
- Ask for validation of the debt and question
any extra charges. FDCPA §809
requires a collector to provide you with a written validation of the debt
if you request it in writing. The
collector must give you his mailing address so you can make such a
request. Collectors often have old
or stale information. The
validation process requires them to go back to the original creditor and
obtain a statement for you as to what the creditor thinks is currently
due.
- Question all extra charges. Frequently a collector or creditor will
tack on collection costs, interest, or attorney fees. Absent a written statement in a contract
with you, such charges are rarely valid or enforceable. Institutional lenders such as banks and
credit card companies will routinely have contracts that contain clauses
permitting the assessment of pre-judgment collection costs and attorney
fees, but ask anyway. So if a creditor
is claiming that they are due collection cost in addition to the original
debt, demand to see a copy of the contract that says that they are
entitled to that. Similarly, do not
pay post-judgment attorney fees unless the court orders it. Judgments carry with them the
requirement to pay only certain minor costs and interest at the judicial
rate. If the creditor wants more,
they have to go back to court to get it.
Court costs and post-judgment interest at the judicial rate
are added to debts that have been reduced to a judgment.
- Do not be deceived into making any
payments, however small, without understanding the consequences. Collectors will frequently try to get
you to make a small payment on an old debt in order to re-start the
statute of limitations. For a
discussion of that topic as well as other issues related to old claims,
see our article on old debts.
- Do not ignore a Summons. If you receive a Summons to court with a
Complaint, it means that you have been sued. No matter how you feel about the debt,
if a written Answer to the Complaint is not filed within the time
permitted, you will be in default and the court will enter judgment
against you for the full amount claimed plus costs. That judgment will then be collectable
as if everything that the creditor had said about the debt was true. If you have defenses or counterclaims,
you must assert them within the time permitted by law. If you find that a judgment has been
entered and you had no notice of the suit or you had a valid reason for
not answering, then a written application must be made to the court to
have the judgment vacated so that you can defend. Usually it is best to have your lawyer
do that. You must not only have a
valid defense, you must be able to convince the judge that there was a
good reason for not answering in time.
Even after the judgment has been vacated, the case will still be
pending and you must file your Answer.
So, it is the best practice to file it on time the first time.
- Assert your defenses. You can answer a complaint or dispute a
debt for many reasons. You may not
have ordered or received the thing for which you are being charged. You may have paid or made partial
payments. The debt may be so old
that the limitations period has run.
These things are known as “affirmative defenses” and you must
assert them in writing in your Answer.
Depending on the type of defense, you may also have the burden of
proving it to be true. If you are
defending yourself, just assume that you have to prove the defenses that
you have and be prepared to introduce documents or testimony to do that.
- Assert any counterclaims. Defendants frequently forget that they
may have claims against the creditor that relate to the same matter. Perhaps the creditor breached the
contract in some way. Perhaps the
goods were not as warranted. If you
are defending in New Jersey,
you must raise any issues related to the same matter in one suit. So any claims that you have against the
creditor should be raised in what is called a “counterclaim”. Counterclaims frequently help if the
plaintiff is being represented by a collection law firm because of the way
that those firms bill their clients.
Do not raise counterclaims or any other claim that is frivolous or
does not have a reasonable basis in both fact and law. Also note that counterclaims usually
cannot be asserted against credit card companies because they are not
guarantors of performance of the underlying agreement. However, if the amounts are large enough
the original vendor can sometimes be brought into such a suit by what is
known as a third-party complaint.
That is one of those things that is best
done by your lawyer.
- Don’t ignore the value of a letter from
your lawyer. If you have questions
about the debt, defenses, or counterclaims or simply want to show your
resolve, you might consider hiring a lawyer to question the debt for
you. A letter on a law firm’s
letterhead shows that you have counsel and can frequently stop an unjust
or tenuous collection effort. True,
you will have to pay the lawyer for the time to understand your situation
and to prepare the appropriate correspondence but you don’t necessarily
have to employ the lawyer to do any more than you need. Remember that collectors and collection
law firms are usually paid a percentage of what is collected. The harder and more complex the case
looks to them, the more likely they are to back off or settle.
- Look for a settlement. By asserting your defenses, you are
requiring the creditor to prove all of the elements of its case. That may not be an easy thing to do and
the creditor knows that. So, if you
have defenses or counterclaims or if a lawyer is representing you, it will
generally be easier to obtain a settlement that may be on good terms for you .
- It sometimes happens that a creditor will
respond to a request to stop further communications with one collector by
hiring yet another. The creditor
seems not to be willing to file suit, but will instead harass you with a
stream of different collectors.
When you get rid of one, another appears who claims to have no
knowledge of the others. That
tactic is more common in cases where the creditor knows that there are
counterclaims. In those cases, you
can write to the creditor directly but the law does not yet provide firm
safeguards against such behavior.
If the debt is not an old one and nearing the expiration of the
limitations period, a tactic that can work to get the matter resolved is
for you to sue the creditor. There
are risks involved in that and it should not be done without careful consideration
and the help of a lawyer, but there are ways to overcome the obstacles
presented if the circumstances warrant.
- If you negotiate a settlement, get it in
writing. When you have paid in
full, get a receipt. If you pay off
a judgment, get a Warrant to Satisfy Judgment.
We sincerely hope that
the information that we have provided is of help to you. Please keep in mind that no information
given in a Q&A exchange can be relied on as legal advice for your unique
situation. If you need legal advice, you
should consult personally with a lawyer.
For further information, see also: http://info.corbettlaw.net/lawguru.htm
JOHN E. CORBETT
Attorney at Law
Copyright 2009, John
E. Corbett