Why you must answer a debt collection lawsuit

August 27, 2009 by Todd Murray · Leave a Comment 

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.

Links of the week

June 15, 2009 by Todd Murray · Leave a Comment 

Capital One Looks to Adapt to Credit Card Laws. How Capital One plans to reinvent itself in the wake of stronger credit card regulations.

The Debt Settlement Industry Is Busy, but It’s a Bit Nervous, Too. In a soft economy, business is booming for debt settlement firms. But with the increased business comes increased scrutiny.

State of Minnesota shuts down local collection agency. Bloomington, Minnesota debt collection agency allegedly misappropriated $125,000 in client funds.

Steering Clear of Dishonest Loan Modification Companies. Tips to identify and avoid fraudulent mortgage modification companies.

Hard Times Make Credit Score Key. With credit harder to obtain, your credit score is more important than ever.

Beware of Neighbors Home Foreclosure. How a foreclosure in your neighborhood can impact your home’s value.

Links of the week

May 26, 2009 by Todd Murray · Leave a Comment 

Change is Coming to Your Wallet. The Washington Post has a great article highlighting many of the provisions of the recently enacted credit card bill of rights. The new law will take effect in 9 months.

Credit Card Law Will Curb FreeCreditReport.com Ads. This article from the Huffington Post points out one of the lesser known, but important, provisions of the credit card bill of rights. The new law targets misleading ads for “free” credit reports that aren’t actually free. The only place to get a truly free copy of your credit report is at AnnualCreditRreport.com.

Home Prices Continue to Decline in March. Home prices fell 19.1% in the first quarter of 2009 compared to the same time period in 2008. National prices have fallen to 2002 levels and are down 32.2% from their peak in 2006.

Links of the week

May 18, 2009 by Todd Murray · Leave a Comment 

Notes From Another Credit Card Crisis. Op-Ed contributor Suki Kim compares America’s current credit card crisis with similar problems in South Korea in the early 2000’s.

Right Steps to Take Before Disputing a Credit Error. How to dispute an error on your credit report under the Fair Credit Reporting Act.

A Final Lesson: Repay Student Debt Quickly. Columnist Michelle Singletary advises new graduates to take a hard look at their budgets and attempt to pay back their student loans as soon as possible.

Plan to Encourage Banks to Allow Short Sales. The Obama administration has proposed incentives for banks to allow homeowners to sell their home at a loss, rather than going through foreclosure.

Weighing the Options with Credit Card Debt. Tips for resolving your credit card debt.

Consumerist Interviews Goolsbee on Credit Card Reform. An interview with Obama credit card advisor Austan Goolsbee on proposed credit card reform legislation.

Links of the week

April 21, 2009 by Todd Murray · 1 Comment 

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. 

The Colbert Report Mon – Thurs 11:30pm / 10:30c
The Word – Have Your Cake And Eat It, Too
Colbert Report Full Episodes Political Humor Gay Marriage