1.2.1 Debt Defense Checklist
Section 1.4, infra, is a debt-defense checklist that, for a given type of debt and phase of collection, immediately links the user to appropriate material to review. It is recommended that readers use the digital version of the debt-defense checklist because the digital version’s live links speed up access to the relevant material. For example, if the debt is reduced to a judgment, clicking on the link brings users to a list of debtor and creditor rights after a judgment for the creditor. Clicking on the link for garnishment of the debtor’s wages immediately calls up the treatise section dealing with that topic.
1.2.2 Chapters 2–6: General Consumer Defenses
Chapter 2, infra, is a practical chapter focusing on the reasons why attorneys should represent consumers in collection actions, tips on setting up a practice in this area, and pointers on conducting the client interview and other preliminary investigative steps. The chapter lists case selection considerations, litigation tactics, and alternatives to representing the consumer in the collection action. Of note is a client intake checklist that can be accessed in Microsoft Word format under “Practice Tools” in the online version of the treatise.
Chapter 3, infra, examines defenses to a collection action that are not based on the merits of the plaintiff’s claims. These defenses can be used to support a motion to dismiss and can also be used later in the proceeding. The most important such defense is the statute of limitations, which has taken on increasing importance as debt buyers bring collection actions years after a consumer defaults on the credit account. Another important group of defenses relate to the adequacy of the complaint and the supporting documents, because a number of states require the complaint to be verified or to include certain documentation. In addition, there may be issues as to whether the plaintiff is qualified to bring an action in the state’s courts, whether the action is brought in the correct venue, whether there is jurisdiction to hear the case, and whether the action can be forced into arbitration.
Chapter 4, infra, covers the creditor’s proof of the merits of its allegations, both the elements of its causes of action and the evidentiary requirements as to the proof of those elements. Creditors often seek to prove their case not with their own evidence but by sending lengthy requests for admissions to the consumer, which are deemed admitted if the consumer fails to timely respond. The chapter provides advice on how to respond to such requests for admissions and how to withdraw an admission that is based solely upon the consumer’s failure to answer.
Creditors also seek to prove their case at summary judgment with documentary evidence. The chapter examines the admissibility and weight to be given to two types of documentary evidence commonly submitted with such motions—affidavits and business records.
A key issue in many collection actions is whether the plaintiff in fact owns the debt and has the right to collect on it. With the advent of debt buyers who aggressively buy and sell portfolios, the consumer’s account may have passed through two, three, or even more hands before it is sold to the entity bringing the collection action. Chapter 4, infra, also examines the plaintiff’s burden to prove that a continuous chain of ownership has properly transferred the debt to that entity.
The chapter then turns to the elements of the creditor’s cause of action. Creditors often bring claims for breach of contract or for the balance owed on a credit card or other open-end account. Another common collection cause of action is “account stated,” which is not based on the contract but on a consumer’s implicit promise to pay an amount delineated in a statement of account. Other possible causes of action treated in the chapter are actions “on account,” for quantum meruit, for money lent, for goods and services, and on a sworn account.
Chapter 5, infra, focuses on basic consumer defenses and counterclaims to the creditor’s action. These defenses include that the debt has already been paid, settled, or discharged in bankruptcy. Other defenses relate to when someone else owes the debt (such as when the creditor mistakenly sues the wrong consumer), when the consumer is the victim of identity theft or unauthorized charges, when the consumer is only an authorized user, or when the consumer’s spouse rather than the consumer owes the money.
Another issue is whether the creditor is entitled to claimed prejudgment interest and whether it has correctly computed that interest. The chapter also examines defenses related to the consumer’s incapacity based on minority, mental incompetence, or intoxication. The chapter considers an important consumer defense when the creditor seeks a deficiency action after a car’s repossession and sale—that the creditor has offered insufficient proof of a commercially reasonable sale of the repossessed vehicle.
A consumer may have numerous counterclaims to a collection action. Chapter 5, infra, focuses on what types of counterclaims are available and tactical considerations as to whether they should be raised in the collection action or brought as affirmative claims in a separate lawsuit brought by the consumer. The chapter looks in particular at such considerations when the counterclaim relates to the plaintiff’s litigation misconduct. The chapter concludes with a discussion of some of the advantages in bringing a class-wide counterclaim to the collection action.
Chapter 6, infra, reviews whether the plaintiff in a collection action can recover attorney fees, other collection expenses, and postjudgment interest. The chapter analyzes whether the plaintiff has a contractual or statutory right to those fees and interest, and the interplay between contract terms and state law. The chapter also examines state law that limits the size of an attorney fee award and sets the amount of postjudgment interest.
1.2.3 Chapters 7–11: Defenses to Special Types of Debt
Chapter 7, infra, looks at special rights that the Servicemembers Civil Relief Act provides for active duty military personnel in defending collection actions. The Act limits the ability of a creditor to take a default judgment and also gives the servicemember the right to stay a creditor’s action. Military service tolls statutes of limitations, reduces the interest rate to 6% on obligations incurred before active duty, and restricts a creditor’s right to self-help repossession, foreclosure, and lien enforcement for obligations incurred before active duty. Other special rights for active duty personnel relate to automobile and residential leases and cell phone contracts. The Act provides consumer remedies for violations.
Chapter 8, infra, looks at criminal and civil proceedings against consumers concerning dishonored checks, including limitations on criminal prosecutions for a consumer presenting a check with insufficient funds. The chapter also looks at the operation of civil dishonored check laws and details the consumer’s remedies for a creditor’s abuse of dishonored check laws.
Chapter 9, infra, is a thorough analysis of consumer law claims and defenses involving medical debt. It provides an overview of special issues raised by medical debt cases, including discriminatory or chargemaster pricing, availability of charity care, overbilling, and billing errors. The chapter also examines a number of federal and state statutes, such as the Affordable Care Act, that specifically address medical debt or can be used to protect medical debtors. It also analyzes statutory and common law defenses to medical collection actions. The chapter considers the applicability of family necessaries statutes that may impose liability on other family members and statutes that allow hospitals to place liens on the tort recoveries of consumers.
Chapter 10, infra, examines federal agency collection actions, including the non-litigation collection methods of administrative offset, wage garnishment, tax refund intercepts, and other remedies under the Claims Collection Act. The chapter also considers government prejudgment and postjudgment remedies under the Federal Debt Collection Procedures Act. It includes a detailed analysis of private remedies for illegal collection of debts owed to federal agencies. A more thorough discussion of collection of one type of government debt—federal student loans—is found in NCLC’s Student Loan Law.1
Chapter 11, infra, reviews a topic of increasing interest—federal and state courts’ practice of assessing various costs and fines to criminal defendants, including user fees, indigent defense fees, and surcharges upon fees and fines. Nonpayment of such costs and fines can result in incarceration, activation of a suspended sentence, suspension of a driving license, and other collection remedies. The chapter considers tactics to minimize imposition of criminal justice debt, defenses and exemptions to collection of the debt, the impact of the debtor’s bankruptcy on the debt, constitutional protections for the defendant, and related topics.
1.2.4 Chapters 12–17: Creditor and Consumer Postjudgment Rights
Chapter 12, infra, analyzes approaches consumers can take to set aside or discharge a collection action judgment that is in favor of the creditor. The chapter reviews the grounds to set aside both default and stipulated judgments and then considers the relief a bankruptcy filing can offer a judgment debtor. The chapter concludes with a discussion of the advisability of an affirmative action challenging creditor litigation misconduct after a judgment for the creditor.
Chapter 13, infra, details topics of general relevance concerning the creditor’s ability to enforce its judgment, with special focus on exemption laws protecting the debtor’s income and assets from seizure after a judgment for the creditor. The chapter includes such topics as the statute of limitations on collection of a judgment, whether a judgment is properly assigned to another party, interstate enforcement of judgments, waiver of exemption rights, due process protections for the debtor, and the constitutionality and validity of exemption laws.
Chapter 14, infra, examines restrictions on judgment creditors’ ability to seize debtors’ wages, benefits, other income, or bank accounts. The chapter considers federal and state limits on wage garnishment and protections against an employer’s discharge of the debtor because of a wage garnishment. It also details protections against seizure of a debtor’s Social Security, SSI, or other public benefits, as well as exemptions for pensions and other retirement benefits. The chapter also analyzes important federal and state rights that limit a judgment creditor’s ability to seize or freeze funds in the debtor’s bank account.
Chapter 15, infra, considers protections against a judgment creditor’s seizure of the debtor’s home or personal property. Homestead exemptions protect the debtor’s home. Similar exemptions may protect the debtor’s equity in a motor vehicle, household goods, health aids, tools of the trade, and other personal property.
Chapter 16, infra, covers debtor’s examinations and imprisonment for debt. The chapter considers debtor and creditor rights when the judgment creditor summons the debtor for an examination of the debtor’s income and assets. Failure to appear may result in the creditor seeking to imprison the debtor for contempt. While other forms of imprisonment for debt are largely abolished, some states allow imprisonment for failure to make court-ordered payments. Other chapters in this treatise consider imprisonment for writing bad checks (Chapter 8) and for nonpayment of court-ordered fines and costs in criminal cases (Chapter 11).
Chapter 17, infra, reviews actions a consumer can take after the consumer prevails in the creditor’s collection action. The chapter discusses various theories allowing the consumer to recover attorney fees from the creditor. It also examines how consumers can improve their credit reports after prevailing in the collection action. Also analyzed are consumer remedies in the surprising number of cases in which debt buyers either sell the debt to another debt buyer or continue to seek collection of the debt, even though the court has dismissed the creditor’s action with prejudice. The chapter concludes with a discussion of what types of litigation the consumer should consider to challenge the creditor’s litigation misconduct that occurred during what is now a dismissed collection action.