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Why Debt Collectors Dismiss Lawsuits All The Time

Written by Michael Bovee

“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.

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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.




About the author

Michael Bovee

Michael is an experienced debt expert and can be found online at Consumer Recovery Network.

34 Comments

  • Steve,

    Can the defendant take the plaintiff to court on a new case for slander if they don’t remove the debt?

    • 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.

  • 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!

    • 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.

  • 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?

    • 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.

  • 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.)

    • 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.

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