How to handle being served a summons and complaint by a creditor or debt collector


News | by — October 6, 2011

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It can be an understandably emotional experience when an individual is struggling to manage their debt load. Feelings of stress, fear, embarrassment, confusion and anger, to name a few, are normal. If a creditor initiates a lawsuit against an individual, then these feelings only intensify. If an individual’s financial picture has gotten to the point of a collection lawsuit, then that person would benefit from a consultation with a lawyer who can review the overall financial picture, and counsel that person on their options. This kind of legal consultation should be free of charge, and can at the least give one practical advice on how to address outstanding debt obligations.

I recently wrote the following article for the Debtor/Creditor Section Newsletter of the Oregon State Bar Association. In this article, written for attorneys, I try to give practice strategies for addressing a collection lawsuit. I hope you find it of some help.

Tim L. Eblen


A potential client comes into your office with a summons and complaint that was served upon them by one of their creditors. They want legal counsel on how best to address this collection lawsuit.
What is the best approach? What are the issues that one should look for? What is the best way to approach the creditor’s attorney?

I spent five years doing creditor’s rights work with a law firm that does primarily collection litigation. In my current practice, we continue to work with creditors, but also represent debtors in consumer law cases, debt workouts, and bankruptcy. In my experience, there are general approaches that can assist a debtor’s attorney, or pro se debtor, in efficiently getting to a fair resolution of any debt collection case. These assume that the client’s goal is an efficient resolution, which is typically the case. Of course, no general rule can apply to every case, but I offer these as a reference to ways one can productively get to closure on a debt obligation.

The main value an attorney brings to any debt collection matter is being able to analyze the facts of the debt at issue, and the debtor’s situation as a whole, to determine any and all potential defenses that the debtor may have to paying the debt, and whether they should attempt to pay the debt.

First, review the facts underlying the transaction that created the debt obligation to determine if there any affirmative defenses, or counterclaims, to your client being liable for the debt. Second, review the facts underlying the transaction, and the facts surrounding any and all collection efforts, to see if any state or federal consumer protection laws, or common law torts, are implicated. For example, has there been a violation of the Oregon Unlawful Trade Practices Act, Oregon Unlawful Debt Collection Practices Act, Federal Fair Debt Collection Practices Act, Federal Fair Credit Reporting Act? Third, look over the debtor’s overall financial picture. Should the debtor consider bankruptcy rather than attempt to settle with the creditor?

If you do not feel comfortable spotting and evaluating the issues above, then you should refer the debtor to an attorney who specializes in this area of law.

Avoid unproductive posturing. Coming out of the gate with aggressive threats and/or statements that are not wholly supported or are irrelevant is unlikely to be productive. First, creditors receive that kind of posturing all of the time, and so it is not likely to have the effect you hope. Second, it becomes a form of bluff that, once called, leaves you in a weak position to effectively negotiate a resolution. I have seen creditor clients take more strident positions as a result of being forced to address untenable arguments set forth by an overly aggressive debtor, or debtor’s attorney.

For example, I have seen some attorneys begin by asserting strongly yet vaguely that their client was “harassed” by a debt collector, that there are consumer law counterclaims that could therefore be asserted, and so the debt should be significantly reduced. If, from the creditor’s perspective and records, it appears that the debt is due and owing, the debtor has yet to make any payments to address the debt, and the “harassment” boils down to multiple lawful attempts by the debt collector to get the debtor on payment terms before initiating a civil lawsuit, then the attorney’s position is easily dismissed.

By way of another example, in cases where a debt is assigned to a collection agency, some attorneys try to reason with the creditor by asserting that surely the creditor bought the debt for “pennies on the dollar”, and so it is patently unreasonable to expect the debtor to pay anything near the full amount of the debt. Whether or not such an assertion is true, it is completely irrelevant to your client’s liability, and it is irrelevant to your discussions with the creditor. If the creditor will settle for a deep discount, they will do so without having to hear a lecture about how much they should be willing to take. As an aside, it is worth noting that many collection agencies are NOT debt buyers, but are assigned the debt for purposes of collection and then take a contingent fee out of any recovery.
Articulate any substantive defenses and counterclaims. In my experience, creditors will take notice when potential defenses and counterclaims are set forth in a letter, supported by specific alleged facts to support them. It is in the creditor’s best interest to investigate any claims made by the debtor, evaluate any potential exposure, and then approach settlement accordingly. By taking time to spell out the defenses and counterclaims, with the facts used to support them, one increases the probability that they will be taken seriously, will be investigated by the creditor, and will give increased settlement leverage.

Do not begin communicating with the creditor by filing an Answer. Assuming, again, that your client’s goal is an efficient resolution, it usually makes little sense to take the time and expense of filing an Answer and serving discovery requests upon the creditor.

First, this will create court imposed deadlines on both parties that will speed up the process, when often it is in your client’s interest to slow things down and try to negotiate a settlement. Once an Answer is filed then any collection case under $50,000 will be put into court-annexed arbitration. You will then find that you and the creditor are spending as much time dealing with procedural issues surrounding the arbitration process, as you do in trying to come to a fair resolution.

Second, by beginning with a simple phone call and letter, you are giving the creditor an informal, and less expensive, avenue for assessing the case and offering an acceptable resolution. The creditor will see the value, in resources saved, by settling early. Once a creditor has gone to the expense of responding to discovery requests, preparing for trial, paying the arbitration fees, etc., then the price of proceeding with the case becomes smaller, while the cost of settling may get larger.

Make good faith reasoned settlement offers. While this may sound like negotiation 101, I have been surprised by how many times an attorney will make snide comments about a creditor client (unrelated to any case specific facts), give a low ball settlement offer without providing any reasons, and then expect a positive response from the creditor. That tactic rarely works.

When a debtor seeks legal counsel in resolving a collection lawsuit, part of what they need is assistance in assessing what to offer, and when it is worth providing certain financial and personal information to the creditor in order to facilitate settlement.

In one case I had opposing counsel send me a completed chapter 7 bankruptcy petition which allowed me to see the extent of the debtor’s liabilities and unexempt assets. This information caused my client to consider a low settlement offer that it otherwise would have dismissed out of hand.

Another example, more common to many collection lawsuits, is when the debtor is unable to offer a settlement in full, but instead needs to set up a payment plan. While generally I do not counsel any debtor to provide employment information to a creditor, there are times when I think it helpful. If the debtor has stable employment, and has made a thoughtful payment plan offer that they are committed to completing, then it may be worth providing the debtor’s employment information. This gives the creditor some security (if debtor defaults on the payment plan, then creditor can issue a writ of garnishment against debtor’s employment) that can be leveraged for a lower monthly payment amount.

Debt collectors are easy targets for criticism. So are debtors who do not honor their obligations. Yet, in helping a debtor with one specific collection lawsuit, that kind of generalized scapegoating is unproductive. A cool headed and fair minded approach to assisting debtors who find themselves a defendant in a collection lawsuit will aid that debtor in getting to where they want to be: debt free.

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