While we normally advise our clients who are sued by debt buyers to fight the lawsuit as debt buyers are unwilling or unable to prove their case, we do understand the desire of some Alabama consumers to settle the lawsuit filed by a debt buyer. If you decide to go this route, please be aware of several looming dangers and take steps to protect yourself. We will address in a quick fashion four of the biggest ones that will face you.
First Danger – Default Judgments
First, we have seen situations where Alabama consumers have settled with the debt collector/debt buyer (through the collector’s attorney) and even though the case was settled, the debt buyer still moves for and gets a default judgment. This results in a judgment on your credit report for many years and can lead to garnishments and constant problems. The judges who enter these default judgments are not to blame as they are being misled by the debt buyers who intentionally do not tell the judge that the case is settled. Instead the debt buyers simply tell the judge that the defendant (Alabama consumer) failed to respond to the collection lawsuit.
Solution To First Danger – Written Confirmation
The solution is to never rely on anything that the debt buyer tells you. Confirm everything in writing to the debt buyer’s attorney. Fax it. Mail it. Email it. Send it certified. Every way you can think of. Put in writing that the case is settled and that the lawsuit will be dismissed with prejudice (see the “Second Danger” below for more on this) and that you do not need to file an answer. Put in there that the debt buyer promises to not move for a default judgment against you if you pay the settlement. Put the way the payment is to be made (check, cash, money order, etc) and when it is due. Make the debt buyer respond, in writing, that your written letter or email is accurate. If the debt buyer or its lawyer won’t agree to this in writing, you should at least be honest with yourself that you are vulnerable to the debt buyer getting a default judgment against you…..Solution? Don’t settle without the written document.
Second Danger – Dismissal Without Prejudice
Debt buyers will sometimes not go for the default judgment but instead will actually request the court to dismiss the case but withOUT prejudice. They do this so they can sue you again. Kind of defeats the purpose of settling with them, huh? If you are going to settle the case, you should be done with it. Forever. Not having to deal with the debt buyer suing you again or transferring it to a debt collector.
Solution To Second Danger – Written Agreement
This will sound like the solution to the first danger – that’s because having a written agreement is so important. The safest thing is to hire a lawyer to write up the agreement but if you don’t do that then at least put in writing and have the debt buyer agree that the case will be dismissed WITH prejudice. This means you can never be sued again for this debt.
Third Danger – Account Stays On Credit Report
You settle the case. Most people expect the account (or “trade-line”) to be removed from their credit reports but this normally does not happen. Often the debt buyers will simply change the status to “settled” and will show it as a zero balance account. This is a negative item on your credit report that can hurt you for many years to come.
Solution To Third Danger – Agreement To Delete
You’ll notice a theme – get the agreement in writing! Specifically on the credit report issue, have an agreement with the debt buyer that upon payment the debt buyer will request that the consumer reporting agencies (or credit bureaus) – Equifax, Experian, Trans Union, and whoever else the debt buyer reports to – delete the account. Often times the debt buyer will swear that the country would fall apart if they requested the deletion but it is a simple matter that takes about 2 minutes for the debt buyer to do. The credit bureaus don’t care – they’ll normally do whatever the debt buyer tells them (that’s a problem when you defeat the debt buyer in a lawsuit).
Fourth Danger – Account On Credit Report For Full Balance
Even if you don’t have a written agreement, the debt buyer should still update the credit bureaus that you have paid off the debt and it should have a zero balance – you don’t owe anything as it settled so it must show a zero balance. Amazingly, many debt buyers feel that because at one time you supposedly owed them (which we have never seen proven) that they can keep the balance on your report for years and years even after you settled it. This demonstrates the malice and vindictiveness of these debt buyers who do this. Truly one of the most nasty dirty tricks with Alabama consumers’ credit reports.
Solution To Fourth Danger – Dispute And/Or Sue
You can always check your credit reports for free, review them to see what the debt buyer is saying about you, and then dispute directly with the credit bureaus. If it is not corrected, sue the debt buyers and, if appropriate, the credit reporting agencies.
Another option, particularly if the debt buyer has updated the credit reports after the settlement (a fairly common practice) and has shown it with a balance owed, you may be able to sue right then under state law and the Fair Debt Collection Practices Act. Also, you should look at your credit reports to see if they debt buyer pulled your credit report after the settlement. If so, it is likely it had no right to do and this will violate the Fair Credit Reporting Act and potentially expose the debt buyer to punitive damages to try and persuade these guys to stop taking these wrongful actions.
What To Do Right Now
Here’s the bottom line – if you have been sued feel free to call us – we’ll give you your options. Bring us your cooperation and participation – leave your wallet at home. We may can defend you against these debt buyers. But if you decide to settle it, please keep the things we discussed in this blog post. If you have been burned by one of these debt buyer dirty tricks, come see us. We sue abusive debt collectors. We can’t think of many more abusive dirty tricks than these – talk to us about suing the debt buyer who lied to you or put false information on your credit reports.
Another resource for you is to join our Facebook Fan Page – Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.