The vast majority of consumers don't show up to court when they're sued over debt, but arriving to say a few words could be a game-changer for your credit.
This post comes from Christine DiGangi at partner site Credit.com.
Studies show that the majority of consumers being sued over a debt fail to show up to court, often resulting in a default judgment. The judgment means you’re required to repay the debt, which, given the circumstances, will likely be a significant financial obstacle, and your credit standing will suffer as a result.
Avoiding your debt collection lawsuit practically guarantees you’ll have a judgment placed against you, but you don’t have to sit back and let that happen. Showing up is the first step toward winning the case or settling your debt, and the next step is even easier: You need only say two words.
Debt collectors often assume a debtor won’t show up to court to face a debt lawsuit, allowing them to get what they came for (the judgment) without having to do the legwork (provide proof of the debt).
Somewhere between 60 and 95 percent of consumers who are sued for debt fail to participate in the lawsuits, a 2010 debt collection report from the Federal Trade Commission says, based on estimates provided by lawyers across the country. As far as default judgments go, they result most commonly from debt-collection lawsuits. A recent report from the Center for Responsible Lending cited a 2011 report from New York, which said 80 percent of default judgments in the state stemmed from such lawsuits.
These tendencies make debt buyers’ jobs incredibly easy, but consumers can disrupt this pattern by challenging the lawsuit. Just say, “Prove it.” Make the debt buyer prove you owe the debt, because if they can’t, the case could be dismissed.
It’s important to remember that this is not a cure-all and will not necessarily work every time, but the odds are in your favor.
This concept was the subject of a recent segment on “This American Life” called “Magic Words,” in which a reporter watched as a debt case was dismissed because the debtors asked for evidence showing they owed the debt. A lawyer who watched the dismissal unfold explained to the reporter how debtors rarely show up, and if they ask for proof of their debt, the collector usually doesn’t have it. When the creditor sells an account to a debt buyer, documentation doesn’t always change hands.
“Make them show their proof,” said Amy Bennecoff, a senior associate at Kimmel & Silverman in New Jersey. “It’s their burden of proof. If they don’t have the contract, if they don’t have the statements, you may win.”
“Showing up” is harder than it sounds
There’s a lot more to challenging a debt lawsuit than asking for evidence. Debtors may need to take off work for their court hearings, which their jobs may not allow, and getting to the courthouse is another issue. Some states have fees for filing an answer to the lawsuit, which the debtor may not be able to pay.
There are often solutions to these obstacles — applications to waive fees, planning ahead to arrange transportation — but it’s not always easy for the debtor to figure out what they have to do. When you receive a notice saying you’re being sued over a debt, research your options as soon as you can by visiting the court’s website. If you’re able to arrive in court to face the debt collector, your chances of winning the case are much higher than if you’re a no-show, because anything is better than that, really.
What to do when you are sued over debt
In the segment on “This American Life,” the reporter talked about a guy who used the “prove it” tactic as a way of avoiding legitimate debts. In that situation, it may seem unfair that someone can get a case dismissed over a real debt because the collector doesn’t have the right paperwork, but at the same time, it could also be considered unfair to the consumer that creditors can get judgments without providing sufficient proof of a debt. The system can be worked both ways.
Debt collectors seem to be the ones benefiting most. Debt lawsuit procedures vary by state, but you’ll definitely want to do your research if you find yourself dealing with one. Bennecoff said she once showed up to court with a client, asked for proof of the debt, and the collector responded with information about a debt belonging to someone with the same name as the client, but it definitely wasn’t the same person. There are also cases of collectors suing for debts after the statute of limitations has expired or the debt has been paid.
“A lot of courts don’t require a lot of information to file these complaints, and then you get these defaults [judgments],” Bennecoff said. “Pay attention to what’s getting filed against you.”
Otherwise, you may pay a steep price. Judgments can stay on your credit report seven years from the date they were entered in the court, even longer if they go unpaid, and your credit score will suffer as a result.
If you’re dealing with a judgment, work to improve your credit by focusing on other aspects of your credit, like credit utilization, so you can keep your score as high as possible, despite the judgment. You can check your progress by looking at two of your free credit scores every month on Credit.com.
More on Credit.com:
- 10 Tips for Negotiating With Debt Collectors
- A Debt Collections Crash Course
- 3 Strategies for Consolidating Debt