Why Debt Collectors Dismiss Lawsuits All The Time

“Dear Michael,

While searching for information about myself online, I find out that I am being sued by a debit collection agency. I live in CA and have never received a formal complaint or summons from Livingston Financial LLC.

Can Livingston Financial LLC or any collection agency do this without proper notification. Based on the info I gathered online the suit was dismissed without prejudice. Does this mean this is over and done with? Please help and thanks.

Angela”

It is not uncommon for a debt collector to file a lawsuit, only to later dismiss it. It is a bit odd to come across the fact you are being sued for collection of a debt when casually searching the web for stuff about yourself.

Did you use a collection targeted search? Did you start off with a search on your local courts website?

Debt collection lawsuits are filed in droves. Debt buyers like Livingston Financial LLC buy up non performing accounts with an expectation they will make a profit. Their willingness to pay court filing fees (that are fairly high in California), only to abandon the lawsuit by dismissing it before ever serving you, is not conducive with profit objectives. But there are reasons for debt collectors to do that.

5 reasons why debt collectors dismiss lawsuits

1. The debt collector was never able to locate you in order to affect proper service. They will dismiss the case after too long of an effort, or the court will if too much time passes from filing date, and there being no service of process.

Even when you are not hard to find, there can be errors and incorrect information with the data a collector passes on to, or that is used by, a licensed process server.

2. The court will dismiss cases of their own volition as part of their calendar and docket management efforts. This happens not just with cases where the lawsuit is filed and never gets served, but also with cases where the collection suit is contested, and several appearances made. In fact, courts dismissing stalled out collection lawsuits are more common than you may think. Dismissal for lack of service, or lack of prosecution, can range in time. You can call your court clerk and ask what their policy is.

See also  Livingston Financial, LLC - CFPB Complaint

3. Debt collectors regularly dismiss lawsuits when you negotiate a mutually agreeable settlement out of court.

4. Dismissals have been a normal occurrence, up to today, when the debtor is able to sufficiently show they understand their rights, the discovery process, and rules of evidence, and to the point where the debt collector is not willing to bring their case to trial. The odds of people successfully defending against a debt buyer are increased when working with an experienced debt defense attorney.

5. Debt buyers now suing in California have to adhere to the Fair Debt Buying Practices Act (FDBPA). Depending on the timing, Livingston may have dismissed your lawsuit as part of a house cleaning and compliance concern related to these new laws.

The dismissal without prejudice does not prevent Livingston from trying to collect from you in the future. They could file another lawsuit to collect in that very same court.

If that happens, post an update in the comments and lets go from there.

Anyone concerned with a dismissed collection lawsuit, or steps you can take to get a dismissal, is welcome to post in the comments below for feedback.

Michael Bovee founded CRN, a unique company offering debt negotiation education and services, in 2004. Bovee has been contributing articles and free reader feedback on this site for several years.

Michael is a debt industry professional who has volunteered his time to help answer reader questions.

If you have a debt related question you’d like to ask our team, just use the online form.

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38 thoughts on “Why Debt Collectors Dismiss Lawsuits All The Time”

  1. Hi Steve,
    I was served with a notice of suit for bad debt, but the day after I was served, a Request for Dismissal-Entire Action Without Prejudice was filed. The case status is now showing Dismissal of Entire Action and the Case Management Conference shows a cancel reason of “Vacated”. Does this mean there is no active suit? Do I need to respond? I’m not currently working and don’t have any cash to negotiate a settlement or payments at this time. Debt was sold in Jan of 2019 by the original creditor and has since been sold multiple times since then. Not sure what the best course of action is. Appreciate your time and input.

    Reply
    • I’m not an attorney and can’t give you legal advice. You’d have to have a chat with an attorney licensed to practice law in your state for that.

      It does sound as if they dropped the case with the opportunity to refile at any point in the future.

      However, I always hate to assume. Call the court house where the suit was filed and confirm with them the case is no longer active.

      Reply
    • I’m not an attorney and can’t give you legal advice. You’d have to have a chat with an attorney licensed to practice law in your state for that.

      It does sound as if they dropped the case with the opportunity to refile at any point in the future.

      However, I always hate to assume. Call the courthouse where the suit was filed and confirm with them the case is no longer active.

      Reply
    • It’s America, people can sue other people for anything. That doesn’t mean that’s a winning case. A better approach would be to see if the reporting of the debt violated the Fair Credit Reporting Act. Attorneys like to take on those cases.

      Reply
  2. Hi Steve, didn’t the CARES Act make it possible to remove debts being reported to credit bureaus — or some other way to protect credit scores during the pandemic? Looking forward to your help understanding that!

    Reply
    • Well, not really. If the creditor made an agreement to delay a payment for a certain period of time then the credit report should reflect the current payment status at the time the accommodation was made. For example, a creditor agreed to give you a two month payment holiday and you were current at the time that agreement took place, the credit report should reflect that you are still current during the two months without payment. If your account was delinquent when the agreement was reached then it will continue to be reported delinquent.

      There is no automatic skipping of credit bureau reporting. The temporary rules only apply for agreements made with your creditors between January 31, 2020, and July 25, 2020.

      Reply
  3. Steve,
    I have a Case that was dismissed without prejudice but the debt collector will not remove it from my credit report or remove my debt. What steps can I take to have this removed from my credit report and the debt removed all together?

    Reply
    • The fact the case was dismissed does not change the allegation that you owed the debt. The debt can legally be reported for seven years from the time it last became delinquent.

      Reply
  4. New Question: After you stop paying down a credit card, how long can you still pay the original creditor as the debt moves through the collections process? For example, you lose your job and suddenly can’t pay your bills; then years later, you have a stable income and want to clean up your credit report and settle as many debts as possible. Kindly answer the following specific questions: 1) Can you still pay the original creditor after it sells the debt? 2) If a debt buyer sues you, can you still negotiate to settle the debt with the original creditor before the lawsuit ends? 3) If a debt buyer sues you, and the suit is dismissed/discontinued with prejudice, can you still negotiate to settle the debt with the original creditor after the lawsuit ends? (For 2 and 3 above, you never acknowledged you had any business with the debt buyer at any point in the lawsuit.)

    Reply
    • Creditors are required to report the debt as a bad debt for tax purposes after 180 days past due. After that, they typically bundle the bad debts and sell them to bad debt buyers. Once the debt is sold the new owner of the debt is the only legal entity to pay. The new owner may assign it to a collection agency or sell it on again. Once a debt has been sold there is no sense or reason to pay the original creditor.

      Trying to deal with the original creditor at that point would be like dealing with the car dealership that sold the used car you bought from someone who bought it from the dealership.

      Reply
  5. Steve and Michael, thank you so much for this critical information on a daunting topic, as well as your helpful reply in these comments. I have two questions, please: 1) If a debt buyer attorney files a ‘Notice of Discontinuing Action without prejudice’ after a pre-trial conference that resulted in the court attorney giving them an order to comply with a prior discovery order (which they had not yet sufficiently complied with), and then that deadline passed and they did not deliver additional discovery or any correspondence at all, does the Discontinuing Notice in this context indicate they are dropping the case? Location is NYC. 2) What are the best ways (in NYC) to prevent this debt from being sold to a new debt buyer who starts the collection process all over again? If paying is not an option, due to easily documented financial hardship, what is the best way to permanently end the threat of another lawsuit, please? Thank you, in advance.

    Reply
    • I’m not an attorney and can’t give you legal advice. You have to talk to an attorney licensed in NY. NYC has an excellent department of consumer affairs but at this time I doubt they are staffed to do a lot. https://www1.nyc.gov/site/dca/index.page

      Here is what I can share from experience. A suit can be dropped without prejudice and filed again. A debt buyer can purchase an old debt and start collection again. There is nothing at the moment that universally protects a consumer from anyone attempting to collect a debt of file suit outside the statute of limitations (SOL). The SOL is a defense the debtor can raise if sued.

      The only proactive way I know to legally close the door on outstanding debt is bankruptcy. Bankruptcy provides legal protections for the debtor from any further activity on most debt. It also imposes penalties on creditors that try to later recover.

      Reply
  6. Chase filed a summons and complaint collections against me I didn’t respond in writing but we filed Bankruptcy and listed them in the bankruptcy, then it shows they dismissed it without prejudice and the same day filed for entry of judgment but there is something about chase collections not pursuing judgments in a certain time frame cuz they got in trouble and I fall into that time frame? The 10 year mark is in 8/2020 I don’t know where to go from here? do I have a judgment? the order to show cause shows vacate? what does that mean? everything was discharged in bankruptcy in Riverside County California, I don’t see it on my credit report but if you do a background search it says I might have a judgement. What should I do?.

    Reply
  7. I apparently owed Capital One $7k. I just got a letter from the attorney suing me that stated “ it is here by stipulated and agreed the above matter be and is hereby dismissed without costs against either party”

    Can you let me know what that means and if that’s just them saying they are going to try again?

    Reply
  8. Thanks for this post.

    I just found out my cc debt suit was dismissed without prejudice. Could you give me your opinion on the chances it will be reopened?

    I was served the suit and I submitted an answer. The dates were set for the settlement conference (march), pre-trial and trial. Case was dismissed in January.

    Reply
  9. I filed a motion to dismiss then received a voluntary dismissal from the debt collection law firm. Do I have to file that with the court? Or would they have done that?

    Reply
  10. Hi I was sued by Wells Fargo after not being able to pay back my $6000 credit card along with its high interest during this time I relocated to a new address and found out that they have been trying to serve me several times what are my chances of this being dismissed ? It is now going on 7 months after filed when I checked online

    Reply
    • You would have to either try to deal with it yourself or hire an attorney licensed in your state to look at the improper service issue. They could always refile if the first case is dismissed.

      Reply
  11. I have been sued 3 times by debt collectors that bought the charged-off accounts. After receiving a court summons, I promptly hand wrote a letter explaining my financial situation, thereby creating my inability to pay then, now or later. 2 of the lawsuits were promptly dismissed; 1 with costs paid, the 2nd without prejudice. The 3rd required me to complete a form identifying my expenses and income. After receiving that back, a dismissal without prejudice was filed.

    Reply
  12. Hi! I was wondering if someone could help me understand what some of this means…
    so I was 18, working at a dept store at the time while in college, and stupidly got myself into about $3000 worth of credit card debt. Ridiculously high minimum monthly payments made me unable to pay at the time. This was around 2014. I was later notified my debt had been sold to a debt collection agency, and now a local debt collection law firm.
    In May of this year, I was served a court summons that they had filed a civil suit for the debt. I am unable to hire a lawyer at this time due to financial difficulty and thus simply called the local law firm asking if they were willing to settle the debt and they provided a monthly payment option. I didn’t agree to anything definite at that time as I wanted to talk it over with my husband.
    I have now received a letter in the mail stating
    ORDER OF DISMISSAL PURSUANT TO RULE 41(a)
    Now this this day, comes on to be heard the oral motion of the Plaintiff (debt collectors) herein by and through its Attorney ———, that the cause filed herein be dismissed without prejudice as the Plaintiff has been unable to obtain service upon the Defendant.

    What does this mean???

    Reply
  13. I was sued back last year in July and have continuously asked the law firm representing Portfolio Recovery for more documentation and the original documents stating I signed and was personally responsible for the debt.

    They are giving me the run around and have asked for several continuations (I am now about to head to my 5th).

    What are my options or what can I do to get the judge to dismiss the suit given they just keep dragging their feet?

    Reply
  14. Can you also give an opinion on this one…
    Case Type Filing Date
    Rule 3.740 Collections 12/15/2017
    Case Name
    Jefferson Capital Systems LLC vs. Myself
    Disposition Type Case Status Date Destruction Date File Location
    Request for Dismissal 07/06/2018

    Reply
  15. I was sued by Portfolio. I contested the claim. The Judge was just about to rule in my favor when Portfolio voluntarily dismissed the case WITHOUT PREJUDICE. This was about 3 years ago. They however to spite me because I would have won the case entered an adverse collection report in my credit bureau. I did file a dispute in my credit file but it has done no good. I was turned down for credit again due to this report. Is there a way to get this removed from my CB record or some type of filing with the Court that I can make to show I don’t owe Portfolio’s claim?

    Reply
  16. My daughter is in hardship status with student loans and due to unemployment is currently on medicaid and SNAP. She has an outstanding credit card balance of a little over $2000 and Chase has sent a letter accepting $200. If I pay this for her, would this eliminate the debt entirely or would they still be able to send this off to a debt settlement company for the remaining balance?

    Reply
  17. Please tell me what this means below?

    Jefferson Capital System, LLC Plaintiff V. Myself
    Notice of Voluntary Dismissal
    Please take notice that Plaintiff hereby voluntarily dismisses the above – styled action pursuant to Section 9-11-41 (a) of the O.C.G.A WITHOUT prejudice. Respectfully submitted on the 18th day of SEPT, 2017

    Reply

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