So you’ve been served with a debt collection lawsuit and don’t know what to do? The first step is to answer the lawsuit in a timely manner. In Minnesota, for example, you must answer the lawsuit within 20 days of being served. Other states may have different deadlines. Check with a consumer lawyer in your area if you are unsure. This post will walk you through the process of answering the lawsuit.
If you don’t answer the lawsuit within the required time, it is likely that a default judgment will be entered against you. In most states, including Minnesota, this means that the court will enter a final judgment against you based on your failure to answer the complaint, not the merits of the debt collector’s case. You will not get a chance to be heard at a hearing and in most cases a judge won’t even review your case.
Even if you believe you owe the debt, you are entitled to answer the lawsuit and force the creditor to prove its case. Remember, the creditor has the burden of proof and must prove that you agreed to be liable for the account and that you owe the precise amount of money they are seeking. This is even more important when the creditor in your case is a debt buyer.
A debt buyer is a business that purchases delinquent accounts from the original creditor and then sues consumers to collect the debts. Because the debt buyer did not originate the debt, it must rely on the original creditor to provide it with evidence to prove its case. In some cases, the original creditor doesn’t provide the debt buyer with any evidence of the debt. And when the original creditor does provide evidence, it often is just a single billing statement that was generated long after the account became delinquent. Even though they often have insufficient evidence to prove their case, debt buyers still sue out thousands of cases every month because they know that most people won’t respond to the lawsuit. Somewhere in the neighborhood of 90% of collection lawsuits proceed by default and result in judgments being entered against consumers without the creditor having to prove its case. This basic premise is why collecting purchased debt is a thriving sub-industry. Debt buyers know that they can obtain thousands of judgments without having to produce a single piece of evidence.
S0 if you are served with a collection lawsuit, you need to answer it in a timely manner. This will force the creditor to prove its case. Sometimes they can’t, particularly if the creditor is a debt buyer.
If you live in Minnesota, feel free to download my free Answer form and instructions. And if you want help defending yourself against a collection lawsuit, feel free to contact me.
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I’ve written in the past advising consumers not to use for-profit debt settlement companies to resolve their debts. The New York Times published an article this week detailing some of the problems with debt settlement companies. The story features a West Virginia couple that worked with a debt settlement company who, predictably, failed to negotiate a resolution with the couple’s creditors. The couple paid nearly $4,000 for this “service”, only to see their debt balloon and their credit scores drop. The debt settlement company, Credit Solutions, was recently sued by the attorney general of the State of Texas over its practices. The company’s own data shows that nearly 80 percent of its accounts do not settle. And for the accounts that were settled, many were settled for more than the 40 cents on the dollar that Credit Solutions promised in its advertisements.
Meanwhile, the Washington Post has a story about President Obama’s meeting this week with representatives of the credit card and banking industry. The President will supposedly warn the industry to “support strict measures that curb lending abuses or face the wrath of angry consumers and a determined Congress,” according to banking industry officials.
Finally, the Colbert Report ran a segment ridiculing HR 1214, the house bill designed to “regulate” the payday lending industry. The bill seeks to legalize a 390% APR for 2-week payday lending loans and a 780% APR for a 1-week loan.
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