Volunteer attorneys educating the public about debt collection lawsuits
Are you struggling with debt? If you have been sued for a debt and you have questions about how to respond, how the process works, or what your rights are? The DeKalb Volunteer Lawyers Foundation has answers. Local attorneys will provide useful information to people who are being sued in consumer debt cases in DeKalb County. There will be an opportunity for short one-on-one conversations with the attorneys present. Participants are requested to bring all documents related to their case.
Along with other prominent consumer attorneys of Atlanta, Daniel DeWoskin will be sharing his knowledge on the topic of debt collection lawsuits.
This event is sponsored by the DeKalb Volunteer Lawyers Foundation.
The Decatur branch of the DeKalb County Library System is conveniently located within walking distance of MARTA and the DeKalb County courthouse. For directions from Google Maps, click here.
On June 1, 2015, Channel 2 News aired a news segment by Clark Howard on the importance of standing up for yourself when faced with a debt collection lawsuit. DeWoskin Law Firm’s Jill Sheridan was featured on the story as a consumer who once faced a debt collection lawsuit by a debt buyer in Gwinnett County and won. Click here to view the news story. Clark Howard says never walk away from a debt collection lawsuit.
The vast majority of people who are sued by debt collectors lose because of their own failure to act. If you do not file an answer with the court after being served with the lawsuit or you fail to appear in court when a date is set, you are basically ensuring that you have no chance of winning. Give yourself a fighting chance by doing something. You have too much to lose by simply doing nothing in response to a debt collection lawsuit.
Many people do nothing in response to a debt collection lawsuit because they assume hiring a lawyer to defend them in a debt collection lawsuit would be too expensive. However, many consumer attorneys offer free consultations on these cases and payment plans for their services as well. Don’t make assumptions without exploring the options available to you.
If you are dealing with debt collectors and want to learn your options, you should take advantage of the FREE consumer clinic on debt collection lawsuits held monthly at the Decatur library. Volunteer attorneys are there to discuss debt collectors and debt collection lawsuits with members of the public for FREE.
The short answer to this question is six years. The Court of Appeals of Georgia determined that credit card agreements are contractual obligations and Georgia law provides a six year statute of limitations on lawsuits based upon contracts. This means that starting with the date upon which you became in default on your credit card payments and you never caught up, the debt collector would have six years from that date to file a lawsuit against you and serve you with that lawsuit. If the debt collector waits until that six year statute of limitations has passed and then files a lawsuit, the defendant then has an absolute defense against the lawsuit that the statute of limitations has passed on the debt collector’s claim. Different states have different statute of limitations on lawsuits on credit card debt. Unfortunately, we have seen that just because the statute of limitations has passed on some lawsuits, debt collectors still occasionally file lawsuits on the debt anyway. In a couple of cases, the evidence that the statute of limitations on the plaintiff’s action had passed was attached the their own complaint documents! The defense of lapse of the statute of limitations on the plaintiff’s claim is a defense that must be asserted in the Defendant’s Answer to the plaintiff’s lawsuit or the defendant risks losing the defense altogether. With very few exceptions, even if the debt collector files the lawsuit within the statute of limitations, they must also serve it upon you within that statute of limitations period to avoid giving you the defense against the lawsuit.
If you are sued on a credit card debt after the statute of limitations has expired, this is a violation of the Fair Debt Collection Practices Act (FDCPA). The statute of limitations on Fair Debt Collection Practices Act (FDCPA) lawsuits are short – only one year!
There is an argument that some debt collection lawsuits against consumers are barred by a different statute of limitations in Georgia that is four years. A lawsuit based upon a “Suit on Account” has a statute of limitations of four years in Georgia. On the face of the lawsuit you will often see the title “Lawsuit on Credit Card Account” or maybe there are different boxes that can be checked off with the options of contract or account. It is simply the option of the debt collector filing the lawsuit which “theory of recovery” he chooses, whether an action on a contract or on an account in credit card debt cases. The theory of recovery, generally, outlines the legal requirements for proving a claim. Debt collectors will argue that the longer statute of limitations of six years would apply, of course, because it provides them with the largest window of time to collect on the debt by filing a lawsuit. Without supporting case law and good evidentiary arguments, a defendant’s assertion that a four year statute of limitation should apply simply based upon the choice of the plaintiff’s action on account will likely not gain much traction.
Generally, the statute of limitations on the amount of time a debt can reported to your credit report is seven years. This statute of limitations is completely different than the statute of limitations on the legal pursuit of the debt itself. Credit reporting is governed by the Fair Credit Reporting Act, a body of federal law which decides the statute of limitations on credit reporting. The statute of limitations on collecting debt is governed on a state by state basis. In Georgia, a debt can be reported on your credit report for at least one more year after the statute of limitations runs out on debt collector’s right to pursue you legally for the debt. If there’s already a judgment on a debt collection lawsuit, it can be reported on your credit for up to ten years as a public record.
Once a judgment is issued in a lawsuit, the statute of limitations has no effect on how long the judgment holder can collect on that judgment. Many people believe that even if a judgment is entered against them that its only good for the six years that the statute of limitations would apply. This is incorrect. The purpose of the statute of limitations is to provide for a defense to a lawsuit before a judgment is issued. In Georgia, judgments can be renewed every seven years. There are specific things the judgment holder must do to legally renewed the judgment and assuming the judgment is properly renewed every seven years, it could theoretically last for as long as the judgment holder continues to properly renew it. If a judgment holder does not properly renew a judgment after ten years passes, then the judgment is finally dead and cannot be enforced against the defendant.
Many individuals contact my firm with confusion as to why they are being pursued for a debt that was charged off by the original creditor. Often times, the charged off debt for which they are being pursued is by a debt buyer who purchased the debt from the original creditor or another debt buyer. Just because a debt is charged off by the original creditor, this alone does not mean that the debt is extinguished or otherwise forgiven or uncollectable. When you have a loan or credit card balance and you are paying it as agreed, your account would be considered an asset to the creditor for accounting purposes. If you fail to make your payments as agreed, your account is less valuable as the likeliness of collectability declines. Federal regulations require creditors to charge off the debt at around 120-180 days after no payment has been collected. A charge off is simply an accounting term used to describe the removal of the debt from the “Assets” portion of a financial balance sheet of the original lender. In other words, they are no longer considering your debt to be an asset because you failed to pay. Once a debt is charged off, the creditor basically assumes you aren’t going to pay them voluntarily. This does not mean that they won’t hire a debt collector to pursue you for the debt or sell the debt to a debt buyer who in turn will attempt to the collect the debt from you.
If you know the charged off date for the debt, this is a good starting point to determine the beginning date for calculation of the statute of limitations. If the debt is a credit card, the debt became in default and never regained positive status around 180 days before the charge off date. Once you have determined when the debt became in default initially and never regained a positive status, you are then able to calculate the statute of limitations date from there. The statute of limitations for credit card debts in Georgia is generally six years. So, you would want to take the initial date of default and calculate six years from that debt.
A while back, the Association of Credit and Collection Professionals, or ACA International, released an article dispelling myths about consumer debt collection. Read the article here. The article addresses four “Myths” regarding debt collection. Of course, the smart consumer must consider the source of the information as well as the motives at work in this “public service message,” as it were.
“Repayment of consumer debt is the lifeblood of America’s credit-based system and vitally important to the national and state economies,” says ACA International Chief Executive Officer Pat Morris. This statement is utter nonsense. The lenders of much of this consumer debt have long since leveraged their risk in the matter, sold off the debt to scavengers who purchased it for a slight fraction (pennies on the dollar), and/or reaped tremendous tax benefits for their losses.
Much of this consumer debt stems from the lenders taking outrageous risks on those whose credit would not justify any such risk. These individuals may have been sent pre-approved credit cards with low credit limits, such as $300 or so, and then have been subjected to sky-high interest rates, over limit fees, and a host of other predatory charges that more than compensate the lenders for any eventual loss of capital.
To say that the lifeblood of our credit-based system is the repayment of consumer debt in these circumstances is to suggest that the best way to help the economy is to syphon what little remains of those struggling just to get by. The lenders were often insured against the sort of losses that they sustained. The contractual interest rates that they recoup far outweigh their losses on even the riskiest bets they make. An equally ridiculous response might be that if consumers paid all their consumer debt, they would eliminate the jobs of debt collectors and thus cause joblessness and the collapse of the economy.
For all the myths that this article could ever attempt to dispel, it begins with the biggest myth of all: that if these debt scavengers and ruthless collection activities are not permitted to thrive unencumbered the entire economy will collapse. Any unbiased reader need only look to a newspaper to note that credit card companies are not suffering at this moment, but consumers are.
As always, consumers should be vigilant about collection activities, their rights, and their credit. They should never pay or even agree to pay an alleged debt without written confirmation and validation of the debt. They should demand that any offer or agreement be sent in writing. Ideally, they should ensure that any communication with debt collectors be in writing, as debt collectors are notorious for deceptive activities. The article is correct that they are not all the same, but out of an abundance of caution, the best rule is always to get it in writing. Often, merely asking that something be sent in writing will cause a debt collector to become more intimidating, hostile, or arrogant.
Never take a debt collector’s word that his company owns the debt. If a company claims that it purchased your consumer debt, make them provide proof in writing. They can almost never prove these claims and rely heavily on fear, threats, and improper and unlawful tactics to get anything they can out of terrified consumers. If you think that you are being victimized by a debt collector, contact an attorney before agreeing to anything.
It’s about time for regulators to take more notice of these issues. Many debt collectors, and first party lenders, have engaged in fraudulent and abusive practices with little to no oversight or accountability. I am skeptical about what impact the Federal Trade Commission and other regulators will have in the short term, given just how much capital is at stake. There is so much money to be made by disregarding consumer rights, and that is only when consumers have such rights.
There is so much work to be done to address abusive practices that I can only read this article with the hope that it is good place to begin.
In the consumer work that I do, I repeatedly hear about abuses that people are subjected to by debt collectors without any respect for the rule of law and without any sense of common decency. I am frequently asked by clients, friends, colleagues, and others what are some of the ways that people can protect themselves against becoming victimized by these collectors.
I use the term victimized because of the clear distinction in power in such phone calls. Debt collectors will often be much more bold and aggressive on the telephone than they would ever be in person. The job that requires making these types of phone calls day in and day out is ideal for a person who suffers a certain kind of cowardice. These callers know who you are, or at least have access to a good deal of sensitive and private information. All the while, you know nothing about the callers. This is power for the debt collectors.
After cataloguing the many types of complaints and accounts I hear about the manner in which these collection abuses take place, I have come up with four questions that, if asked by the consumer immediately when the call begins, may very well shut down the entire situation before the consumer is intimidated, tricked, bullied, harassed, or otherwise lured into providing compromising information to the complete stranger on the other end of the phone. What I hope the information that I am providing here will do is prevent readers and consumers from giving such callers even more sensitive and private information than they already have.
First, the person who receives a call from a debt collector should ask the first and last name of the person calling. If the caller tells you that he is Mr. Thompson, or Ms. Russell, but refuses to give a first name, the consumer should hang up the phone or otherwise terminate the call. Be prepared for the caller to try to change the subject or “deflect,” as the longer they can keep you on the phone, the greater the chance they have of getting you to eventually give them more information that they can use to take more aggressive collection actions. Do not be afraid to hang up the phone if the person who knows your first and last name will not give you his or her first and last name.
Second, ask for the name of the company that the caller is calling from. When you ask this question, you may hear the person say they are calling “for” somebody or “on behalf of” some other company. This is not sufficient. If the caller works for ABC Collection Company, you should know the full name of the company. This is going to be helpful for you as the consumer to know and compare what information they say they are calling about with what accounts you may or may not have open, in collections, or listed on your credit report. Once more, if they refuse to answer the question, the call should be over. No more questions.
Third, ask for the number from which they are calling. These days, many of these collection companies have found savvy, and sometimes even illegal, ways to disguise their phone numbers. They do this so that people with caller ID may not recognize the number and will pick up the phone. As I have said, the longer they have your ear, the better their chance of getting paid. Most of these callers work on commission, so they are driven salespeople and may easily lose sight of the boundaries that federal and state laws place on them. If you cannot get the phone number, you cannot continue with the phone call.
Fourth, ask them for the full account number that they are calling about and who is the current owner of the debt. If you have gotten this far and have not had to hang up the phone yet, you will likely find the debt collector answering this question with some statement about how they would need to verify your social security number or identification before they can go into that. This is simply a clever ploy to get you to answer questions before they show you that they at least deserve your five minutes. If they try to deflect or avoid answering, hang up the phone!
I don’t wish to make this all sound so routine or scripted that you let your guard down. Many of these collectors are very experienced and have made a lot of money by making false promises, by falsely stating the amount of the debt or lying about how much they would settle the case for, or even by blatantly threatening that if a person does not pay for or account for the debt that he or she can be arrested. You cannot go to jail or be charged criminally for owing a debt (unless that debt is to the IRS and other factors are met).
My point is that the call will likely not follow any of the exact script that I have laid out above, but I would be shocked if a vigilant consumer is able to get through the four questions and still finds himself or herself on the phone with a debt collector. They are not customarily successful by demonstrating professional, kind, and understanding demeanors on the phone. They are instead trained on how to use assertive tones, guilt, shame, and a host of other tactics to exploit unsuspecting strangers on the other end of the line into making agreements that they may not be able to uphold. They are also quite capable of getting many, many folks to give them social security numbers and bank accounts. This is never a good idea. This is NEVER a good idea.
I feel compelled to say that a second time. Do not give out your social security number or banking information over the telephone. No good can ever come of this regardless of the threat that the debt collection caller may make. If you feel pressured to give this information, the caller is likely violating the law. It is as easy as that. Furthermore, if you’re not sure what to do, tell the caller you have to talk to your lawyer and that you will call them back with the number and name, first and last, that the person gave you at the beginning of the call. If the caller tells you that the deal or offer to settle is only good for that night, it is a lie, or not a “deal” at all.
As an attorney, I have one rule that transcends all the work that I do and has been an invaluable resource for me and my clients. If it is not in writing or recorded, it did not happen. If you find yourself talking to one of these debt collection callers, tell them to send you the settlement offer in writing. Tell them to provide all their information, the account they are calling about, the balance, the owner of the account to you in a letter in the mail. They may then try to “verify” your address, but I caution you to respond that you are certain they already have it. You can then wish the caller a goodnight and hang up.
In over a decade of practicing law, I have never heard a single positive experience of someone who resolved a debt through a telephone call. On the other hand, I have heard nightmare stories over and over again where people were tricked or bullied into giving total strangers access to their bank accounts. These people were not stupid, if that is what you were thinking. We all have moments of frailty when we are more subject to being taken advantage of, and when a debt collector calls, we have a stranger who knows something about us that makes us feel bad about ourselves, our financial situation, or our current circumstances. Once they have us feeling defeated, they act as though they are in a position to help. They are not in a position to help.
I do not want to have you as the reader thinking that every single debt collector is a criminal or violates the law when he or she does his or her job. Experience tells me that those people with strong ethics and respect for the law do not thrive as debt collection callers. They are not willing to cross lines that the law creates for them and they will ultimately make less money than those willing to do whatever it takes. Vigilance and knowledge are the best tools you have at your disposal to deal with the callers who do not care about boundaries. The four questions listed above should serve you well going forward.
A garnishment is a collection action that takes place once a party to a lawsuit has a judgment against a defendant. This means that there was already a case and it was already lost. People cannot be garnished just because someone says they owe money. It is only after there is a judgment that a garnishment of their wages, accounts, or other property can take place. The garnishment action does not have to be filed in the county in which the original judgment occurred, only in the county where property of defendant is held.
So, what this means is that if a person wants to fight a garnishment, it is almost always an uphill battle. As a lawyer who represents consumers, I hate garnishments because my opponents usually feel what is often a well-deserved sense of confidence when walking into court. After all, they have already won the war and got the judgment. What is one more measly battle to try and get payment? And, they have clearly found a source of collection for my clients whether through a wage garnishment or from garnishing bank funds. Ugh.
When a garnishment is filed, the creditor is basically telling the employer, bank or whoever has property of yours that you have a claim to that property. At that time, you are not actually a party to the action and the garnishment action is between the creditor and the garnishee (party holding the funds of yours). To even become a party to the garnishment action, one must filed a traverse. Some courts in Georgia charge to file a traverse; usually the charge for a traverse is a very modest fee of around $20.00. When a traverse is filed, the court will set a hearing to determine whether or not there is a valid judgment and if certain procedural requirements were met such that nothing is improper or illegal about the garnishment itself.
Often, what you will hear at these traverse hearings are challenges raised by defendants that they were never properly served with a lawsuit or that they never owed the money in the first place. The trouble with these arguments is that they are being made before the wrong court. Once again, if you are saying that you never owed the money, the time to argue this and assert this defense was within 30 days of being served with the lawsuit. If that wasn’t done, the defenses were really waived, meaning you lose them. Thus, a party who never had a justified and legal claim can acquire one because you failed to stop them from getting a judgment. Think of it like this, nobody has a right to break into your house and steal your belongings. However, if you are sitting in the hallway and watching them steal your stuff and you decide not to call the police, or even to say that what they are taking doesn’t belong to them, you are asking for trouble.
There is merit to the argument that someone was never originally served with the lawsuit. After all, how can someone defend a lawsuit that they never knew was filed against him or her? He or she can’t. The problem here is that the court hearing the traverse is only concerned with the existence of the judgment. If it is not valid because the person was never served, the proper and preferable action would be to ask that the court stay the garnishment proceeding and immediately file a motion to vacate the judgment in the court that originally granted the judgment to the plaintiff.
This may mean filing a motion in a court in an entirely different jurisdiction. However, it is the only way to undo the jeopardy that the defendant in a garnishment is in with respect to losing his or her property. In the meantime, the garnishment court will generally be agreeable to staying the proceeding until the motion to vacate is heard by the other court. By “staying,” I mean that the property will remain held up in the court registry or otherwise not paid to the plaintiff until the motion to vacate and other issues are heard and decided. Sometimes, just the threat of this delay and the further work required of the collector can facilitate some sort of settlement.
As I have mentioned, I am not a fan of fighting garnishments primarily because I often feel like a turtle on its back. The best time for fighting has long past and a judgment was already entered. That being said, I do get in this arena and have had success, but they are hard fought and take a great deal of time and effort.
Debtor’s Prisons and “Attachment Bonds”
In Georgia, you will not go to prison or be held criminally liable for owing money. This is true provided that the debt is not the result of some criminal scheme or owed as restitution for injuries or damages caused by a crime for which you are convicted. This means that if you owe money on a credit card or on some account or note that you borrowed on, you can be sued, but not jailed in the event you cannot pay.
In some states, such as Missouri, there are provisions apparently in the law that allow for creditors to sue you and, in the event you fail to answer or show up, actually take steps to have you taken into custody. See this article. This is outrageous and should offend the conscience of every American. In Georgia, if you fail to appear in court or answer a lawsuit, the party suing you gets a default judgment. They win the case, which is something extraordinary, but that is it. They can garnish or collect their judgment in any legal way, but they cannot have you locked up.
In Missouri, and in some other states, if you are sued and fail to respond, as opposed to just awarding the party suing you a judgment, the court will often entertain and sign an attachment bond or order. This order doesn’t attach the defendant’s property, but the defendant himself or herself. The sheriff then goes out and locks up the defendant, who may have not answered for very understandable reasons such as a failure to having been properly served or perhaps some legitimate and providential cause. The defendant is then locked up and held with some purge amount set for his or her bond. This “purge” amount is likely the amount the creditor plaintiff was suing for. Thus, debtors prisons, a concept that should be foreign to us as freedom-loving Americans should certainly not be permissible under the law, are able to vex and oppress a host of people whose “crime” or “offense” may have been to do little more than find themselves unemployed, broke, or homeless.
Debtors prisons are bad for everyone. They burden the taxpayers, law enforcement, and the courts by needlessly shifting the monetary and time expenses to the system when the creditors and third party debt buyers took the risk in the first place. They criminalize routine civil collection actions and further disadvantage a population that is already outgunned when it comes to defending themselves in court. After all, criminal defendants have constitutional rights that require the appointment of counsel when they cannot afford counsel. People being sued on debts and then subject to these attachment bonds do not have such access to counsel routinely. Volunteer lawyer foundations and legal aid offices are quite often not equipped and staffed to be able to take on these representations. These people are poor, but often not poor enough or have enough at stake to avail themselves of any “free” legal services.
So, the taxpayers then foot the bill for jailing these people for their failure to file an answer. The creditors may not see any problem with this system. To them, the jailing comes because the debtors failed to respond and come to court to talk about the debt. This is nonsense. Fortunately, in Georgia, our courts recognize that not answering a lawsuit has a serious consequence, a default. The other party wins by forfeit. It is not contempt to not answer a lawsuit.
This brings up an interesting point, however. In Georgia, in some jurisdictions, after a default judgment or any judgment, for that matter, the prevailing party may send out post judgment interrogatories or post judgment discovery. These are usually a series of questions designed to finding out where a debtor-defendant banks, works, or has property that might be subject to collection to satisfy the newly-acquired judgment. If a debtor-defendant fails to respond to these inquiries timely (within 30 days), the judgment holder then files a motion for contempt with the court.
In some jurisdictions, the courts will then hold a motion hearing on the contempt issue. If the debtor-defendant still fails to respond, a warrant may be issued by the court and the debtor-defendant may later find himself or herself subject to arrest for contempt of court. As I mentioned, this only happens in some jurisdictions. In others, the judges will see this as just another way to have a debtor-defendant locked up for owing money that they cannot afford to pay. Having a person held in contempt so that they can be cross-examined as to how much money he doesn’t have doesn’t really serve justice and just clogs the system with needless hassle and expense.
It is also foolish to have purge amounts on these contempt cases because even when a debtor-defendant’s family member steps up to make the bond to get his or her loved one out of jail, the debt is not being satisfied by the party responsible for it. This is a perversion of justice and abuse of process. It can and does happen in Georgia, but not on the same scale as what appears to be happening in Missouri according to the article cited above.
As always, if you are a debtor-defendant, the best rule of thumb is to be vigilant about your credit and the statuses of various debts. Promptly respond to any lawsuits with an answer, even if it is just a general denial. Study what your rights are in the particular jurisdiction in which you live in or are being sued in. When practical and possible, hire competent counsel. Many creditors will not hesitate to take unfair advantage of any means that are available to them. The best way to avoid being a victim is to be aware and knowledgeable. These debtors prisons are reprehensible, but with diligence and effort, you can avoid becoming an inmate just because you do not have the means to pay a debt (especially one you don’t legitimately owe!).
A default judgment is what a plaintiff can get when a defendant is validly served with the lawsuit under the law, but fails to timely file an answer. An answer to the lawsuit must be filed within 30 days of service (there is one exception to this: when a lawsuit is filed and discovery is served upon the defendant, the defendant then has 45 days from the service of the lawsuit to file an answer. If you don’t know what this means, be safe and file an answer within the 30 day period from the date of service). The moment you are served with the lawsuit, the clock starts ticking. Filing an answer requires you to respond to the Plaintiff’s lawsuit in writing and file your response with the clerk of court in the county in which the lawsuit is filed. Even after the 30 days period has run, there is a period of 15 days after that in which you can still save yourself from a default judgment. A defendant who fails to answer the lawsuit can “open” default by filing an answer and paying costs of court no later than the 45th day after being served. After that, it will be up to the court to determine whether or not the defendant can fight the lawsuit at all.
Many debt collectors and debt buyers are extremely successful precisely because the people they sue fail to file any answer whatsoever. It may be because they don’t know what to do, don’t have the money to hire a lawyer or settle the case, or are perhaps just overwhelmed by the idea of what might happen if they go to court. By doing nothing, they ensure that the other side has the upper hand from that point on. It is of the utmost importance that the defendant file some answer to the lawsuit, even if it is just to say that “I do not owe the plaintiff any money.” This will be enough to preserve the issues for trial so that the defendant can take the time necessary to hire an attorney or, at the very least, educate himself or herself as to how to defend the case as best he or she can.
In the event of a default that goes beyond the 45 days mentioned above, there are only three reasons that the Court can permit the defendant to open default and get the case back to where it needs to be. These are providential cause, excusable neglect, and proper case. The Court has wide discretion to determine whether or not a default should be opened, but a defendant takes his chances from jurisdiction to jurisdiction and even from judge to judge. I have had cases in which both I and my opposing counsel agree that things would have turned out differently but for the judge who was hearing the case. The same could be said of almost any legal issue, but it seems quite obvious in this particular instance.
As a rule, the law does not favor default. The law, and presumably the Courts, are to prefer that all cases be litigated and decided on their legal and factual merits. The fact that one party has failed to adhere to the time restrictions and procedural requirements of the law do demand that some guidelines and repercussions exist for fairness. However, when practical and possible, the courts are supposed to err on the side of allowing parties to litigate on the merits. Unfortunately, this is a call that is made by a judge and can go either way.
The lesson here for the defendant who has been served with a lawsuit is always file a timely answer. Do not give this kind of leverage to your opponent. Fear and intimidation can cost you dearly. You must be vigilant and be your own best advocate.
I recently had a case in which my client was being sued by a third party debt buyer for $15,000 or so. My client had little money to hire an attorney and actually consulted with a bankruptcy attorney. Before she knew it, the thirty day mark was upon her and she did not file an answer. She kept telling herself she was saving to hire an attorney. Note that saving to hire an attorney is not one of the three justifiable reasons for opening a default that I spoke of earlier.
By the time my client did contact and hire me, I was filing a motion to open default, along with all her defenses and counterclaims, and it was 78 days past the 30 day point. The plaintiff debt buyer had not even moved for a default judgment, but the case was simply in default. We went to a hearing on the matter, at which time I argued that my client had many defenses that went to the merits of the case, that the plaintiff had suffered no prejudice by my client’s failure to timely answer, and that due to her inexperience with the case and financial difficulties, this was a “proper case” under the law.
The judge drilled me for 35 minutes as to my arguments. He believed that the plaintiff would suffer prejudice if he opened default because they would have to defend against my counterclaims. I countered that he could open the default only for the limited purposes of allowing the defenses at trial and not the counterclaims, but he shut me down instantaneously.
“Just what makes this a proper case, Mr. DeWoskin,” he asked. I gave him the best answer I could give. I pointed out that the default calendar he had just read consisted of about 80 or 90 cases. I showed him that there were about 12 defendants in the room who took the time to come to court to challenge the entry of defaults in their cases. My client was one of those 12. She had now incurred the cost of hiring qualified counsel, come to court in person, and stood there prepared to argue her case on the merits. The judge shrugged off my arguments rather easily, and moved on with his challenges to my position.
I was next pressed as to why 78 days past the deadline set by law was reasonable. I told him that there was very little guidance under the law and caselaw as to just how many days past the deadline are reasonable. “If it was only 5 days, Your Honor, there is nothing under the law to say that this would be reasonable. I suppose the best argument I can make is that it was not 110 days.” I elaborated by going back to my first position and showing that there was no prejudice, the plaintiff had not filed any motions for a default judgment, and that no such judgment had yet been entered. By this point, you can clearly see why I find arguing against default so frustrating as an attorney, especially when my clients have such strong defenses.
This case ended when the plaintiff asked to have the case continued so that we could discuss settlement. The case did ultimately settle, but not nearly on the terms that would most have favored my client had she just filed a simple answer denying the plaintiff’s claims.