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The 2 words that can get you out of paying a debt

If you're nervous about going to court over a debt, don't be. Show up, say this simple phrase, and you're on your way.

By Credit.com Aug 29, 2014 2:14PM
This post comes from Christine DiGangi at partner site Credit.com.

Money Talks News on MSN MoneyStudies show the majority of consumers being sued over a debt fail to show up to court, often resulting in a default judgment. The judgment means you're required to repay the debt -- which, given the circumstances, will likely be a significant financial obstacle -- and your credit standing will suffer as a result.


Worried man © CorbisAvoiding your debt collection lawsuit practically guarantees you'll have a judgment placed against you, but you don't have to sit back and let that happen. Showing up is the first step toward winning the case or settling your debt, and the next step is even easier: You need only say two words.


'Prove it'

Debt collectors often assume a debtor won't show up to court to face a debt lawsuit, allowing them to get what they came for (the judgment) without having to do the legwork (provide proof of the debt).


Somewhere between 60 percent and 95 percent of consumers who are sued for debt fail to participate in the lawsuits, a 2010 debt collection report from the Federal Trade Commission says, based on estimates provided by lawyers across the country. As far as default judgments go, they result most commonly from debt-collection lawsuits. A recent report from the Center for Responsible Lending cited a 2011 report from New York, which said 80 percent of default judgments in the state stemmed from such lawsuits.


These tendencies make debt buyers' jobs incredibly easy, but consumers can disrupt this pattern by challenging the lawsuit. Just say, "Prove it." Make the debt buyer prove you owe the debt, because if they can't, the case could be dismissed. It's important to remember that this is not a cure-all and will not necessarily work every time -- but the odds are in your favor.


This concept was the subject of a recent segment on This American Life called "Magic Words," in which a reporter experienced firsthand a debt case dismissed because the debtors asked for evidence showing they owed the debt. A lawyer who watched the dismissal unfold explained to the reporter how debtors rarely show up, and if they ask for proof of their debt, the collector usually doesn't have it. When the creditor sells an account to a debt buyer, documentation doesn't always change hands.


"Make them show their proof," said Amy Bennecoff, a senior associate at Kimmel & Silverman in New Jersey. "It's their burden of proof. If they don't have the contract, if they don't have the statements, you may win."


'Showing up' is harder than it sounds

There's a lot more to challenging a debt lawsuit than asking for evidence. Debtors may need to take off work for their court hearings, which their jobs may not allow, and getting to the courthouse is another issue. Some states have fees for filing an answer to the lawsuit, which the debtor may not be able to pay.


There are often solutions to these obstacles -- applications to waive fees, planning ahead to arrange transportation -- but it's not always easy for the debtor to figure out what they have to do. When you receive a notice saying you're being sued over a debt, research your options as soon as you can by visiting the court's website. If you're able to arrive in court to face the debt collector, your chances of winning the case are much higher than if you no-show -- because anything is better than that, really.


What to do if you are sued over debt

In the segment on This American Life, the reporter talked about a guy who used the "prove it" tactic as a way of avoiding legitimate debts. In that situation, it may seem unfair someone can get a case dismissed over a real debt because the collector doesn't have the right paperwork, but at the same time, it could also be considered unfair to the consumer that creditors can get judgments without providing sufficient proof of a debt. The system can be worked both ways.


Debt collectors seem to be the ones benefiting most. Debt-lawsuit procedures vary by state, but you'll definitely want to do your research if you find yourself dealing with one. Bennecoff said she one time showed up to court with a client, asked for proof of the debt, and the collector responded with information about a debt belonging to someone with same name as the client, but it definitely wasn't the same person. There are also cases of collectors suing for debts after the statute of limitations has expired or the debt has been paid.


"A lot of courts don’t require a lot of information to file these complaints, and then you get these defaults (judgments)," Bennecoff said. "Pay attention to what's getting filed against you."


Otherwise, you may pay a steep price. Judgments can stay on your credit reports seven years from the date they were entered in the court, even longer if they go unpaid, and your credit score will suffer as a result. If you're dealing with a judgment, work to improve your credit by focusing on other aspects of your credit, like credit utilization, so you can keep your score as high as possible, despite the judgment. You can check your progress by looking at two of your free scores every month on Credit.com.


More from Credit.com


127Comments
Aug 29, 2014 4:04PM
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Or you could just practice responsible borrowing and pay back borrowed money as promised... but silly me.
Aug 29, 2014 4:35PM
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I thought this was supposed to be an article about escaping debt.  Therefore, the two words you need would be: Don't Borrow.
Aug 29, 2014 6:19PM
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Debt equals slavery.  As long as the powers-that-be keep the masses in debt, they are able to control them.  Why do you think they give you so many incentives to borrow - credit card points, rock-bottom interest rates, 7 years to pay for a car, no money down to buy a house, virtually unlimited student loans, etc..., while at the same time punishing savings.  They WANT you to be broke.  They WANT you living paycheck to paycheck.  They WANT you dependent and not self-reliant.

The transition to a consumer-based, debt dependent economy was no accident - it was all carefully planned and executed.
Aug 29, 2014 4:47PM
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Or only use the word "NO".  No to any debt you can not afford to pay for in cash.  The only exception might be a house.
Sep 2, 2014 8:30AM
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How about the 2 words that can keep you from going in debt "Stop spending"
Sep 2, 2014 9:32AM
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Don't get into debt in the first place and then act all surprised and defensive when people actually expect their money to be repaid!
Aug 29, 2014 5:04PM
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I was expecting the 2 words to be:

"Bush's fault"
Aug 29, 2014 4:15PM
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I've beein in the lending and debt collection business for 25 years and this is just a silly story.  First of all, when the lender files the paperwork with the court it must provide a copy of the contract and payment history and show the court clerk how you arrived at the balance due.  This is mandatory in all jurisdictions before the case is even considered to be filed by the clerk.

 

Secondly, if you are responsive to the collector, they will, or at least should, provide you with all such documentation before it ever gets to the courthouse.  The reason most cases go to court is because the borrowers ignore the calls and letters.  They all were adult enough and smart enough to borrow the money but when the payments become due they all get stupid really fast.

Aug 29, 2014 5:28PM
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The only two words that will really help you escape debt, "He/She's Dead".
Aug 29, 2014 7:26PM
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One of the biggest areas for judgments is  failure to pay rent and rental property damage. If your dumb enough to meet your ex-landlord in court and demand his attorney prove your the ex-tenant, you deserve everything your gonna get.
Aug 29, 2014 6:44PM
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Maybe the reason 60% to 95% don't fight judgment collection is because they owe the money. The tactics provided in this bullsh..t article, especially when you owe the money, might work once every blue moon (what ever that means) but I wouldn't count on it. Judgments are obtained through a court order, most judges require the debtor be properly identified  by social security  numbers and other forms of photo ID such as driver license information. If your dumb enough to make a B.S. "prove it's me" claim in court you better have that false  police report which alleges someone stole your ID ( that's another bag of worms you'll regret). You'll also most likely get hit up with extra court costs on top of everything else you owe. The best rule is to not borrow what you can't pay back, but millions refuse to give up what they can't afford.
Aug 29, 2014 7:50PM
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60-95%??  couldn't do a little more research to get a more accurate figure??
Aug 29, 2014 7:38PM
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Odd.....these aren't the two words I use when folks ask for my $$$......
Sep 2, 2014 9:20AM
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Government:  As long as you're in debt your under my thumb!
Sep 2, 2014 9:56AM
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Well good for the deadbeats of the world.  Sometimes it's so obvious the debt is real but a good crook knows he can get out of the debt because the creditor trusted them.  I work in the building industry and to this day the relationship between suppliers, sub contractors and general contractors is the only real security we have.  Homeowners think I should sell tens of thousands of dollars worth of material to their job and give them time to pay.  The minute the material is there I lose all ownership and control.  The homeowners can pull every dirty trick and I have no recourse except to take them to court where I lose the majority of the money to the lawyers.  After 30 plus years in business I don't trust anyone.  If you think I'm a shady supplier consider this.  In all my time in business I've never been taken to even small claims court.  I think that says it all. 
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Teaching people to be dead beat democrats is what got this country into the mess we are in!
Sep 1, 2014 9:35PM
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Statute of Limitations is all you need to claim if the debt is over a set period of time and by the time it gets to court, the Statue of Limitations has probably kicked in.  What is the State of Limitations?  Depends on the kind of debt and how long its been plus the state of origin.  Most likely 4 or 5 years and sometimes medical bills are 2 or 3 years.
Sep 2, 2014 2:31PM
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Prove it?  How a bout "Pay it".  It's your debt and your responsibility.
Sep 2, 2014 12:55PM
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How about 3 words?  PAY YOUR BILLS.
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