What Happens When You Are Sued By a Debt Collector In District or Small Claims Court In Alabama
What Happens When You Are Sued By A Debt Collector in District or Small Claims Court in Alabama
An overview of the process from beginning to end.
In my hands, I’m holding a copy of a typical lawsuit, which is also called a complaint.
A debt collector, such as Unifund, Midland Funding, LVNV, Portfolio Recovery, or Asset Acceptance, prepares a complaint.
They file this document in court, and it states who is suing you.
The lawsuit will have your name on it, and at the top, it will state the court it was filed in: district court or small claims court and which county.
Then it will state how much money you’re being sued for. It could be $1,000 – $10,000.
Normally, you didn’t borrow money from Unifund, Midland Funding, or Portfolio Recovery.
You had a credit card, and sometimes the lawsuit will specify which credit card the debt came from.
It could be from GE Money Bank, a Chase credit card, a Capital One card, or some other card.
At the end of the lawsuit, there will be a statement such as, “based on everything contained in this complaint, we’re seeking a judgement against you for the amount you’re being sued for.”
That’s what starts the lawsuit.
The Letter Phase
Usually, the next thing that happens is you get a letter. You may get a lot of letters!
Usually, the first letter you will receive is from a place called Nichols & Ferry. They are a “mediation firm.”
They are not lawyers.
Usually, will send you a letter the day after you get sued.
The letter will state that you’ve been sued, and it they will offer their services to you. Now, you may also get letters from bankruptcy lawyers.
In my opinion, you should not get any letters from bankruptcy attorneys until after you’ve been served.
Ethical rules say attorneys have to wait 7 days after someone has been served before sending an advertisement letter to them, but some lawyers don’t follow that.
If a lawyer is violating the ethical rules by sending you letters early on, maybe that’s not the lawyer that you want to consider, but that’s your decision to make.
If you receive a letter from a non-lawyer offering to help you negotiate or mediate this, my natural response would be,
“Why would I want a non-lawyer to represent me in a legal matter?”
That doesn’t quite sound right. But again – use your own judgement on that.
Let’s walk through the process:
- You get sued.
- You get notified by mail from lawyers or Nichols & Ferry.
- You get served.
You could be served by a sheriff’s deputy, a private process server, or via certified mail.
A deputy or private process server will knock on your door, or they walk up to you in your driveway, hand you some documents and say, “I have some papers for you.”
Now, you’ve been served.
Being served is significant because it triggers the clock to start running on how much time you have to respond to this lawsuit.
You have 14 days to respond.
This article is really about being in small claims or district court, and we’re only talking about lawsuits in Alabama.
What if you don’t do anything?
Unfortunately, 80-90% of people do nothing.
If you do nothing, when your 14 days runs out, then the company who sued you will file a motion, an intrigue, or a notice to get a default judgement against you.
If they get a default judgement, that will significantly negatively impact you.
A default judgement is a real judgement that opens you up to:
- Garnishment of your wages up to 25%
- Garnishment of your bank account
- The seizing and selling of your house or your car
- A lien on your property
So, you definitely want to avoid the default judgement. You have to take action within 14 days.
What do I do?
You have 5 options:
- You can file bankruptcy – very rarely is this appropriate, but it can be appropriate
- Fight this lawsuit on your own – without hiring a lawyer
- Settle the lawsuit on your own – without hiring a lawyer
- Hire a lawyer to sue
- Hire a lawyer to settle the lawsuit
Normally, when you hire my firm, we combine the last two.
We respond to the lawsuit for you and give the debt collector two options:
- You can drop the We’ll pay you no money, you get it off of the credit report, and we won’t sue you.
- We’ll go to trial.
Those are the options.
We don’t really negotiate other than asking if they want to fight this, or if they want to settle this and get it off of the credit report so it will go away.
Can I handle this on my own?
What should I do?
The most critical thing to do is to file an answer to the lawsuit. Respond to it.
If you’ve been sued in small claims court, they’ll give you a form with 4 boxes on it:
- Box A says you sued me in the wrong county
- Box B says I admit everything
- Box C says I admit that I owe the debt, but I don’t believe that I owe the full amount that you claim
- Box D (frankly, this is the only one we deal with) says, “I deny owing ” Then a space is provided where you can type or write in an explanation.
In district court, typically you won’t receive that form, but you can find it online. If you can’t find it online, you can hand write an answer or type an answer. There’s really no magic form.
When creating your own response:
Put your name, the name of the company suing you, and the case number in the upper right corner.
The form will say SM, which stands for small claims, or DV, which stands for district civil.
You’ll write that in, put what you’re saying in your answer, and sign it. Then you file it in the court.
So, what do you put in your answer?
Since I don’t represent you, I can’t tell you what to put in your answer.
This is not legal advice, but what I’m doing is giving you general education advice so you can see the big picture of what’s going on in these lawsuits.
But, here’s what a lot of people put down.
They say, “I’ve been sued by Unifund, but I’ve never done business with this company. I’ve never borrowed money from them. They have never fixed my air conditioner, my car, or my roof. I’ve never had any dealings with them. Therefore, I don’t owe them any money.”
If a debt buyer sues you, they have to prove that you owe the debt, and if they can’t prove it, they lose.
But even if they prove this, they first have to prove that they own the debt.
I don’t know of any way that you could know if they own the debt when you get this lawsuit because it just says they own it.
Well, they could say you owe a billion dollars, but just because they say that doesn’t make it true.
What else should you include in your answer?
You can put other affirmative defenses.
This is where you say, “Even if I do owe the money, and even if Unifund owns the debt, they still lose.”
The most common one is the statute of limitations.
In Alabama, we say the statute of limitations is 3 years. The debt collectors say it’s 6 years.
So, which is it? Ultimately, it’s for your judge to decide.
But there’s a very strong argument that the correct answer is 3 years.
Almost always, the debt collectors are suing you beyond 3 years. So, people often include that in their answer.
They’ll say, “I don’t owe the plaintiff any money, and the statute of limitations has expired.”
What should you do with this answer?
Take it to the clerk’s office.
When you arrive at the courthouse, usually there’s security, and say, “I was sued in small claims or district court, and I’ve got my answer. Where do I go?”
The security officers will be able to tell you where the clerk’s office is. When you get there, explain to them.
“I’ve been sued, and I want to file my answer. Am I in the right place?”
Take a few copies of the lawsuit so you can give one to the clerk and she can stamp it with the date and time so they know when it was submitted.
They put that in the file.
Then give them a copy to stamp, and you keep that so you’ve got proof that you filed an answer.
Then you want another one to be able to send to the collection lawyer.
I suggest taking a photo of your answer when you get home or get back in your car. Make sure that the date and time of the stamp are visible in the photo.
That way if someone ever comes back later and says you never filed an answer, you have proof that you filed it.
We’ve had this happen before, where the collection lawyers will say, “I want a default judgment because 14 days has expired, and your time is gone.”
They can move for a default judgment. They’ll claim that you never filed an answer. You want to be able to say, “I have the answer right here. See? It’s stamped up here.” So why do I say take a picture with your phone?
Well, what if you lose the paperwork? You’ve got it on your phone. But don’t just leave it on your phone.
Email the picture to yourself.
If you have a gmail account or another email account that saves in the cloud, email it to yourself so that if you drop your phone, lose your phone, or your paperwork gets destroyed, you’ve got the proof of it.
After the answer is filed… What happens next?
Usually, the next thing is you get a trial date.
That will come in the mail.
It’s typically about the same size as your voter ID card, not a full-sized letter.
It could come as a regular letter, but it also could be the size of a small note card.
After you file your answer, be sure to tell everybody who lives with you – not to throw the mail away without me looking at it.
You may grab the mail, flip through it and say, “These are just a bunch of advertisements.”
Then, between the Papa John’s coupon and the Captain D’s coupons this little notecard that is your trial notice may get accidentally slipped in there.
It’s not going to come certified mail, and the court has no obligation to call you. They don’t have any obligation to make sure you receive it.
So, you need to be checking your mail every day, going through every piece of paper, to see if you received a notice from the court.
In most counties, you’ll be trying your case about 4 – 8 weeks after you submit your answer.
So, if you don’t get the trial notice within about a week, start calling the clerk’s office and say, “This is John Watts, I got sued by Portfolio, here’s my case number, I filed my answer about a week ago (or two weeks or whatever), and I haven’t gotten a trial date yet. I just want to make sure I haven’t missed that.”
As long as you’re nice to them, they’re going to be nice to you.
They’re going to look up your case and say, “Oh, we haven’t set it for trial yet, or here is the trial date.”
Be respectful of them.
Don’t walk in on Monday morning at 8:30 am and be impatient. Don’t go on Friday afternoon at 5:00.
Try to go when it’s not going to be so crazy, or if it is really crowded, be patient.
If you’re calling them on the phone, I wouldn’t call at a time when it’s busiest for them. Just check in every 3-5 days until you get that trial date.
Once you get the trial notice, what do you do?
If you’re handling it on your own, let us know, and we’ll send you some information about mistakes that people often make.
We have a list of 7 of them. I won’t go into that here because you can look at the information we’ll send you, but that may be helpful to you.
Here’s the other thing you do:
Go to court before your trial date.
1-2 weeks before your trial date, go to court.
I don’t mean just any court – go watch small claims trials in your judge’s courtroom.
Here’s how you do that:
Pick up the phone, and call the judge’s office.
If you don’t know who your judge is, you can call the clerk’s office and ask. They will tell you who the judge is.
Call the judge’s office and say, “This is John Watts. I got sued by Midland Funding, I have a trial date July 15, and I was wondering if you are going to have any other trials before then so I could just come watch and see what happens?”
Everyone that I know who has done this has gotten this response:
The court is very nice. They’re actually pleased that you’re calling because these proceedings are open to the public, but really the public never comes in to watch what’s happening.
So, the judges like for the public to see, and if you’re going to represent yourself, they really like for you to come ahead of time so you will know what to expect.
Why should you do this?
- You need to know where the courthouse is.
- You need to know where the judge’s office is.
- You need to see what parking is like.
- You need to figure out how to get through security.
- You need to know where to find your judge.
A lot of people say, “I want to handle this on my own. I don’t want to pay any money to a lawyer.”
That’s fine.
I tell them, “Here’s what you need to do. Go watch some trials before your trial.”
They say, “I’m too busy for that. I don’t have time, and I don’t need to do that. I know where the courthouse is.”
Then they call me after their trial, and they’ve lost.
Well, what happened?
- They got confused about where the courthouse was, so they were running late.
- They couldn’t find a parking spot.
- They had no idea that on Monday morning there would be so many people there.
- Then, they forgot about security.
- They had to stand in line, and they knew they were going to be late.
- They didn’t plan for how long it would take to get through security.
- They finally got through security, and they couldn’t remember which courtroom it was in, so they accidentally sat in the wrong courtroom, figured it out, got to the right courtroom, they were already finished, and the judge didn’t seem happy that they showed up 25 minutes late.
- They panicked and agreed to a consent judgment.
That happens repeatedly with people who do not want to hire a lawyer. Here’s the solution:
In order to be successful on your own, if you’re not spending money, you’ll have to spend time.
- Visit your courthouse the week before your trial.
- Find where you’re supposed to go.
- Find out about parking.
- Find out how security works.
What do you do when you get there?
- You sit down.
- Look around.
- Bring a notebook.
- Take notes.
What happens when the judge walks in?
Normally, everyone stands up.
What happens when the judge does what’s called “the docket call?”
That’s where the judge names the cases he will be hearing that day.
“Ok, I’m calling these cases – Midland vs. Smith, LVNV vs. Jones, Portfolio vs. John Watts.”
People will stand up when their name is called. Lawyers stand up. People who are representing themselves will stand up.
But here’s what you’ll see: if there are 10 people representing themselves, about half of them will stand up.
What do the other half do? They don’t show up. They lose.
So, that gives you an idea. You have to show up.
Then you just watch and observe what happens. It’ll make you so much more comfortable.
I’ve been trying cases for 20 years.
I’m not telling you that to brag, but to just say that I’ve been doing this a long time in federal court and state court.
I have a ton of trial experience, but if I’m going into a new courthouse, I’m going to get there beforehand, even if I’m familiar with the courtroom.
I want to go to that courtroom, get a feel for where I sit, and take note of where the jury sits.
Even though you won’t have to worry about a jury trial, it’s still good to take note of that just so you can soak it all in.
The goal is to remove a lot of the nervousness.
Now, I don’t want you to walk in and have no concern.
If you walk into the courtroom the morning of your trial, and you have no concern about it, you may be dead.
Your heart should be pounding, but it ought to be controlled.
That just means that you’re interested, that you care about this because you want to do well.
If you walk in with the attitude of “I don’t care,” why would you even show up?
You want to care, but you don’t want to be overwhelmed with nervousness or anxiety.
What happens at the trial?
The collection lawyer will have some documents.
He might say, “Come out into the hall with me,” and the judge may say, “Go out into the hall with this lawyer.”
He will say, “Look, I have all of these papers. I’ve got statements. So, that proves you owe this debt.”
Well, no. That proves that you have statements. That’s all it proves.
He might say, “Well, I have statements! That means you owe the money!” Well, I don’t know if I owe the money or not. I don’t know who you are.
“Oh, we’re Midland, and since we have the statements, that proves that you owe us the debt.”
No, that proves that Midland sued, and it proves that Midland has copies of statements.
When they say, “I have the statements,” that’s the lawyer’s way of acting like having some statements ends the case.
No, it just means you have statements.
There may be a dozen companies that have copies of the statements, but that doesn’t mean that they can sue me or that I owe a dozen companies.
If I owe the debt to GE Money Bank, and GE Money Bank has sold that debt, I only owe it to whoever truly owns that debt.
Midland says, “But we own it!”
Well, I don’t know if you own it or not. Do you? We’re in court. Prove that you own it. They don’t like that.
They will claim to have a purchase agreement, which is just a contract.
Sometimes they act like there is nothing in writing, but you don’t buy $500 million worth of debt on a handshake or over a text message.
There’s a contract.
They’ll bring you the first page of the contract, and they’ll say, “See? Here it is.”
It will say “Purchase Agreement” across the top, and it will say, “Midland and GE Money Bank agreed to settle the accounts listed in Exhibit A, and there are no representations made other than what’s in the purchase agreement.”
Then the lawyer will say, “See? Here it is. We proved it.”
That’s one piece of paper. This is the contract that was signed when you bought $500 million worth of debt?
“Oh, no. This is the front page. That’s all we’re going to give you.”
Well, if you bought the debt, why wouldn’t you introduce into evidence the whole agreement?
“Oh no, we can’t do that. That is super secret. They don’t even give that to us.”
Well, that’s a little bit of a problem for you because Midland sued me in court. So, Midland has to prove that they own the debt.
They’ll say, “Yeah, but I mean, we wouldn’t make this up.”
As if all of the scandals involving the big banks didn’t occur?
Remember robo-signing?
Bank of America, Chase, and the big banks were making documents up!
They had people signing thousands and thousands of affidavits a day to take people’s homes, and the people signing the affidavits said, “I swear that this information is accurate.”
Instead of reviewing the details of each case, the robo-signers assumed the paperwork was correct and signed it automatically.
You know what else happened?
They had people signing the documents that were dead.
How does a dead guy sign an affidavit?
They just had a stamp signing it over and over.
Or they had the notary saying this person really signed it, but the person was dead. They just already had them notarized.
Nobody was really checking into this to see what was going on.
So, some debt buyer comes along and buys something for pennies on the dollar, and they want to come into court and say, “If we sued you, you have to believe us.”
Actually, I don’t believe you. You have to prove it, and bringing in one little piece of paper doesn’t prove it.
Then they will say, “Oh, well, in addition to this, we have another piece of paper that has your account number on it.”
So what? What does that prove?
A piece of paper isn’t going to prove anything in my opinion. Someone from GE Money Bank has to testify that they sold the debt to Midland.
What if they sold it to another company who then sold it to Midland? Then we need more witnesses.
Let’s assume they can prove that it goes from GE Money Bank to Midland. Does Midland still own it or did they transfer it to someone else?
Somebody’s got to come to court and testify.
Now, the debt buyers will say, “This is outrageous! We are not going to send a witness, and we’re not going to prove all of this stuff. I mean, we sued you, and remember, we got the statements. That’s all the proof we need.”
No. You can’t even get the statements into evidence.
“Well, this is unfair. This is really going to be a burden on us.”
Well, here’s the thing:
When I sue these debt collectors in federal court, I don’t go to trial and say, “I don’t have any witnesses.”
“I don’t really have any paperwork because it’s kind of outrageous to expect me to prove my case in court. I said that you did this bad stuff. That ought to be good enough.”
I would get thrown in jail by the federal judge if I did that.
But they come into small claims or district court and they’re like, “Yeah, I don’t have any proof. I shouldn’t have to prove anything.”
No, they have to prove it. That’s why we have trials.
What happens if they win the trial?
They prove they own the debt and you owe it. They win. Now you have a judgment against you.
- You can either pay that judgment,
- You can do nothing, and they’ll garnish your wages, garnish your bank account, they can seize your house and car, etc.
- Or, you can appeal You have 14 days to appeal it to circuit court.
What happens at circuit court?
It starts all over, as if what happened down here in small claims or district court never happened. This is because you have a right to a trial by jury.
What if you win?
The debt buyer (Midland, Portfolio, etc.) has 14 days to appeal it because they have a right to a trial by jury.
There are no juries in small claims or district court.
So, what if you win, and they don’t appeal it? What does that mean?
What it normally means is that you do not owe this debt.
So, Midland sued you, said you owed $5,000, now you have a judge that enters an order that says judgment for the defendant.
That means you do not owe Midland that money.
What are the implications of that?
Well, did Midland credit report that you owed them $5,000?
Midland started this fight, and now we have an order. They started this lawsuit, and they lost it.
But they’ve been telling the world that you owe $5,000.
Now we know from this order that you don’t owe $5,000. Seems like a problem for Midland.
They sued you and said that you owed $5,000. That’s a problem.
Before they sued you, they wrote you a letter or had their lawyers write a letter saying you owe $5,000.
Well, it turns out, that’s not true. And then what did they do afterwards?
What if they continue to keep it on your credit report?
That’s wrong conduct.
Remember: they had it on your credit report saying that you owe $5,000, so they claimed you owed $5,000, they wrote you a letter saying you owed $5,000, they sued you for $5,000, and it turns out you owed them zero.
That’s a problem for them under the law.
I hope that this big picture overview has been helpful to you.
I haven’t tried to get into all of the details or all of the exceptions to the exceptions, but I hope that this overview was helpful to you.
Reach out to us if you are in Alabama!
If you are in Alabama, feel free to reach out and we can chat about what happened and whether the collection or credit reporting you are facing now is legal or illegal.
Always feel free to call us at 205-879-2447 or fill out our contact form.
Thanks!
Here is an article about the mindset you should have when a debt collector calls you.