Unfortunately, most people do nothing to defend debt collection lawsuits. Maybe that’s because they don’t think there’s anything that can be done or maybe they don’t want to spend money on a lawyer. But there are sometimes defenses to these lawsuits and it might be cheaper to pay an attorney to defend the lawsuit than to let a large debt become a judgment.
One defense is to challenge the documentation creditors have at the time of the lawsuit. In Iowa a creditor can get a judgment on a credit card debt by providing an account agreement with the consumer, a final or ‘charge-off’ statement with the consumer’s address, a sworn statement from a person with knowledge that regular monthly account statements were sent to the consumer, the charge-off statement is the sum total of those statements, the consumer used the credit card, and the consumer never objected to the monthly statements.
Another way to obtain a judgment on a credit card debt is by filing an account agreement with the customer and a transaction history ending at a recent charge-off statement, together with a sworn statement from a person with knowledge authenticating these two items. In this event, the creditor is limited to recovering any increase in debt shown on the transaction history, plus ongoing interest.
If any of the documentation described above is missing the consumer may have defenses to the lawsuit.
Many debts are now collected, not by the original creditor or even by a collection agency representing the creditor, but by a company who has bought these debts for pennies on the dollar. At such low purchase prices original creditors have no incentive to provide the debt buyer with any loan documents like credit applications or account statements. As a result, debtors can be sued by a debt buyer with none of the evidence that would typically be required to prove that the company suing actually owns the debt. Debt buyers like Velocity Investments, LVNV Funding and CACH LLC frequently sue without having the paperwork needed to show a debtor owes it money.
Debt collection agencies and debt buyers also use false affidavits, sue the wrong person, sue on debt beyond the statute of limitations, sue on debt discharged in bankruptcy and sue on debt that’s already been paid. In some cases debt buyers just find people with the same or a similar name to sue, regardless of whether they actually owe the debt. Employees of the debt buyers sometimes engage in “robo-signing” of affidavits where they machine stamp their name to thousands of affidavits in a single day, despite the affidavit needing to be signed only after the person has personally reviewed and verified the accuracy of the information. Since defendants in nearly all debt collection lawsuits don’t do anything to challenge the lawsuit, debt collectors win by default, resulting in garnishment of wages and bank accounts.
If you are facing debt collection and want to discuss defending these lawsuits, contact us immediately after a debt collection agency contacts you so we can discuss your options.