LEGAL GUIDE
Written by attorney Bennett James Wills | Apr 23, 2013

Sued by a Debt Collector: Now What?

Have you been threatened to be sued by a debt collector? Have been sued to collect on your defaulted debt? You are probably wondering what you should do when collectors come calling. This is a brief overview of the legal process in Maryland and what you can expect.

Applicable Law

In Maryland, two statutes apply to debt collectors. First is the Fair Debt Collection Practices Act (“FDCPA"). Second is the Maryland Consumer Debt Collection Act (“MCDCA"). These statutes have the same goal: to protect the consumer from unfair and deceptive collection practices. They provide the consumer recourse if their rights have been violated. These statutes also outline the rights the consumer has during any and all collection activity.

Background

There are generally two types of creditors that may try to sue you. First is the Original Creditor. This is the person, bank, or business that initially loaned you the money. Second is the Assignee Creditor. This could be a debt buyer, or they could have received they debt through other channels. This person or business has the same rights as the original creditor when trying to collect on your debt. Knowing who the creditor is will be an important step in evaluating your case because they are each required to present certain evidence to win a case against you.

Debt buying is big business. Often consumers are sued by these debt buyers and the consumer does not understand who they are getting sued by. For example, you opened a credit card years ago with a bank. You defaulted on that card by ceasing to make payments. Instead of wasting time and effort to collect, the Bank sold the rights to your debt for pennies on the dollar to a debt buyer. That debt buyer will then try to collect. And whatever they get from you over what they paid for the debt is profit.

Initial Communications and Pre-lawsuit

If a collector has only begun to call you but has not yet filed suit, this is a critical time to demand that the collector provide you with some information. After the first contact, you should send a letter in writing demanding 1) validation of the debt; 2) that you not be contacted at work; and 3) that all communication be in writing. DO NOT ADMIT TO OWING THE DEBT – THIS COULD HURT YOUR DEFENSE.

At this point in time, once you have been provided with the necessary information requested, you may make an offer to settle, request an offer to settle, or wait until you are sued. Usually when you request an offer, they will ask you to pay in full. Keep in mind these collectors have certain authority to settle the debt, often as low as 50% depending on the creditor. This will be discussed later. If you legitimately owe the debt and you know it, then settling is probably a good idea. Since you have already defaulted on a loan or credit account, your credit score is damaged, but you should still try and avoid a suit or judgment.

Lawsuit

A. District Court: If you have been sued in the District Court of Maryland, the claim against you is less than $30,000. YOU HAVE 15 DAYS TO FILE A NOTICE OF INTENTION TO DEFEND. DO THIS NOW EVEN IF IT’S LATE. You can find your Notice of Intention to defend slip on the bottom of your summons paper. Follow the directions. Tear off the slip and mail it back to the court. It’s not necessary to explain your defense at this time but whatever you write, do not admit to owing the debt. If you failed to file this on time, you MUST show up at the affidavit trial date listed on the top right of your summons. Be prepared to present a defense on that date.

B. Circuit Court: If you have been sued in the Circuit Court of Maryland, the claim against you is greater than $30,000.01. YOU HAVE 30 DAYS TO FILE A WRITTEN ANSWER AND YOU SHOULD HIRE AN ATTORNEY. This is past the scope of this article.

Pre-Trial

Before your scheduled trial date, it’s important to review the attachments that were included with the complaint when you were sued and to understand who the creditor is that is trying to collect against you. To be sufficient, the following lists are generally what is required, at a minimum, by the courts depending on the type of creditor. [1] If something is missing, then you can base your defense on the missing item, as the evidence could be viewed by the court as insufficient.

Original Creditor

· Proof of ownership

o Statements/bills usually suffice

· An accounting of the balance, fees, and/or interest

o Statements/bills usually suffice

· Proof the claim is not barred by the applicable 3 year statute of limitations

o Creditor must show actual use of the account within the last three years, usually by showing evidence of a payment

· Original signed signature card or contract

o Not always necessary, usually not necessary in a credit card case

Assignee Creditor

· Proof of ownership

o Bills of sale from each assignor from the original creditor to the assignee (chain of title)

· An accounting of the balance, fees, and/or interest

o Statements/bills usually suffice

· Proof the claim is not barred by the applicable 3 year statute of limitations

o Creditor must show actual use of the account within the last three years, usually by showing evidence of a payment

· Original signed signature card or contract

· Not always necessary, usually not necessary in a credit card case

Settlement Before Trial

After you have been sued and have had a chance to evaluate the strengths of the creditor’s case, it is time to consider settling if you think you will lose at trial. You should come up with a reasonable number. Keep in mind, that collectors have the ability to settle for less than what they sue you for. If it is an original creditor, the collector may be able to settle around 70% of the original debt. If it’s an assignee creditor, like a debt buyer, you may be able to settle around 25%. Every creditor is different and has different limits. They are not going to tell you what those limits are, but you should ask or make them give you the first offer. If you can get the claim settled, the creditor usually dismisses the case against you. There are three common agreements that creditors will make - I usually recommend a 3-506(b). An attorney could better advise you on this type of agreement and the pros and cons of using it.

Discovery Before Trial

Depending on the court you have been sued in and the amount of the creditor’s claim you may have a right to send the creditor discovery. This is a method you utilize to gain valuable information. Discovery is outside the scope of this article, but can be imporant to help your case.

Trial

Depending on the court and the claim amount you will either have a bench trial or a jury trial. A bench trial is where the judge decides the case. A jury trial is where a jury decides your case. The creditor only has to prove his case by a preponderance of the evidence. Meaning it is more likely than not that you owe the money. It is not a high standard.

The creditor will present his case first by asking you questions and then giving the court his documents. The documents will likely be admissible under certain rules of evidence, but you can always make an objection if you have an argument.

Once the creditor finishes his case, he will rest and then it will be your turn to present your evidence and defenses.

The creditor may involve witnesses to testify to certain documents or other evidence. If this is the case, you will have the opportunity to ask those witnesses questions as well. Same goes for you. If you have witnesses, you can ask questions and then the creditor can do the same.

Once each side has finished presenting their evidence, the judge will render a verdict. If the verdict is in your favor, you win, and the case is dismissed. If the creditor wins, you will have a judgment entered against you. From there, you have the right to appeal.

Judgments Against You

If a judgment is entered against you, either because you failed to show up or you lost your trial, you have certain rights pursuant to the Maryland rules. Depending on the claim amount and court, you have certain time limits in which to file such things as motions for a new trial, motion to vacate, or motion to alter or amend. The clock also starts running on your appeal time.

You other option is to come to a post-judgment settlement agreement and set up a payment plan with the creditor to pay the debt owed. This can prevent the creditor from garnishing your wages, up to 25% in some cases, garnishing your bank accounts, and putting a lien on any real property you own. If the judgment is too much to handle, then you should explore the option of bankruptcy as well.

Judgments hurt your credit and can stay on your credit report up to seven years. You should try to get any judgment paid off as quickly as possible to being repairing your credit score.

Conclusion

Defaulted debt can hurt and stay with your credit score and be on your credit report for a long time. Judgments can make your credit even worse. If you are faced by a collector, you should hire an attorney to protect your rights and ensure that the creditors and collectors are following the law.

[1] There are many types of creditors, these lists are not intended to be full and complete. The creditor attempting to collect on your account may be required to have more or less than what is on these lists. It’s always advisable to contact an attorney if you are sued to evaluate your case.

This article is intended for educational purposes only. It is not legal advice. It does not create an attorney-client relationship with the author. It is a general overview of the process in Maryland. It is not a comprehensive guide on how to defend your case. It is always recommended that you seek the advice of counsel if you are facing legal issues.

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