Posts Categorized: Collection Defense

NCSLT to pay over $15 million for illegal collection practices

Last week, the Consumer Financial Protection Bureau sued the infamous entity known as National Collegiate Student Loan Trust. The lawsuit points to three main allegations against NCSLT: (1) it sued people for debts that it couldn’t prove were owed; (2) it filed false and misleading affidavits in court; and (3) it brought nearly 500 lawsuits after the time limit to sue had expired.

On the same day the suit was filed, the CFPB also filed a proposed settlement with NCSLT. This surely means that the CFPB had been investigating the trusts for some time and only filed the lawsuit after NCSLT had agreed to the CFPB’s proposed settlement. Under the terms of the settlement, the National Collegiate Trusts have agreed to:

*Not start a lawsuit unless NCSLT has a copy of the signed promissory note and documentation that it owns the loan

*Not file suit in a case where NCSLT knows that the time limit to sue has passed or has other information that leads it to believe that the loan would be unenforceable

*Stop filing false and misleading affidavits and withdraw any false or misleading affidavits that have been filed in pending cases

*Stop all wage levies, bank garnishments, and other post-judgment collection efforts if NCSLT had filed a false or misleading affidavit in the case

National Collegiate Student Loan Trust has also agreed to allow an independent audit of all the loans in its portfolio and has agreed to pay over $15 million in penalties to the CFPB. Further, NCSLT has 120 days from the day the settlement is approved to identify the consumers affected by its illegal practices and refund up to $3.5 million to those consumers.

This settlement is not final until it is approved by the court. Once the settlement is approved, I’ll update this post with more information, including next steps for affected consumers.

Who is National Collegiate Student Loan Trust?


Over the last few years, National Collegiate Student Loan Trust has brought hundreds of debt collection lawsuits against Minnesota citizens. If you’ve been sued by National Collegiate Student Loan Trust, here’s what you need to know.

Who is National Collegiate Student Loan Trust?

NCSLT doesn’t lend money. It’s merely a series of trusts that contain a pool of hundreds of private student loans. The loans have been packaged together and sold as investment vehicles. If this sounds similar to the way mortgages are handled, it should.

There are several National Collegiate Student Loan Trusts. They are typically named with the year the loan was originated. For example, most of the cases I’m seeing lately involve National Collegiate Student Loan Trust 2007.  I’ve also seen loans held by National Collegiate Student Loan Trust 2005 and 2006.

How do the student loans get into these trusts?

First, a bank issues a student loan to help someone pay for college. The bank then sells the loan to an entity called National Collegiate Student Loan Funding. This entity is merely a holding company that deposits all of the student loans into the individual trusts. Once the loans are packaged into trusts, bonds are sold to investors. The investors receive money based on the amount of money collected from student loan borrowers.

The trusts themselves don’t actually service the loans and collect the payments. They hire someone, called a servicer, to do that for them. In most of the cases I’ve seen, the servicer is U.S. Bank.

Another interesting element of these trusts is that the loans are partially guaranteed. This means that the investors basically have an insurance policy when student loan borrowers aren’t able to make payments. If the borrower defaults, the guarantor steps in and covers the payment.

What should I do if I’m sued by National Collegiate Student Loan Trust?

In my experience, it’s difficult to negotiate a reasonable payment plan with National Collegiate Student Loan Trust. They demand that the borrower hand over a bunch of sensitive financial documents, such as tax returns and pay stubs before they’ll even consider a settlement offer. And the offers that they make are rarely affordable. To avoid this frustrating experience, I’ve been advising people to fight back against the lawsuit by answering it and challenging NCSLT’s proof in court.

National Collegiate Student Loan Trust can usually prove that they acquired a pool of loans from the originating bank. But, in my experience, they rarely have sufficient proof that they own your loan. There are other ways to challenge the sufficiency of their evidence and, depending on the specific facts involved, you may have other defenses as well. We’ve been successful getting NCSLT cases thrown out of court and have negotiated very favorable payment plans by pushing back.


Featured photo by purplejavatroll // CC BY-SA 2.0

Supreme Court tackles case about collection of old debt

Yesterday, the U.S. Supreme Court heard arguments in a Fair Debt Collection Practices Act case involving an old debt that was past the statute of limitations. It’s not often that the Supreme Court hears a FDCPA case, so I thought it would be worth digging into a bit. Plus, the issue involved in the case is one that affects consumers everywhere.

Case background

The consumer, Aleida Johnson, filed a Chapter 13 bankruptcy. In a Chapter 13, the person typically pays a portion of each of her debts and the remaining amount of the debts is wiped out. The amount of each debt that gets paid depends on the person’s income and assets. For a creditor to qualify to have some of its debt paid back, it has to file a “proof of claim” with the bankruptcy court. The proof of claim is just the basic information about the account, such as the amount, the date the account was opened, and so forth.

In Ms. Johnsons’s case, a debt buyer named Midland Funding filed a proof of claim with the bankruptcy court for a debt that was over ten years old.  The debt was so old that it was past the statute of limitations, which is the amount of time, by law, that a creditor has to start a lawsuit to collect an unpaid debt. In Ms. Johnson’s case, which arose in Alabama, the statute of limitations for suing on unpaid debts is six years. So there was no dispute that Midland could no longer bring a lawsuit to collect the old debt.

Many courts have ruled it is a violation of the FDCPA for a debt collector to file a lawsuit on an old debt that is past the statute of limitations. The related issue that the Supreme Court has to decide is whether it is a FDCPA violation for a debt collector to file a proof of claim in bankruptcy court on a debt that is past the statute of limitations. A decision in the case isn’t expected until June of 2017, but some of the Justices’ comments were revealing:

JUSTICE SOTOMAYOR: I’m having a great deal of difficulty with this business model…You buy old, old debts that you know for certainty are not within any statute of limitations…And apparently, you collect on millions of dollars of these debts. 

JUSTICE ALITO: If your description of Midland’s business model is correct, it doesn’t seem to me that it has much, if any, social utility.

The case, of course, will ultimately turn on the legal question involved, but these comments show that some of the Justices are skeptical of Midland’s business model.

What you need to know about the collection of old debt

If you’re facing debt collection on a debt that is more than a couple of years old, the first thing you should do is figure out how long the statute of limitations is. Remember, the statute of limitations is the amount of time set by law for a creditor to start a lawsuit against you. In Minnesota, for example, the statute of limitations for most debt collection lawsuits is six years. This means that the lawsuit only has to be started within six years. It doesn’t mean that the lawsuit has to be finished within six years.

Once you know what the statute of limitations is, you need to determine when it starts to run in your case. Generally, the statute of limitations begins to run on the first day that you are in default on your account. A quick way to figure out when your account went into default is to determine the date that you made your last regular payment. Although this won’t always be a precise date that the statute of limitations began to run, it’s a good estimate.

When you know the applicable statute of limitations and the date it started in your case, the rest is just simple math. Using Minnesota’s six-year statute of limitations as an example again, if you defaulted on your account on December 15, 2011, the creditor must start the lawsuit against you no later than December 15, 2017.

If the creditor doesn’t start the collection lawsuit within the statute of limitations, it loses its ability to use the judicial process to collect the debt. This doesn’t necessarily mean that the creditor can’t call or write you to collect the debt. In Minnesota, a debt collector may collect a debt that is past the statute of limitations. But it can’t threaten to sue you or sue you for an old debt that is past the statute of limitations. And if the debt is more than seven years old, it can’t be reported to the credit bureaus.

If the debt collector brings a lawsuit on a debt that is past the statute of limitations (or time-barred as some courts say), you have an absolute defense to the collection lawsuit. You need to raise this defense in your answer or it may be waived. Also, it’s your burden to prove that the statute of limitations is up and you may need to gather some evidence first. But this is a powerful defense that, if proven, will result in the debt collector’s case being thrown out.

In addition, many courts have held that a debt collector violates the FDCPA when it threatens to bring or brings a lawsuit for an old debt that is past the statute of limitations. When a debt collector violates the FDCPA, you have the right to sue them and the law provides that the collector has to pay you up to $1,000, plus any provable actual damages–such as emotional distress. Further, the debt collector has to pay your attorney fees and costs. So if everything goes your way, you could get the debt wiped out and get some money back from the debt collector.

A quick summary of the law on the collection of old debt

(1) In Minnesota, a debt collector can attempt to collect a debt past the statute of limitations through phone calls, letters, or similar methods. This rule may be different in other states.

(2) A debt collector in Minnesota cannot, however, threaten to sue you or sue you for a debt that is past the statute of limitations. This is also true in most other states.

(3) A debt collector cannot put a debt that is more than seven years old on your credit report. This is true everywhere. I would also take the position that a debt collector cannot even threaten to report a debt that is past the statute of limitations.

(4) Until the Supreme Court decides the Midland Funding case, it is unclear whether a debt collector can file a proof of claim in a Chapter 13 bankruptcy and receive payment through the bankruptcy process. But we should definitively know the answer to this question in the next six months or so.



CFPB issues report on consumers’ experiences with debt collectors

Last week, the Consumer Financial Protection Bureau issued a report titled “Consumer Experiences with Debt Collection.” The report was based on survey data collected between December 2014 and March 2015 from consumers who were contacted by debt collectors. The Bureau touts the survey as providing a more comprehensive picture of consumers’ experiences with debt collection than has been available from other debt sources.

Here are some of the findings I thought were noteworthy:

Nearly one-third of all consumers have been contacted by a debt collector. 32 percent all consumers reported being contacted by a debt collector about a debt within the past year. About 75 percent of these consumers were contacted about more than one debt.

Low income and non-white consumers are more likely to experience debt collection efforts. Over half of consumers with annual household income of less than $20,000 reported being contacted about a debt in collection, compared with only 16 percent for those with household incomes of $70,00 or more. Similarly, more than 40 percent of non-white consumers reported having been contacted by a debt collector, compared with 29 percent of white consumers.

Credit cards, student loans, and medical bills were the most common types of debt. The survey separates the types of debts into two categories: “loans” such as student loans, auto loans, and credit cards; and “past-due bills” such as medical bills and utility bills. Among consumer contacted about “loans,” 44 percent were contacted about a credit card and 28 percent were contacted about a student loan. On the “past-due bills” side, nearly 60 percent of people were contacted about a medical bill.

One in seven people in collections were sued to collect the debt. 15 percent of consumers with a debt collection experience reported that they were sued by a creditor or debt collector during the preceding year. Only about one-quarter of these people reported attending a court proceeding.

Over one-third of people contacted by collectors were contacted four or more times per week. 37 percent of people who were contacted by a debt collector reported that they were contacted four or more times a week. 17 percent reported that they were contacted eight or more times week.

Debt collectors honored a request to stop contact only 25 percent of the time. 42 percent of consumers who were contacted by a debt collector requested that the collector stop contacting them. However, the collector stopped the contacts in only 25 percent of those cases.

Nearly 30 percent of consumers reported being contacted about a debt they didn’t owe. According to the survey, 28 percent of consumers who had been contacted by a debt collector reported that at least one debt was being collected that the consumer believed wasn’t owed. One-third of consumers who had been contacted said the collector was trying to collect the wrong amount.

I talk to people in debt collection nearly every day and these findings are consistent with my conversations and anecdotal observations. I strongly believe that when dealing with debt collectors, knowledge is power. Take some time to learn about the collection process and your rights. Here’s some suggestions to get you started in learning more:

(1) educate yourself about your rights under the Fair Debt Collection Practices Act, which governs what debt collectors can and can’t do. If you feel like a debt collector has broken the law, consider filing a complaint with the CFPB or talking to an attorney about suing the collector under the FDCPA.

(2) if you just want to pay the debt, learn how to best negotiate a settlement with a collector.

(3) if you’re handed a collection lawsuit, always answer it by the appropriate deadline to avoid a default judgment.

(4) after answering the collection lawsuit, learn the typical next steps and how to approach them.

(5) if a collection judgment gets entered against you, know what your options are to minimize the damage.

(6) if you’re being garnished by a collector, learn more about the process and your rights.



Debt collection judgment? What you need to know.

debt collection judgmentA debt collection judgment is a court order that you owe the creditor money. The judgment is the final decision in a collection lawsuit. It gives the debt collector the power to garnish your bank account and wages. It has a negative impact on your credit score. And in some cases, creditors will exercise their post-judgment power to seize some of your personal property and have it sold to pay the debt. Having a judgment against you is an unpleasant situation to be in and is one of the main reasons why it’s so important to answer the summons and complaint. If a debt collector has a judgment against you, here are some of your options:

Consider vacating the debt collection judgment

If the judgment was obtained by default, you may be able to bring a motion to vacate the judgment. This will give you a chance to defend yourself. Think of it as a do-over. But you’re only able to get a debt collection judgment vacated in very limited circumstances. A consumer lawyer can help you decide if a motion to vacate is right for your case.

Negotiate a settlement or payment plan

If a motion to vacate the judgment is not appropriate in your situation, your options are pretty limited because the time to dispute the debt has passed. In many cases, your best choice may be to try to negotiate a settlement of the debt collection judgment. That may be the only way to avoid the stress and inconvenience of garnishments. Good deals are hard to come by after judgment because you’ve lost most of your leverage. But if you can demonstrate a significant financial hardship, or have a lump sum of cash available, you may be able to get the creditor to knock a decent chunk of the balance off.

If all else fails, bankruptcy may be your best option

If the judgment is for a significant amount of money, or if you have multiple judgments, your best choice may be bankruptcy. Bankruptcy puts an immediate stop to garnishments and other collection activity and will allow you to wipe out or manage all of your debts.

Remember that the FDCPA applies even after the judgment is entered

The FDCPA is a federal law that regulates what debt collections can and can’t do when collecting. If a collection violates the FDCPA, you have a legal claim against them for up to $1,000 in statutory damages, plus provable out-of-pocket and emotional damages. The debt collector also has to pay your attorney fees and costs. A viable FDCPA claim is also great leverage to get a debt collection judgment resolved favorable. So keep a record of all the conversations you have with the debt collector and save all letters and voice mails from them. And if you think that a debt collector has violated the FDCPA, talk to a consumer lawyer right away.


(photo: Xurble)

Debt buyer lawsuit: What you need to know.

A debt buyer lawsuit is a collection lawsuit brought by a company that bought the debt after it went into default. It’s a completely different animal than a collection lawsuit brought directly by the original creditor.

What is a debt buyer?

A debt buyer is a company that purchases delinquent debts from creditors for pennies on the dollar and then tries to collect the full amount, often making a nice profit in the process. Debt buyers have strange names like Midland Funding, Cavalry Portfolio Services, or Unifund CCR Partners. As with any business, they come in all shapes and sizes. Some debt buyers operate nationwide and have millions or billions of dollars in accounts. Others operate regionally and have much smaller debt portfolios. Some specialize in certain types of debt, like credit cards, second mortgages, and the like.

Here’s a partial list of some of the debt buyers I’ve come across:

  • Asset Acceptance
  • Cavalry Portfolio Services
  • Central Prairie Financial
  • Dakota Bluff Financial, LLC
  • Debt Equities, LLC
  • Equable Ascent Financial, LLC
  • Livingston Financial, LLC
  • LVNV Funding
  • Midland Funding
  • Palisades Collection
  • Pipestone Financial, LLC
  • Portfolio Recovery Associates
  • Red Rock Lake Financial, LLC
  • Unifund CCR Partners

Why it’s critical to answer a debt buyer lawsuit

Debt buyers are notorious for filing collection lawsuits in bulk. According to a 2009 article in the William Mitchell Law Review, debt buyers obtained 2,400 default judgments a month in Minnesota. These judgments were obtained by default because the consumer didn’t show up in court. In almost all of these cases, the debt buyer didn’t have to present any evidence to a judge.

This last point is crucial because debt buyers acquire accounts in bulk and often don’t have the account-level documents needed to prove their claims. That’s why it’s so important to answer a debt buyer lawsuit within 20 days of being served to ensure that a judge reviews their evidence.

Possible defenses to a debt buyer lawsuit

One good way to defend a debt buyer lawsuit is to challenge their proof of ownership. Because they didn’t extend the credit, they should be required to prove their ownership of the account and their entitlement to collect the balance. The more times a debt has been bought and sold, the less likely it is that the current debt buyer can prove each step in the chain of ownership.

Another possible defense is to dispute the debt buyer’s evidence. Under the court rules, if a party wants to introduce documents (like credit card billing statements, for example) it must provide testimony about the reliability of the documents. This can be difficult for the debt buyer to do properly because they didn’t create the account documents in the first place.

An additional defense to consider in a debt buyer lawsuit is the statute of limitations. The statute of limitations is the length of time that a creditor has to start a lawsuit after the account goes into default. In Minnesota, it’s generally six years, although there are exceptions. It’s not uncommon for a debt to be bought and sold multiple times and some debts bounce around for years before a legal action is taken. These repeatedly-sold accounts are sometimes called zombie debts (because they never die) and the statute of limitations is often a powerful defense in these cases.

There are other possible defenses that are more fact specific and will depend the particular facts and circumstances of your case. There are also some bad defenses that consumers often put in their answer. It may be wise to discuss your case with an attorney experienced in defending debt buyer lawsuits before proceeding too far to see what defenses apply to your case and how strong they are.

How to answer a collection lawsuit in Minnesota

Before I explain how to answer a collection lawsuit, it’s important to understand that Minnesota is a unique state because a lawsuit is started by serving the defendant. It is not required to be filed with a court at the beginning of the case. Because of this quirk, a lawsuit in Minnesota will almost never have a court filing number. And the courts will not have a record of the lawsuit until the creditor files the lawsuit and pays the filing fee. But this doesn’t mean the lawsuit isn’t legitimate. If you’re served with a lawsuit in Minnesota, you must answer within 20 days. If you don’t answer the lawsuit, it’s likely that a default judgment will be entered against you without a court hearing.

So the first step to respond to a collection lawsuit is to answer it. An answer is a formal legal document that responds to each of the allegations in the lawsuit. A phone call or letter isn’t sufficient. Here’s how to answer a collection lawsuit in Minnesota:

Fill out the caption

Overall, your answer should be formatted much like the collection lawsuit itself. Start by filling out the caption at the top of the lawsuit. This is where the name of the county and judicial district are listed. It’s also where the plaintiff and defendant’s names appear. You can basically copy this directly from the lawsuit. Just change the title of the document from “complaint” to “answer.”

Respond to all of the allegations in the lawsuit

The body of your answer is where you respond to the allegations in the complaint and list your defenses. It’s best to number each paragraph of your answer to correspond with each numbered paragraph of the complaint. There’s basically three responses to an allegation: (1) admit; (2) deny; and (3) deny based on a lack of information.

Your responses must be truthful, so if you know that the allegation is true, you have to admit for. For example, if the collection lawsuit alleges that you live in Hennepin County and you live in Hennepin County, you have to admit it. On the other hand, if the lawsuit alleges that you live in Hennepin County and you live in Ramsey County, then you would deny the allegation.

Many times, you won’t know the answer to an allegation. For example, many debt buyer lawsuits allege that the debt buyer purchased the account from the original creditor. Since you weren’t a party to this transaction, you have no way to know if this allegation is true or not. So it’s usually best to deny the allegation based on a lack of information. You only have to admit something that you know for a fact is true.

You should also watch out for multiple allegations in a paragraph. It’s possible to admit one part of an allegation and to deny another. Read each allegation carefully and be sure to respond to all of its parts and sub-parts. When you’ve finished responding to every allegation, sign and date the answer.

Serve the answer by mail

Once you’ve completed the answer, make two copies. You serve one copy of the answer by mailing it to the debt collector’s lawyer, or the debt collector itself if they don’t have a lawyer. It’s best fill out a sworn statement, called an affidavit of service, to prove when you served the answer. Here’s a form affidavit from the Minnesota Court website.

Keep  the second copy of your answer for your records. Hang on to the original answer for filing with the court, but you don’t have to file it until the debt collector does if you don’t want to.

Knowing how to answer a collection lawsuit isn’t enough

Now you know how to answer a collection lawsuit in Minnesota. But answering is just the first step. There will likely be discovery to answer and a motion to respond to. When you get these things from the collector, it’s probably best to talk to a consumer lawyer right away. Responding to discovery  or a motion is complicated, there are strict deadlines, and it’s possible to lose your case based on a technicality if you don’t follow the court rules.


Sued by a debt collector? Avoid these defenses.

Sued by a debt collctor

When you’re sued by a debt collector, you must respond to the lawsuit with an answer within 20 days or a default judgment will be entered against you. An answer is a written legal document that responds to the allegations in the lawsuit. A default judgment often leads to bank garnishments, wage garnishments, and other involuntary collection efforts. So while it’s critical to respond, there are some defenses that should be avoided.

Lack of a signed contract

Many people believe that debt collectors must produce a copy of the contract that the account-holder signed to prevail in a debt collection lawsuit. But there are alternative theories used by debt collectors, such as account stated, that may allow them to prevail by merely introducing credit card billing statements. Account stated is an equitable theory where the debt collector must show that the consumer “assented” to the account by receiving billing statements and not objecting to them within a reasonable period of time. Although there are defenses to this argument, particularly if the plaintiff is a debt-buyer, the point is that a signed contract doesn’t have to be produced.


Unfortunately, the fact that you cannot afford to pay the alleged debt is not a defense when you’re sued by a debt collector. The issue in a debt collection lawsuit is whether you are legally obligated for the debt, not whether you can afford to pay the alleged debt. That fact that you are unemployed, receive public assistance, or are otherwise “judgment proof” may mean that the debt collector will never collect any money from you. But it is not a legal defense to a lawsuit.

Attempted to pay

While frustrating, the fact that the debt collector refused to work out reasonable payment arrangements with you is not a legal defense to a debt collection lawsuit.  Courts do not have the authority to force the debt collector to accept the payment plans or settlements.

Ex-spouse responsible for payment

Just because your divorce decree ruled that your ex-spouse is solely responsible for payment of a joint debt, doesn’t mean you cannot be sued for the account by a debt collector. Divorce courts do not have the power to modify contracts between you and a third-party debt collector. You may, however, be able to sue your ex-spouse to repay you for any money you are ordered to pay the debt collector.

Good defenses when you’re sued by a debt collector

Now that you know how not to defend a debt collection lawsuit, here are some good potential defenses: statute of limitations, unauthorized and/or fraudulent use of the account; identity theft; incompetent or insufficient evidence; and lack of valid assignment of the debt (usually only applicable in debt buyer lawsuits). This is not an exhaustive list and these defenses may or may not apply to your particular case. Consult with a consumer lawyer in your area for specific advice about your case.

(photo: Picture Perfect Pose)

Debt collection lawsuit in Minnesota? What you need to know.

Dealing with a debt collection lawsuit can be a scary and confusing process. This is especially true in Minnesota where the initial stages of the case often take place outside of court oversight. Hopefully, this post will shed some light on the collection litigation process and allow you to make a more informed decision about how to get your case resolved as quickly and painlessly as possible.

Before we begin…

Debt collection lawsuit

Photo by Chris Potter

This post describes the basic steps of a debt collection lawsuit in District Court in Minnesota. Every state has different laws and procedures. What happens in a Minnesota lawsuit may be very different from what happens in a collection lawsuit in another state. If your collection lawsuit is not in Minnesota, then you shouldn’t rely on anything I’ve written here. And if your case is in Minnesota Conciliation Court, or small claims court, then the steps are different than what I’ve described here.

Step 1 — Service of the Complaint

In Minnesota, a debt collection lawsuit begins when the consumer is served with the Summons and Complaint. The Summons is a notice that a lawsuit has started and contains basic instructions about what to do next. The Complaint details what claims are being made. The Summons and Complaint are not required to be filed with a court and most debt collection lawsuits will not be filed at the time they are served. Accordingly, the Summons and Complaint will not have a court file number on them. There is a lot of information on the internet that suggests that a Complaint without a file number is invalid. This may be true in other states, but it isn’t true in Minnesota.

I’m often asked what it means to be “served.” Served essentially means “notified.” In Minnesota, the most common way to serve a defendant with a Summons and Complaint is to personally hand it to the defendant. Another common method of service is to hand the Summons and Complaint to a person of “suitable age and discretion” that lives with the defendant. This is usually a spouse, older child, or roommate. In Minnesota, it’s possible to serve a Summons and Complaint by mail, but the defendant must sign an acknowledgment that they’ve received the complaint or it’s not effective service. It’s also possible to serve a defendant by publishing notice of the lawsuit in a newspaper or similar publication, but this is very rare in debt collection lawsuits.

Step 2 — Answer the Complaint

Once a debt collection lawsuit is served, the defendant has 20 days to respond with an Answer. An Answer is a formal, written, legal document that specifically responds to each of the allegations in the Complaint and lists any defenses that the defendant has. Phone calls or letters are not considered Answers under the court rules.

If the defendant does not answer a lawsuit within 20 days of being served, then he is in default and a judgment may be entered against him. In a debt collection lawsuit, a default judgment is a final court order that the consumer owes the money. If a default judgment is entered, none of the steps below will take place and the case will be over. A default judgment is granted not because the creditor has better evidence or arguments, but because the consumer didn’t participate. It happens administratively and no judge will ever see the case. If you want to protect your rights and force the creditor to prove its case in front of a judge, then you must answer the lawsuit within 20 days of being served. This is especially important if you’ve been sued by a debt buyer.

Step 3 — Initial disclosures and discovery plan

After the Answer is served, the parties are required to confer about the case and develop a plan for discovery (Step 4, below). This conference, which can be by phone, is required to take place within 30 days of the original due date for the Answer. Most debt collection law firms will send a letter to set up the conference.

The parties are also required  to disclose all known witnesses and supporting documents, as well as to itemize the claimed damages and describe any insurance coverage for the claims, at this stage of the case. These are known as Rule 26 initial disclosures and must be sent to the other side within 60 days of the original due date for the Answer.

Both the initial disclosures and discovery conference and plan were added to the court rules in 2013.

Step 4 — Discovery

Once the discovery conference takes place , the next step in a debt collection lawsuit is discovery. If the case has not been filed with the court, there is no explicit time frame for discovery to happen and the parties are free to serve discovery whenever they wish. Once the case is filed with the court, the court will issue a deadline for discovery to be completed by.

Discovery is simply an opportunity for the parties to exchange information about the claims and defenses involved in a case. Discovery is not compulsory and a party is only required to provide information if they’re properly asked. The most common forms of discovery in a debt collection case are Interrogatories, Request for Production of Documents, and Requests for Admission. Interrogatories are basically just questions that one party asks of the other. Requests for Production of Documents, as the name implies, requires that certain documents related to the case be produced. And Requests for Admission are essentially true or false questions about the claims or defenses in the case.

To request discovery, a party has to properly serve their Interrogatories, Requests for Production of Documents, or Requests for Admission. Written discovery is usually served by mailing the requests to the other side. The other party then has 30 days from the day the discovery was served to respond fully. Simply mailing a letter to the other side asking them to provide information about the case is not sufficient and doesn’t trigger the other side’s duty to respond.

Requests for Admission are probably the most critical part of discovery, because if they are not responded to within 30 days, they are considered admitted. Creditors write their Requests for Admission carefully so that if the consumer doesn’t respond to them, they will end up admitting each element of the creditor’s claims. I’ve seen cases where the only evidence that the creditor put in front of the judge was the consumer’s failure to respond to the Requests for Admission.

The bottom line: if you receive discovery requests, you must truthfully respond to them in writing within 30 days. If you don’t, you risk losing your case on a technicality and being penalized by the court. And if you want to ask questions of the other side and see what documents they have, you must mail them proper discovery requests. If they don’t respond within 30 days, you can ask a court to make them respond and penalize them if they don’t.

Step 5 — Filing the case with the court

In 2013, the court rules were changed to require that cases be filed with the court and brought under court supervision within one year from the date the Complaint was served. If the case isn’t filed within the one-year time limit, it is automatically dismissed with prejudice and can’t be re-started. The rules allow the parties to agree to extend this deadline, but there rarely is a reason for a defendant in a debt collection lawsuit to agree to extend this deadline.

To file the case, each party must file their initial pleading (ie. the Complaint or the Answer) and pay the court filing fee, which is about $325. The parties also have to file their discovery plan from Step 3 above. Once the case is filed, it will typically be assigned to a judge and the court will issue a schedule with deadlines for the case.

Step 6 — Summary Judgment Motion

The next step in the majority of debt collection lawsuits is the creditor’s summary judgment motion. This is a hearing in front of a judge where the creditor will offer all of its evidence and legal arguments and ask the judge to give them a judgment. Defending a summary judgment motion is a complicated and involved process, but essentially it requires the consumer to file a brief with his legal arguments, any written testimony that he wishes the court to consider, and any documents that he wants the court to review. There is a hearing where the judge will have an opportunity to ask questions of both sides. The judge then considers all of the arguments and evidence and decides whether the creditor is entitled to a judgment. If the judge rules in favor of the creditor, a judgment is entered and the case is over. If the judge rules against the creditor, then the case will proceed to trial.

Defending against a creditor’s summary judgment motion is probably the most difficult thing for a consumer to do himself. There are a myriad of rules, procedures, and deadlines that must be strictly followed. Many summary judgment motions are won by the creditor on a technicality rather than on the merits. For this reason, a consumer faced with a summary judgment motion should strongly consider hiring an attorney. If you want to hire an attorney to help you at this point, you should hire one immediately after getting notice of the creditor’s summary judgment motion. There are strict deadlines to file your response and an attorney will need as much time as possible to get up to speed. Don’t wait until the week before the hearing to call an attorney.

Step 7 — Mediation

In most cases, the court requires the parties to engage in mediation. Mediation involves a neutral third-party, sometimes a retired judge, that tries to help the parties resolve their differences and settle the case. The parties usually have to bear the cost of hiring a mediator, although more and more courts are offering low-cost mediation for qualifying cases and parties. The mediator can’t require you to settle the case, but they can help you see the benefits of settlement and propose different settlement options.

Step 8 — Pre-Trial and Trial

If you’re fortunate enough to defeat the creditor’s summary judgment motion and the parties don’t settle at mediation, the next step in a debt collection lawsuit will be a trial. The judge will issue detailed instructions about the time leading up to trial. There are so many variables at this point that it’s difficult to describe all the potential scenarios. If you get to this point, you would benefit greatly from discussing your case with an attorney. You have a great deal of leverage to get the case resolved if you defeat the summary judgment motion and an experienced consumer attorney can help you maximize that leverage to get the best possible outcome.

Settling a debt collection lawsuit

At any point during a debt collection lawsuit, the parties may agree to settle the case. Usually, this means that the consumer will pay an agreed-upon amount of money and, in exchange, the creditor will dismiss the lawsuit. The amount of money that the creditor will agree to settle for depends on many factors, but generally speaking, the better your legal defenses, the better deal you can get. A document financial hardship can also help facilitate a manageable settlement. Here are some tips for getting the best deal possible.

A final word — the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act is a federal law that regulates what debt collectors can and can’t do when collecting debts. The FDCPA applies even if you owe the debt. If you’re involved in a debt collection lawsuit, you should to educate yourself about the FDCPA. This post is a good place to start. Basically, a debt collector can’t harass you, lie to you, or use any unfair collection tactics. If a debt collector violates the FDCPA, you can sue it for up to $1,000, plus any actual damages. The debt collector also has to pay your attorney fees and costs if you win your FDCPA case. A FDCPA claim can often be brought as a counterclaim in a debt collection lawsuit, which often will give you additional leverage to get the suit resolved.

Stop collection calls for someone else’s debt

Photo by Chris Potter

Photo by Chris Potter

On of the most frequent consumer complaints received by the Consumer Financial Protection Bureau are annoying collection calls for someone else. It’s unclear whether these collectors are intentionally pursuing the wrong person or that they’ve made a mistake. But if you’re getting calls or letters from a collector for someone else’s debt, you probably don’t care why it’s happening, you just want the collection attempts to stop. Here are some suggestions to stop collection calls for someone else.

Collection calls for someone else

If a debt collector is calling or writing you about a debt that you don’t owe, the first thing you should do is tell them very clearly that they have the wrong person and that this is someone else’s debt. Be polite but firm. The collector may ask you to confirm the last four digits of your social security number or a similar personal identifier. While it may be unwise to give the collector your full social security number, there probably isn’t too much risk in giving them  the last four digits to confirm that the debt isn’t yours. The collector may ask you if you know the actual account-holder and how to reach them. While you’re under no obligation to do so, you may consider passing along the other person’s information if you know it.

In addition to verbally telling the collector that it is someone else’s debt, you may consider sending a follow-up letter confirming what you told them. Identify yourself in the letter and then write something like: “you called me on this date at this number. I am not the person who owes this debt. Please stop contacting me.” If you know any details about the account in question, include a reference to those in your letter to be sure the collector can properly identify the account. Send this letter certified mail with a return receipt and keep a copy of the letter and receipt for your records.

You should also keep detailed records of any additional collection attempts after you’ve notified the collector that the debt isn’t yours. Keep track of the time, dates, and duration of any additional calls and save any voice messages. If you think the calls are robocalls, make a note of that and why you think so. Also, keep copies of any letters or other documents that they send you.

It’s also a good idea to check your credit reports to make sure the other person’s debt isn’t listed on your reports. Use Annual Credit Report to get free copies of your credit reports from the three major credit reporting agencies. Once you have the reports, make sure that the other person’s account isn’t showing up on your credit report. If it is, you should send a dispute letter to each of the credit bureaus incorrectly reporting that account. Take a look at this post for more information about how to dispute incorrect information on your credit report.

If you’ve told the debt collector that you are not the right person and continue to get collection calls for someone else, it’s time to talk to a consumer rights attorney to discuss the situation in more detail. In addition to helping you stop the collection attempts, a consumer attorney can advise you whether you have any claims under the Fair Debt Collection Practices Act against the debt collector. If the debt doesn’t belong to you, you’ve told the collector that, and the collector still keeps calling, it deserves to get sued under the FDCPA and be held accountable for harassing an innocent consumer.

Collection lawsuit for a debt that isn’t yours

If you get served with a collection lawsuit for someone else’s debt, you need to take additional steps. You should do everything suggested above, but you also have to submit an answer to the lawsuit. In Minnesota, the answer must be submitted within 20 days. An answer is a formal legal document that responds to each of the allegations in the complaint. If the debt isn’t yours, you should be able to deny most of the allegations in the lawsuit. You should also note somewhere in your answer that the debt is someone else’s. Even if you don’t owe the debt, you have to answer the lawsuit. Failure to respond to the lawsuit will likely result in a default judgment against you. A default judgment can be difficult (and expensive) to overturn, even if the debt isn’t yours. It may also lead to garnishments and other unpleasantness.

Because the consequences of a collection lawsuit are quite serious, you should strongly consider discussing your situation with a consumer lawyer. A consumer lawyer can help you prepare an answer to the lawsuit and also advise you if you have possible counterclaims against the debt collector for pursuing the wrong person.