Settle or go to court?
Date: Fri, 11/17/2006 - 12:46
But let's say you find out there is a lawsuit. Should you just pay up and settle the debt, or should you fight it in court?
It's always worthwhile to find out what the DC (debt collector) is asking for. Call and ask how much they want to settle the lawsuit. If it is a number you like, ask them to draft a "settlement agreement and mutual release of claims." Use those words. Without it, you have no security that the debt is actually settled. Take the agreement to an attorney and offer them $100 to look it over for you. Basically, it should say that the settlement is full and final, and that both sides are giving up all claims they may have against one another that exist at the time the agreement is signed. Do not send a check until you have an agreement signed. If you have a due date or court date before you get the agreement signed, SHOW UP, or you will lose all right to contest the debt, and in all probability, the DC won't bother to complete the settlement with you. Nothing counts unless it is in writing. (Not entirely true, but pretty much.)
If you don't like the deal, if it includes charges you don't recognize or that don't make sense, or for any other reason, consider fighting the charge. Other things to look for: has the statute of limitations expired since the last activity on the account? Did they serve you properly (not a good reason alone, since they can always start over--might as well fight it)?
If you do decide to fight it, find a lawyer if you can. I can't speak for all lawyers, but I usually give clients a choice of fee arrangements. If I think the defense is likely to succeed, and the client has kept careful records or recordings (meaning there is a good fdcpa lawsuit), I will offer to absorb the costs of defense in exchange for a lump sum (in addition to my regular contingency fee) of the FDCPA lawsuit I will bring if we win. If I am unsure of the outcome, or if the client prefers, I will usually accept as a flat fee a percentage of the amount of the debt up front, if the client pays the court costs (usually ~$250-350).
I know there are other consumer lawyers using similar fee arrangements, so check around. Find one on naca.net (the National Association of Consumer Advocates).
If you challenge the debt, the DC will have to prove, essentially, two things: (1) that the DC owns the debt, and (2) that the debtor owes the debt. In addition, things like the statute of limitation, the amount of the debt, and other issues may play a key part of the defense.
Hi Sam, thanks for the informative post. It makes us aware that
Hi Sam, thanks for the informative post. It makes us aware that we don't need to feel intimated when a CA calls people.
As you have brought up the SOL things, I will like to clear a query. The SOL often gets confusing. I know that if the SOL of a state expired, the debtor gets the legal protection from being sued. If he makes the payment on a debt which is past the SOL, will that again come into legal collection and collectors can file a lawsuit?
I learnt that the debt is always valid and it can be paid anytime, either when the statutes is active or when it is past the SOL.
If my question isn't clear yet, do I invite legal troubles by paying a debt that is past the SOL?
If the SOL expires, but you make a payment on the debt, you rest
If the SOL expires, but you make a payment on the debt, you restart the SOL. So yes, you open the door to a new lawsuit if you make a payment on a debt past the SOL.
I don't know how this governs credit reporting, but it may be that a creditor cannot report your debt after the SOL has expired. I'm not sure about that, however.
But DCs can continue to collect after the SOL expires. They just can't sue, and effectively can't do a thing to you. Tell them in writing not to contact you by phone, and ignore their messages (although I would open them to be sure you aren't being sued, which could entitle you to damages under the fdcpa).
Sam, How long is the SOL on a debt? Thanks again for the info!
Sam,
How long is the SOL on a debt? Thanks again for the info!
It depends entirely on your state, but also on the type of debt.
It depends entirely on your state, but also on the type of debt. In Minnesota, for example, if the debt was incurred in connection with a sale of goods, the SOL is 4 years. If an extension of credit, 6 years. So it really depends on a lot of factors, starting with your state's law.
Once again, check with a lawyer. It doesn't cost a thing to call a lawyer in your state. Just look in the right place: naca.net (I know I sound like a broken record with this, but debt collection is a highly specialized area of law, and NACA is the one place where you can find a fair amount of experts on it.)