Debt Collector Lawsuits – Calling Their Bluff

It appears as if my predications about the outcome of most credit card debt lawsuits is becoming more and more evident.  Debt collectors are using and abusing our court systems to collect on “uncollectable” debt via wage garnishments and captured assets. 

The debt collectors dream is a “default judgement”.  In fact, I remember hearing from a former collector for a major junk debt buyer who told me that when an incoming call came from a consumer whom they had filed a lawsuit against, their caller id system labeled the caller as “Mr.Default”.

The default judgement is a goldmine for the debt collector.  Nine out of 10 lawsuit cases end in a default judgement because the Defendant (you) does not respond to their summons or show up in court.  The debt collector is purchasing “bad debt” or previously “uncollectable” debt for pennies on the dollar.  Every “default” represents a huge profit to the collection agency, the costs for filing a civil suit is minimal compared to the payday when they get their default.

However, as more and more consumers are educating themselves about this type of lawsuit the collectors are tweaking their strategies.  We are seeing this in Illinois where the number of debt lawsuits filed each month is at an all-time high.  (See my post about 119,000 civil summons in Cook County, IL)

Andy Miofsky, an Illinois Consumer Law Attorney (http://www.debtlawnetwork.com/author/amiofsky/) wrote: 

“There is an interesting phenomenon occurring in the state court of Madison County, Illinois. Chicago area debt collection law firms are flooding the courthouse 280 miles away in downstate southern Illinois with credit card collection law suits.

Hundreds of cases are filed each month against Madison County residents. Most defendants do not appear and are defaulted into judgments. Many others appear and admit they owe the money and try to work out payment arrangements. But it is a third group of defendants that is drawing the attention of courthouse observers – the defendant that demands a trial.

These Chicago law firms have been seeking dismissal of their lawsuit instead of proceeding with trial against defendants who appear with an attorney and request a trial. Illinois law permits a party to voluntarily dismiss its own lawsuit without prejudice by paying the defendant’s court costs. “Without prejudice” means the plaintiff can re-file the case. In a small claims case, court costs usually amounts to less than $100. So, by paying these costs, the debt collector avoids a trial and retains the right to file a similar lawsuit on the same debt and against the same defendant another day.”

Is this legal? Yes. And, I expect the result for those Defendants that are representing themselves and filing proper Answers and demanding Discovery documents such as a Demand for Production of Documents are experiencing the same end result. A dismissal without prejudice.

Frankly, if you are the Defendant, I think a dismissal without prejudice is a positive outcome. Many of the consumers who I have heard from that are representing themselves and have received a dismissal without prejudice are grateful but wary of another lawsuit. Yes, you can be sued again for the same debt BUT in all likelyhood, the current debt collector will sell off your debt to another firm and begin the whole process over again.

You may or may not be sued again. But, this buys you time (probably years) and if you know how to represent yourself you go through the whole exercise again and when the “new” collector can’t produce the documents you have an even better chance of getting your suit “dismissed with prejudice” since this is your second trial.

I think the lesson here is to stay calm, stay strong, fight your lawsuits either with a consumer attorney or represent yourself if you cannot afford one and wait and see. The worst outcome is you set up a payment plan at the hearing and the best outcome is a dismissal with prejudice. To purchase templates for representing yourself (Pro Se) in a credit card debt lawsuit please visit http://www.howtoansweracreditcarddebtlawsuit.com or http://www.CreditCardDebtLawsuit.Info