Some collections lawsuits are fairly straightforward because the debtor’s liability is clear, but others are more complex. If you are being sued by a creditor or collector, you may have ways to get the case dismissed. Defenses in these cases often hinge on technicalities or procedural rules. Sometimes a debtor may argue that the creditor or collector did not properly document (or verify) the debt, or they may assert that the collections lawsuit is time-barred.
Defenses Based on Documenting the Debt
Verify the Debt
Debtors are entitled to seek debt verification from a collector within 30 days of receiving notice of a debt.
If a creditor or collector does not provide documentation of a debt, it may be hard for a debtor to identify it. When the entity seeking to collect a debt is not the original entity to which you owed the debt, its records may be inaccurate or incomplete. Under the federal Fair Debt Collection Practices Act, you can seek debt verification from a collector within 30 days of receiving notice of the debt. The collector will need to verify the debt by sending you an account statement or otherwise telling you what you owe and giving you information about the original creditor. (You cannot use the debt verification process against the original creditor.) All collections efforts regarding that debt must stop until the collector verifies it. Otherwise, you can obtain damages in a lawsuit against the collector unless it can prove that it had policies in place to prevent this type of error and continued collections efforts by mistake.
The initial complaint in a collections lawsuit usually must attach a copy of the account statement or written contract related to the debt. If the creditor or collector fails to comply with this rule and offers no reason for not complying, you can ask the court to dismiss the case. Alternatively, you can ask the court to order the creditor or collector to produce the information before allowing the lawsuit to proceed.
If the plaintiff is not the initial creditor, it needs to prove that it received an assignment of the debt. This may mean producing a bill of sale or assignment. Similarly, the debtor may be able to have the case dismissed if the plaintiff cannot produce this documentation.
Defenses Based on Time Limits
In some cases, a creditor or collector may not be able to bring a lawsuit based on a very old debt because the statute of limitations for getting a judgment on that debt has expired. The statute of limitations sets the time period in which a party can bring a lawsuit based on a certain type of issue. In debt collection cases, it is usually between three and 10 years, although it varies by state. Statutes of limitations can be renewed or restarted depending on the actions of the parties. For example, if you pay part of the debt or acknowledge that you owe the debt, this may restart the statute of limitations. Or the statute of limitations may be extended if the creditor gives the debtor more time to pay the debt.
The length of the statute may vary depending on whether the debt relates to an open-end or closed-end account. An open-end account is an account that the consumer uses repeatedly for many types of transactions, while a closed-end account relates to a single purchase. Some accounts may share features with both open-end and closed-end accounts, making it difficult to determine which statute applies. Also, some states have specific statutes of limitations for debts from certain types of accounts, such as credit card accounts.
If the statute of limitations has expired, you can raise it as an affirmative defense to a lawsuit. The court will not dismiss the case on this basis unless the debtor raises the issue. If you do not raise this defense, it will be considered waived. You will not need to pay the debt if the statute of limitations has expired. However, the creditor or collector still may seek voluntary payment and continue to contact you about the debt, within the limits of the Fair Debt Collection Practices Act.
Other Defenses to Collections Lawsuits
The debtor never received the product or service for which the creditor seeks payment
The product or service that the debtor received was damaged or defective
The debt was incurred by someone else in a case of identity theft or mistaken identity
The creditor lied to or threatened the debtor to enter into the contract