What are the first steps to take when sued for an old credit card debt in Alabama?
What steps do I need to take after being sued on an old credit card debt?
It is scary to be sued on an old credit card debt. But the way through this is to work at figuring out your options and then taking the best possible action. Knowledge is great . . . but not enough. You must have knowledge PLUS action to get real results.
Here are the steps — and we’ll look at them in more detail:
- Have you been served with the lawsuit?
- How long do you have to answer the lawsuit?
- What do your credit reports say?
- Is the suit brought within the statute of limitations?
- Does the debt buyer really own the debt sued on?
- Go through your five options when sued
Let’s look at these in order.
First — have you been served with the lawsuit?
Being served means the lawsuit papers were given to you or to an adult living in your home.
It can get a bit complicated to know if you have been served so it is best to check with the court if you have questions about it. Or you can contact us and we can look up your situation on the online court system (AlaCourt). And we can talk to you about what happened and whether this qualifies as valid service or not.
It is critical to know when (and whether) you have been served as if you miss your deadline, you will most certainly have a default judgment against you.
Second — How long do you have to answer the lawsuit?
You count from the date of service (Step One).
In Small Claims court, you have 14 days to answer.
In District Court you have 14 day also.
But in Circuit Court, you have a total of 30 days from when you were served.
So write down this date on your calendar. Set reminders on your phone, etc.
Whether you do this on your own or hire a lawyer, make sure your answer gets filed by this date.
Third — What do your credit reports say?
You can pull your credit reports for free — but why pull your reports?
So you can see what the original creditor is saying. And what the debt collector (debt buyer) is saying about you.
Few important things to note:
- Amount your reports say you owe . . . compared to the lawsuit
- Date of last payment . . . compared to the date you were sued (statute of limitations)
- Is another collector or company saying you owe them the money . . . when someone else has actually sued you
There are other things we look at — who is pulling your reports, etc — but get your reports, see if any errors in general, and then also look for the specific items listed above.
Fourth — Is the suit brought within the statute of limitations?
We hinted at this in step three — pulling your credit reports — we want to see if the lawsuit was filed in time. If it was, we go on to step five.
But if it was not, then we have a very good defense.
Statute of limitations is the time to file a lawsuit. If the plaintiff — the one who sued you — waited too long to file suit, then you should win.
So how long does a creditor or debt collector have to sue you?
Here’s the short version (click on link for longer version):
- For credit cards, it can be as short as 3 years or as long as 6 years;
- For many vehicle purchases where dealer finances (and then immediately sells the debt), the statute of limitations is 4 years.
Understand that the collection lawyers disagree with us but this is what we believe is the law.
On credit cards, the big debate is between 3 years or 6 years. I believe it is 3 years but it is safest to assume the collector has 6 years. I would still use the defense if over 3 years but if over 6 years, then absolutely use it.
On almost every “deficiency” case after a vehicle repo, the statute of limitations is 4 years in my opinion.
We look at the date of the filing of the lawsuit, not when you were served.
The start of the clock running is normally the month after your last payment.
Here’s a simple example.
You last paid in October 2012.
Get sued in April 2017.
This is about 4.5 years.
There are lots of moving parts on the statute of limitations defense but it is worth a quick look at when you have been sued and then a more detailed look when you respond to the lawsuit.
Fifth — Does the debt buyer really own the debt sued on?
Even if the debt buyer (Cavalry, LVNV, Midland, Portfolio Recovery, etc.) sues you one year after default, it they don’t own the debt, they should lose (secret #2 in the link).
You see, for a debt buyer to win, it must show you owe the debt AND that it owns the debt.
Here’s an example.
I owe a bank on my house. Let’s say I’m not paying my mortgage payment every month.
Can YOU sue me for that?
“But judge I proved John hasn’t been paying his debt!”
Judge would say, “So what — you are not the right party to sue.”
Imagine if you saw a car wreck and someone got hurt. Can YOU sue the guy who ran the red light?
Nope — you weren’t the one hurt and you can’t sue.
Same with the debt buyers — they must prove they own the debt or it doesn’t matter that you owe someone else.
From a decade of doing this and defending hundreds of cases I can tell you the debt buyers struggle to prove ownership. Maybe I’ve just been lucky but I haven’t seen them prove it.
They often don’t want to prove it — they hate to reveal the sales contracts purchasing debts and they often simply have no proof of ownership. (By the way the sales contracts — called “Purchasing Agreements” — often say the debt buyer agrees none of the information from the original creditor is promised to be true. Kind of like buying a car “as is” — well, as you would imagine they don’t want the judge to know this so they keep these documents top secret!)
So we need to discuss how likely is it (if at all) that the debt buyer who sued you can prove it owns the debt.
All the above factors into your five options which are . . . .
Sixth — Go through your five options when sued
Here are your five options — for many years we have walked hundreds of consumers through these options. I still don’t know a better method for figuring out what is the best course of action than to go through these five options. We have a long video/transcript on these options but the short version is below.
FIRST — file bankruptcy. As you can imagine, this life altering event is only to be used in dire emergencies.
SECOND — fight the lawsuit on your own. This is normally advisable only in small claims or district court and you have to be prepared. But the advantage is you pay no attorney — disadvantage is you have no attorney helping you.
THIRD — settle the lawsuit on your own. Either a lump sum (money all at once) or monthly payments. You have to factor in the damage to your credit report and tax consequences as well as a possible consent judgment.
FOURTH — hire a lawyer to fight the lawsuit. Downside is it costs money — upside is if you hire the right person, you have an experienced skilled lawyer helping you to hopefully win your case.
FIFTH — hire a lawyer to settle the lawsuit. Again there is a cost so compare the cost with the benefit of having a lawyer help you. Ask about credit reporting, tax consequences, and any judgment before making a decision.
(If you want to know our process if you wanted to hire us, start with this article/video and walk through the steps. See if our approach is appealing to you.)
Contact us if you would like help figuring out what to do right now
We can help you with all of these steps and particularly help you figure out which option is the best. You will receive no pressure from us and if you decide to handle the lawsuit on your own, we’ll share some thoughts and tips with you.
Call us at 205-879-2447 or click this link to contact us — we’ll get right back with you. Thanks for reading this article and best wishes!