What I’m about to offer you can be used for good as well as evil so please use this information responsibly. Additionally, I always urge all of my readers to consult with an attorney licensed in their state for legal advice. I am not a lawyer.
But over the decades I’ve been helping people with problem debt there is one constant that needs fixing. When people are sued by a debt buyer or debt collector over an old debt, rather than show up and defend themselves they stick their head in the sand and lose by default.
I completely understand how the thought of having to go into court to face someone suing you is a difficult emotional experience. It’s scary. You’ve probably never been in that situation before and have no experience in handling such a thing and on top of that, it’s about you. Double or triple the stress.
But what is really happening is about 90 percent of consumers sued just never show up for court so they lose by default when they could have easily won and had the debt completely eliminated. Those folks are throwing away a perfectly good opportunity to make a debt go away because they are scared.
If you have an old debt that has been turned over to a new company it is unlikely that company has evidence or proof about any contract for the debt, how the balance was calculated, or even if the debt is really yours at all. I’ve also watched debt buyers go after consumers long after the statute of limitations has expired and the debt cannot be legally enforced.
If people just got some good legal advice about handling the suit rather than doing nothing there would be significantly fewer consumers facing judgments and wage garnishments after losing in court by default.
Now this information can be used for evil if you know you actually owed a debt long ago and just don’t want to pay it any more. But a vast majority of people can use this information for good by utilizing the approach and the four words I’m about to give you for debt you don’t recognize or think is valid.
The Four Magic Words
When you go meet with the attorney in your state they will tell you the four magic words you can utter to make a huge dent in the case against you. The words you want to remember are “Show me the evidence.”
As an example of how this is effective and works, just listen to the recent interview with Ira Glass and Jake Halpern in the first ten minutes of the radio show below.
The radio show is a good example of how this same think happens day-after-day across America.
All you are asking the person suing you to do is just validate the debt is real and you really owe the amount they claim. I’ve written articles on this before and you can find more information on how to validate you debt here, here, here, and here.
The bottom line is you are not trying to pull some fancy legal maneuver or in fact do anything tricky. All you are doing is asking for the person suing you to show you the basis of how they are claiming you owe the money they are demanding from you.
One recent case I know about was brought by a debt collector who was actually not licensed to collect debts in the state the consumer lived in. When that fact hit the fan the debt went away.
Where is the harm in standing up for yourself? If you don’t you are going to lose anyway. So fight.
The reality is most debt buyers just don’t have the proof they need and so they will drop the case and stop trying to collect on that old unenforceable debt.
The reason for this has to do with the sloppiness of the data when a creditor sells a bad debt to a debt buyer or farms it out for collections sometimes. When a creditor sells an old debt they almost never provide copies of any agreements you’ve signed, details on transactions, or even any way to calculate the amount they claim you owe.
Without this information the debt buyer is relying on you not uttering the four magic words and then they will scare you into going on the hook for the debt by suing you and counting on you to not defend yourself.
So if you or someone you know is facing a suit over an old debt by a company you don’t recognize or of an amount you don’t think is valid, then do something about it.
There is no substitute for good legal advice so find a local attorney who is licensed in your state and spend some money to get good advice before you go to court. Otherwise you are just screwing yourself into a debt you never should have paid.
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Transcript of Radio Show
Ira Glass
OK, here’s one of the strangest outcomes in a courtroom I’ve heard about in a while. And it contains a lesson that very well might come in handy for you– and I do mean you– someday in your own life.
Jake Halpern was the reporter who witnessed this. It was in a courtroom in Georgia. He was down there researching a book about credit card debt.
Jake Halpern
This is called– in Georgia they call it magistrate court, and it’s basically small claims court. And you go in, and it’s all debtors. People refer to it even as debtors court.
Ira Glass
So Jake meets a couple sitting there, Frederick and Keanne. They’re in their 40s, nicely dressed. She’s a shoe salesman. He’s an ex marine who had a business buying houses, rehabbing them, and then selling them, which was going great until the housing market fell apart in 2008. And then that kind of went to hell for a while. They ended up taking on some debt.
And then they got a notice in the mail saying that they owed money to a company called LVNV Funding, which is what brought them to court.
Jake Halpern
And Keanne at this point says like, I don’t even know who LVNV Funding is. And one of the reasons that she says “I’m here today in court” is just to figure out what this is all about, because she doesn’t even recognize them as being a creditor.
Ira Glass
How much are they on the hook for?
Jake Halpern
They’re on the hook for $3,762.20.
We’re sitting there talking, and this young guy in a suit all of the sudden calls out their name. And for a moment, it’s not clear who exactly he is. He calls it out in the way that an official would call out your name. And they start walking over to talk to this guy.
This young guy quickly says, I’m the lawyer representing the people that own your debt. Are you Keanne, are you Frederick? And then he looks at me and he’s like, who are you?
Ira Glass
Jake explains that he’s a reporter, he’s researching a book. The guy replies–
Jake Halpern
Well, I’m not comfortable with you being here. And Frederick is like, well, we are comfortable with him being here. And there’s this moment. And this lawyer rolls his eyes and continues with his pitch to them.
Ira Glass
Frederick and Keanne tell the lawyer that they’re confused. They don’t know who this NVLV Funding is or what the debt is. And the lawyer says that his client owns their American Express debt.
Basically, when Frederick and Keanne failed to pay off their American Express bill, American Express sold the IOU to this company, and they’re trying to collect it. Obviously, that’s a big business. There are lots of companies that do this.
The lawyer asks them–
Jake Halpern
You did have an American Express card, correct? And they say, yeah, we had an American Express card. And you do live at– and he gives their address. Yes. Well, this is what you owe.
And then he reaches into his briefcase and he pulls out this piece of paper, which I’m actually holding in front of me. I brought it along. At first glance, it resembles a credit card statement like the ones we get every month that says what you owe.
But then at the top it says, this is an account summary. It is not a credit card statement from the original creditor and has not previously been provided to the consumer.
So it’s really bizarre right off the start. Because they’re handing this thing that’s clearly been set up to resemble a credit card statement, and yet there it says right at the top, but this is not actually a credit card statement.
Ira Glass
And so the things you would find in a normal credit card statement, like a list of charges, it doesn’t have that. It doesn’t say how much of this is the original debt and how much is interest. There’s nothing that would help you figure out how they got to the number $3,762.20.
So Frederick asks the guy if he has anything else that would make sense of this number. Does he have the original contract from when they took out the credit card to prove that in fact his client does actually own the debt now and it’s all legit?
The lawyer says he doesn’t need to provide any of that. The debt is real. They have to pay.
And then Jake pipes up. For his reporting, he’s wondering, does the lawyer actually have any of that stuff– the original signed contract or account statements?
Jake Halpern
So the lawyer turns back to me and he says, are you representing them? And I said, no, no, I’m just curious. And he’s like, well, you can’t represent them. You are not a lawyer.
And Frederick is like, he’s not representing us. He just asked the same question that I did.
Ira Glass
The lawyer repeats, you can’t represent them. And Jake says they go around and around in this for a while.
And finally, it’s time to go into the courtroom. And as they walk in, the lawyer taps Jake on the shoulder and tells them, I’m going to put you on the witness stand.
Jake Halpern
And I was like, OK. I couldn’t tell– it’s just a crazy thing to say. I didn’t know if he was just messing with me.
Five minutes later, they call Keanne’s name out, and then the judge also says, Jake Halpern, you need to come up here, too. And then it’s me and Keanne raising our hands together and being sworn in together, almost like codefendants. That’s the only way I can describe it. It’s like we’re both on trial.
Ira Glass
And you’ve known Keanne how long at this point?
Jake Halpern
I had known her like 10 minutes.
Ira Glass
OK. OK.
Jake Halpern
The young lawyer immediately starts his opening argument. He tells the judge, this man right here is representing this couple, and he is therefore practicing law without a license. Your honor, I need you to inform him that he could face criminal sanctions for doing this.
Ira Glass
Jake tells the judge that he only asked a few questions. And the judge rules, it turns out, this is not the same thing as pretending to be a lawyer. So that gets settled.
And then they turn to the business at hand. Remember, this entire story I’m telling you is about credit card debt and what happens in court when a consumer is sued.
And so far, as you see, the lawyer is playing hardball. He is not messing around, which makes what happens next even more interesting. The judge turns to the lawyer, and the judge says to the lawyer, what do you want to do about this debt?
Jake Halpern
And the lawyer then says to the judge, you know what, give me a minute. I need to consult with my client.
So he walks out of the courtroom. Me and Keanne and the judge are left in the courtroom. The lawyer goes out into the hallway and then comes back two minutes later and says, your honor, we’re going to be dropping this, dismissing the case.
Ira Glass
What?
Jake Halpern
Yeah. And I’m looking at her. Keanne is looking at me. And we’re both like, this makes no sense after all this fuss, this full-court press you put on us.
Ira Glass
So Jake and Keanne and Frederick go into the hallway, and they are trying to figure out what in the world just happened. This lawyer from Georgia Legal Services who saw this whole thing go down joins their conversation.
Jake Halpern
And he’s not in the least bit surprised by this. He’s like, oh yeah, of course he dropped the case. And I’m like, what do you mean, of course he dropped the case?
He said, oh, well, when a consumer actually shows up in court and says the magic words, then these cases basically evaporate. And I say, the magic words? He says, yeah. Show me the evidence.
Ira Glass
Show me the evidence. In other words, show me where you got this number, $3,762.20.
The Georgia Legal Services lawyer told Jake that if you’re standing before a judge and you say, OK, I don’t recognize this amount that you say I owe, and I want to see some documentation, I want to see account statements or whatever, because I have no way to know with certainty that this debt is really mine, the judge will usually turn to the other side and ask for the evidence. And in all likelihood, they’ll have no documentation and they’ll drop the case.
And this is true not just in Georgia, but elsewhere. Because the way this business works, Jake says, when credit card companies sell these IOUs to debt collection companies, they usually don’t give them any documentation. Usually they just give them a spreadsheet with a long list of people who owe money on their credit cards and their addresses and the last payment and how much they owe, and not a whole lot more than that.
So when these companies take you and me to court, what they’re betting on is we won’t show up. Which is a really good bet, Jake says. Because–
Jake Halpern
The vast majority of people who are debtors being sued don’t actually show up in court. The no-show rate, there’s different estimates, but between 80% and 90% of people don’t show up.
Ira Glass
If they don’t show up, they lose. If they showed up, if they said the magic words, they would probably win.
And now you know the magic words. You can use them yourself. Though Jake said he is not sure that he thinks that’s always such a good thing. He talked to another guy who had a lot of debt. This is an Indian immigrant who owned a steakhouse and owed like $300,000.
Jake Halpern
And he had used these magic words almost to the point where it was a scam. He owed all this money for the steakhouse that had gone bust, and he was just showing up in court and saying, show me the original signed contract. Show me the statements. And he was beating these debts left and right.
Ira Glass
Oh, wow.
Jake Halpern
Yeah. He was working it. Oh my God, there’s this magic button and I can totally get off the hook for all this money that I owe. I’m just going to keep on hitting it, boom, boom, boom.
Ira Glass
But you see, now you’re confusing me. Because up until now, I thought the magic button was a really good thing. And now I think maybe it’s a bad thing, too.
Jake Halpern
It could be a good thing or a bad thing. I felt conflicted about it. It seems strange that you wouldn’t now have to pay off anything of what you borrowed. – Source
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Steve Great Job removing the veil from these thing for consumers. This will entice them to learn more and the more they know the less they can be taken advantage of
Steve, you do make one mistake in this article. You cannot DV the debt AFTER a suit has already been filed. You may answer and file for discovery but you cannot ask for validation using the typical debt verification process.