Recovering from Financial Ruin

Two Ways To Counter A Debt Buyer's Claim That You Owe Them Money

11 October 2016 by Veeti Lepisto

When people default on their accounts, it's common for creditors to sell those accounts to debt buyers to recoup some of the money they lost. These buyers then take on the responsibility for collecting the debt, which oftentimes includes suing the debtor for the money. If you find yourself having to defend a lawsuit filed by a debt buyer, here are two ways to respond that may help you win the case.

Ask for Proof the Collector Legally Owns the Debt

Only someone who legally owns a debt may sue the debtor for the money. While debt buyers may purchase accounts from creditors, many times they don't have the required paperwork that goes along with it, such as copies of signed agreements. Additionally, many debt buyers purchase accounts in bulk from third-party repositories, which means they may not even have contracts with the original creditors.

One way to get the case dismissed is to force the debt buying company to prove it is the lawful owner of your debt. Prior to court date, there is a period called "Discovery" where you can request the company send documents to you. Send a certified letter to the company requesting it furnish you copies of its agreement with the original creditor that specifically references your debt and stating it was sold to them.

You should also request the company send you proof you owe the debt in the first place, such as a contract with your signature that lists when the account was opened, the amount borrowed, and interest rate. Many times when debt buyers purchase accounts, they only receive a spreadsheet with the debtor's contact information and the amount owed. They often don't have any supporting paperwork for the debt itself.

If the company can't provide proof the debt exists or that they're the owners of your account, you can request the judge dismiss the lawsuit for lack of standing.

Prove the Statute of Limitations Has Expired

Companies only have a certain amount of time to collect a debt before their ability to take any legal action expires. This is known as the statute of limitations, and the clock starts the day of your last payment on the account. If you can prove the time period allowed for lawsuits has passed, the judge will typically dismiss the suit.

The statute of limitation varies depending on where you live and the type of debt involved. For example, companies have three years in Alabama to collect on credit cards and other types of open-ended accounts. Therefore, be sure to look up the relevant laws in your state.

If you lose your case, these debts can typically be discharged in bankruptcy. For more information about dealing with debt buyers or to learn how bankruptcy can provide a fresh financial start, contact a bankruptcy attorney.

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