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Common Defenses to Raise

The facts of each case are different, and each state has its own laws. Here are some common defenses:

The Lawsuit Was Brought in the Wrong Court. If you are not sued in the county where you live or where you signed the contract with the creditor, the action is illegal because it was brought in the wrong court.

The Collector Has Not Proved It Owns the Debt. The collector has the burden to prove not only that you owe the money, but that you owe the money to this collector. If it cannot do so, you should win the case.

Many collection cases are not brought by the company to which you first owed the debt (such as a credit card issuer), but by someone who has allegedly bought the debt, called “a debt buyer.” Ask that the debt buyer prove that your debt has been properly transferred to it. Amazingly, debt buyers often do not have that proof. It may produce a document indicating it bought thousands of accounts and state that the list of those accounts, including yours, is on a computer tape. This is meaningless until the debt buyer produces the computer tape and shows that your account is one of the accounts on that computer tape.

The Collector Has Not Presented Your Credit Contract in Court. Collectors often sue you based upon a contract you entered into with the creditor and then ask the court to make you pay not just the amount owed, but also interest, late charges, and attorney fees—all as provided for in the contract. To recover on the contract like this, the collector must produce the contract. Make sure the collector produces in court the actual contract you agreed to, and not some standard form agreement with no evidence that it was the one you entered into with the creditor. If the collector cannot do so, it may lose the right to collect attorney fees, late charges, and interest, and may even lose the right to recover on the debt.

If the collector cannot produce the actual contract, it may sue for money on some other theory. For example, it may say that it sent a statement of how much you owed and you did not object. An attorney will be helpful in advising you whether that theory is valid, but this theory should not allow the collector to recover attorney fees and interest based upon a contract, because no contract has been proved.

The Debt Is Too Old to Be Collected. Some debts are so old that they cannot be collected in court (in legalese, this referred to as “that the statute of limitations has run”). If you do not raise this with the court, the collector will win, even if the debt is too old. There is no one simple rule as to when a debt is too old to collect in court. The time period varies by state and even by the type of lawsuit being brought. The time period might be as short as three or four years, but it can be five or more years. On a very old debt, it is risky to make a partial payment or say in writing that you owe the debt, because this can start the time period running all over again.

Someone Else Incurred the Debt or You Are Only an Authorized User. You are only liable for your debts and not for someone else’s (unless you are a co-signer or otherwise guaranteed payment). This means that you are not liable if someone forged your name or used your credit card without your authority (under federal law, you may be liable only up to $50). You are not liable if you are only an authorized user on a credit card. You are not liable for the debts of a family member who passed away (although the debts may be deducted from any inheritance you receive). You may not even be liable for your spouse’s debts, depending on state law.

You Have Already Paid, Settled, or Discharged the Debt in Bankruptcy. Virtually all debts are eliminated by a bankruptcy and this is a defense to the lawsuit, as is that you have already paid the debt, paid more than the collector claims, or if you already settled the debt with the collector or the original creditor. Present whatever evidence you can to support your claim.

Where Money Is Sought After Your Car Was Repossessed. When your car is repossessed and sold, the creditor may claim that the sale proceeds did not pay off the debt and seek in court additional payment. You can challenge that the repossession and sale were not “commercially reasonable.” Then the collector must prove that every aspect of its notice to you and the sale was commercially reasonable.