With so many young people buried under student loans, unemployed, or underemployed, it’s no wonder that millions of Americans are struggling with debt, especially credit card debt. Many companies specifically target those just starting out with high interest cards with unfair or abusive terms with hidden fees. It’s difficult to stay current on these types of cards, and the credit companies begin their aggressive collections much to your dismay.
But there is hope. The credit card companies simply can’t have their way with you. Instead, there are a number of laws that protect you as a consumer. Below is a brief overview. Be sure to consult with an attorney during every step of your debt defense journey.
Statute of limitations.
Some debts are simply too old to be enforced. The time a creditor has to file suit against you is limited by law in each state. In most states, it is anywhere from three to six years. The time starts running from the last date you make a payment. If the statute in your state is three years and you haven’t made a payment in two years, a payment to a debt collector who is quite literally on your case will start the time running all over again.
Federal law. The Fair Debt Collection Practices Act is a federal law that governs all actions that can be taken to collect debts. A “debt collector” is defined broadly to include anyone (including attorneys) who reach out to you when a payment is late or missing. The law requires any debt collector to provide you with a validation of the debt upon request and to stop collection activities until they comply. It also prohibits certain activities such as threatening to sue on a debt that is outside the limitations period.
Remember that if a lawsuit has been filed against you, you can assert FDCPA violations as a countersuit or to set off the amount due. You can recover actual damages, attorney’s fees, and additional damages of up to $1,000 per violations if the violations are found to have taken place.
Lack of Standing
This is a fancy legal term for saying that a creditor can only sue you if it has a relationship to you. Because Credit card companies often sell bad debt to debt purchasers. If the party that sues you is not the original creditor, and you assert lack of standing as a defense, then it will have to prove that it has the right to sue you. Often these debt purchasers will attach bills of sale or other documents to the suit which show that it bought debt from your creditor – but not that it bought your particular account. If you assert lack of standing, the debt purchaser must show proof that your account was one of those that it did purchase.
This may sound easy, but in reality, it is not because the debt is often sold more than once. When this happens the current debt owner may have trouble getting documentation that is sufficient to meet the proof requirements of the court. Much of this debt is transferred using computer generated lists without signatures nor affidavits, completely in violation of debt collection law. Once the debt has been transferred to two or three different entities, the original creditor often will not supply any further information. If this is the case, it may make it difficult for the creditor to meet the proof requirements of the court. This generally requires that the creditor have a witness that can testify as to the accuracy of the business records (at the time they were made) from personal knowledge.
File For Bankruptcy
While bankruptcy usually doesn’t make sense when you just owe a small amount of money, if you’re being sued over a large debt or if it is just one of many other debts you owe, it may make sense to file for bankruptcy. When you do, you will be protected by the “automatic stay,” which will halt collection efforts against you.
As always, if you are thinking about bankruptcy, it’s best to talk with an attorney as soon as you are served with notice of a creditor’s lawsuit, rather than waiting until the day you’re due in court.
Tips Going Forward
While dealing with a debt collection lawsuit, it’s still important to keep an eye on your credit scores and to periodically check your credit reports. Though your credit has taken a hit, watching your credit can alert you to new potential problems that you can work to resolve before they become bigger problems. You’re entitled to your free annual credit report from each of the major credit reporting agencies, and you can monitor your credit score online for free.