Defending Collections Lawsuits
If you’re sued on a standard credit card or retail credit account, you may be frightened and confused, and convinced that you absolutely owe the money. But that’s not always the case, and although bankruptcy is usually the best option if you have multiple debts, it’s still good to know how consumers defend themselves against credit card lawsuits.
Who is Suing?
In most cases, it is not the original creditor that brings the lawsuit against you for an unpaid account. In other words, it is usually not Chase Bank, or Best Buy, or Target, or Capitol One that sues you. More often, it is a debt buyer.
What is a Debt Buyer?
A debt buyer purchases large accounts of debts, sometimes millions of dollars, for pennies on the dollar from the original creditors. But because the debt buyer is purchasing so many accounts, and because the original creditor really wants to just get rid of this old, uncollectable debt, the original creditor often doesn’t give the debt buyer all the paperwork or information on each account sold.
That means that when debt buyers try to collect on accounts, including when they sue, they often run into problems. For example, they may not have a full and complete copy of the paperwork that you signed when you first took out the account. That paperwork is often needed for the debt buyer to sue you.
Debt buyers may be completely unaware of the status of the debt. For example, a debt buyer may not be aware that you made a payment, that you paid off the account, or that the account is too old to be legally collected. In many cases, a debt buyer will try to collect debt that has been discharged in a bankruptcy (an illegal practice, which you as a consumer can sue the debt buyer for even attempting to do).
Lack of Paperwork
Even if the debt is completely legitimate and collectable, the lack of paperwork on the account often leads a debt buyer to ask for amounts in a lawsuit that aren’t supported by or documented by the paperwork.
For example, a debt buyer may ask for attorneys fees, or interest on an unpaid balance, that is not allowable in the absence of a contract between the original creditor and you, the consumer.
Defenses in Bankruptcy
These defenses aren’t only applicable when defending collections cases. They also apply in bankruptcies, when creditors try to challenge your discharge, or claim that for some reason their debt should not be discharged. This kind of challenge is rare, but it happens. When it does, your bankruptcy attorney will use these same defenses to try to demonstrate that the creditor does not have a valid claim to collect anyway, discharge or not.