Many people start to consider bankruptcy because they are tired of dealing with creditors and debt collections companies. But before you start liquidating your assets or commit to a payment plan, you should take the time to check: can creditors still collect your debt, or are there legal defenses you could use to stop the calls?
It may seem straightforward -- you owed money, it didn’t get paid, the creditor sued you, so now you have to pay the debt. And generally, that is true. You do have an obligation to pay the debts you owe. However, your creditors have certain obligations they have to follow if they want to get paid. When they don’t live up to those expectations, you can’t be held responsible. By raising these defenses to a creditor’s debt collection lawsuit, you may be able to end the creditor’s phone calls, or even avoid the debt altogether.
It may sound strange, but when you are facing a debt collection lawsuit, your first question should be if the right company is taking you to court. Collections lawsuits are based on contracts. You entered into a contract with a particular company (for example Visa). But it is common for those credit companies to hire collection agencies to do the dirty work of collecting on the debt. Mortgage companies may also sell off or assign your debt, rather than going through the trouble of suing you.
In these cases, you may be able to raise the defense that the creditor on the lawsuit doesn’t have the “standing” (i.e. authority) to sue you. Someone else would need to do it. Once you raise this defense, it is up to the creditor to show how they became the company in charge of the debt. When an account has traded hands a number of times, it can be hard for the company to present that proof, and you might be able to get the lawsuit dismissed.
Sometimes, the debt that the creditors are trying to collect never belonged to you at all. If your become the victim of mistaken identity, you could find yourself served with papers on an account you know nothing about. Cases of mistaken identity can happen when you and your parent (or adult child) have the same name, you have a common name (like Smith or Jones), or when the credit card company has more than one customer with the same name. The defense in these cases is similar to when the wrong company sues you. Your attorney can help you raise the defense that you never had a contract with the company. Then it is up to the creditor to show they have the right John Smith.
Sometimes, lenders put more than one company on the case of collecting your debt. If one hand doesn’t know what the other is doing, you may make arrangements to pay the debt to one company, only to be sued by another. In other cases, you may have made your payments to the original lender directly after the collections contract was signed. A creditor only has the right to sue you for what you owe. So if you have already paid part or all of the debt, you may be able to get the lawsuit dismissed.
Often, debt collectors try everything else first, before resorting to a lawsuit. But sometimes, they wait too long. In Michigan, any debt that is more than six years overdue is simply too old to collect. When debt collectors dig up old debts, spend too long negotiating with you on possible payments, or wait too long to file their lawsuits, they can give up their right to take the case to court. Even if the lawsuit was filed six years and one day after your last payment, you can still raise the statute of limitations defense and get the collections case dismissed.
Identity theft and stolen credit accounts can also create problems for collections companies in court. When someone creates a credit card account in your name or hacks your password to use your account online, that identity theft can be a defense when it comes time to pay the debt. In most cases, you will need to have reported the identity theft to the police, or at least disputed the charges with your bank or credit card company. That’s why it is always a good idea to review your bank records each month to make sure you know if someone else is using your account.
Even when everything in the lawsuit itself is correct, there are often defenses and counterclaims available to debtors because of how the debt collection company went after the debt. State and federal consumer protection laws, including the Fair Debt Collection Practices Act, put limits on what debt collectors can do to try to get you to pay. When a creditor begins using abusive, unfair, or unlawful tactics, it can sometimes open them up to a lawsuit worth far more than the debt you originally owed.
If you believe that you have been the victim of creditor harassment, it is important that you speak to an attorney with experience in debt collections defense right away. You may need to begin tracking the calls, letters, and emails you receive from the collections company. Many of the damages under state and federal collections law are based on the number of times the law was broken. The sooner you meet with an attorney to discuss your case, the larger your counterclaim could be, and the more likely you will be able to avoid paying the debt entirely.
At John A. Steinberger & Associates, P.C., we know that creditor calls can be a headache. We are a full-service bankruptcy law firm in Southeast MI, serving debtors and families in Southfield, throughout Metro Detroit, and in the surrounding communities. We meet with clients facing debt collection lawsuits to help them decide whether bankruptcy or another option is best for them. We will review your case and consider all possible debt collection options, so you know whether creditors can still collect your debt. Call us toll-free at (866) 690-2140 or contact us online to schedule a free initial consultation.