Credit Card Defense
Anyone can find themselves in debt and unable to pay their bills as they come due. A financial crisis can arise due to loss of a job, your illness or the illness of a loved one, a long-term disability, a divorce or from a myriad of other causes. Many times when you are unable to pay your bills, the original creditor will use a debt collector in an attempt to recover money. Regrettably, all too often debt collectors and the agencies they work for try to get you to give them money through fear, harassment and intimidation. If that doesn't work, some debt collectors are affiliated with or simply owned by debt collecting attorneys and they may very well take you to court. Debt Collectors buy your debt for literally pennies on the dollar and then sue you for the full amount or more frequently for a larger amount then you ever charged or borrowed. While this might seem unfair, if you do not defend a lawsuit when you receive the court's summons and complaint, our courts will allow them to get a judgment against you in the full amount of the alleged debt. If you have been served with a complaint in the States of New Jersey or Pennsylvania, you need to answer the complaint or you will get a default judgment against you.
I've written the following to help consumers understand the process of what's happening to them. This is not meant as a guide for you to handle a case on your own, nor does it create an attorney client relationship between you and the author, but is for informational purposes only. Keep in mind that the Debt Collectors who file these complaints are all attorneys most of whom have been practicing for years. There are also changes in the law that occur, so I don't warrant that this website will be updated. If you are served with a complaint, contact an Attorney, either myself or one of my colleagues but contact SOMEONE.
ANSWERING A COMPLAINT:
New Jersey: In New Jersey most Debt Collectors complaints are filed in Special Civil Part. This is a fast track docket which handles cases up to $15,000. In Special Civil Part, you have 35 days from the date where you were served with the complaint. This may be different from the date the complaint was filed. When you answer a complaint, you have to address each numbered paragraph of their complaint. There are three ways to answer any particular point, "Admitted", "Denied" or "the defendant is without knowledge or information sufficient to form a belief as to the truth of the allegation" (this last category has the effect of a denial). This process, while simple, may call for an attorney. I say this because I constantly see cases that are decided against Defendants through a motion for summary judgment (see below), based in large part on the Defendant's pro se answer (an answer by yourself without an attorney). Pro Se litigants tend to admit things they shouldn't, or simply fail to deny accusations. They explain and digress, writing about issues meaningless to the case.
A default judgment is a judgment that occurred without a trial. It occurs whenever you fail to answer a complaint. A default judgment is just like any other judgment, as far as the manner in which it can affect your life. A Plaintiff can collect money in multiple ways, none of which are pleasant. The key difference between a default judgment and a regular judgment is that default judgments can be vacated.
New Jersey: In New Jersey if you have a default judgment, and you were served with a copy of the complaint you effectively have 1 year to make a motion to Vacate Default judgment. Normally a motion to Vacate Default Judgment is made under Rule: 4:50-1(a); this involves a two pronged test: Excusable Neglect and Meritorious Defense. You must show both in order to have a default judgment vacated.
Excusable Neglect is that neglect which is consistent with the behavior of the reasonable ordinary person. While failing to answer a complaint is necessarily neglectful, our courts do not demand perfection but rather will be understanding so long as the neglect in question was excusable under the circumstances. This requires you to tell the court what was happening in your life that caused you not to answer the complaint. These are the big things in life: health concerns, serious family problems, etc. A couple things that will never be viewed as excusable neglect include: I didn't have money for an attorney or I forgot about the complaint. In my experience this motion gets harder as time goes by, so you would be well advised to seek legal assistance as soon as possible.
Meritorious Defense is the second prong of the test which is necessary to vacate default judgment. This is a safeguard against wasting the court's time. If the result will be the same at the end of the case, why should the court bother to vacate default judgment? Meritorious defense is anything that, if proven, will lead to a judgment not being entered against you. In my experience judges tend to vary considerably on this prong. While I would argue that one need merely articulate the meritorious defense, I have heard judges claim that it must be proven. I have heard others judges claim that the articulation was not sufficient specific. While I disagree with Judges who hold such views, at the end of the day, they make the decisions.
If you are a pro se litigant, it is highly likely that you will eventually receive a motion for summary judgment (this means judgment without a trial and is done when the debt collector's attorney submits a written application to the court alleging that there are no facts in dispute). Some collection firms seem to do this automatically whenever a case is against a pro se Litigant. Others file such motions because the pro se litigant has made a mistake somewhere along the line. Such a motion is predicated on the idea that the facts are not disputed and one party's claim is supported by the law, entitling him to a judgment. If there is no dispute as to what happens, there is no point to having a trial. I've seen this motion at completely inappropriate times when there is disagreement as to every meaningful fact, but this motion still needs to be answered. The answer to a summary judgment generally requires a sworn statement of facts from the Defendant and a brief which goes into an explanation of the law as to why summary judgment should not be granted.
TRIAL vs. SETTLEMENT
If summary judgment is survived, you will ultimately have a choice about whether you want to go to trial or if you want to settle your case. Each have their advantages: Trial is higher risk and higher reward, whereas settlement you maintain control of the outcome but you will pay something. The decision about whether to go to trial or settle the case has to be made on a case by case basis. It depends on many factors including the opposing law firm, the Plaintiff, the offers being made and the personal preferences of the client. There is no 'right' answer, only what is right for you in your case.
If you are going to trial, you need an attorney. It's that simple. While you have the right to try a case pro se, it's highly inadvisable. Any case you make at trial, unless your case presents unusual circumstances, will be based in large part on utilizing the Rules of Evidence to exclude whatever documents the debt collector tries to admit into evidence. If well executed this can be devastatingly effective, but the rules of evidence take most attorneys years to learn, and some attorneys never truly understand these rules. While possible, a pro se litigant would be hard pressed to learn the applicable rules sufficiently well to win a trial against an experienced debt collection attorney.
If you want to settle a case the presence of an attorney working for you will normally allow you to obtain a much better result than where you try to settle a case on your own. However you still have to ask, will the attorney get such a better deal for you in settlement that he or she justifies their fee? This answer probably varies case to case. There are generally two types of settlements, those that are a percentage off and those that are on a payment plan. Sometimes these ideas can be mixed, but once again, this varies case to case.
The most important thing to know about settlement is the idea of defaulting on a settlement. DO NOT ENTER INTO A SETTLEMENT YOU CANNOT HONOR. In any settlement there is going to be a default clause that states your default will result in a judgment against you for the FULL AMOUNT minus credits. If you default they don't need to prove the underlying case, but merely the fact that you didn't honor the agreement. In such a case they will be entitled to the full, original claim amount minus credits. This is best explained by example: if they sue you for $10,000 and you settle for $5,000 in payments of $500 dollars over 10 months. You pay for 3 months and then miss a payment. You paid a total of $1500. They can move for a judgment to be entered against you in the amount of $8,500 ($10,000 – $1500 = $8,500). It doesn't matter that you made a deal for $5,000, the default clause will reference the FULL amount.
Finally, if you settle your case, this may not be the end of the money you pay. It is possible that a debt collector will submit a 1099c tax document to the IRS. This is a document in which the Debt Collector states that they have forgiven a debt, or partially forgiven it. The amount that they have "forgiven" in settlement will be viewed as income coming to you, and you may be required to pay taxes on this "income". Exceptions exist for a taxpayer to the extent that he or she is insolvent. Additionally our tax courts have held that where a bona fide dispute exists with regard to the debt allegedly forgiven, there may be no income attributable to the taxpayer. You should always consult a Certified Public Accountant if you find yourself faced with a 1099c.