Many visitors to our site are facing dramatic new situations:
You may have just found out you’re being sued; or
You have either received a debt collection letter or some other “threat.”
We can help. We can take a look at your situation and the material you were sent – whether it’s a letter or a lawsuit – and give you a roadmap of what to do. It isn’t legal advice, but think of it as a sort of “guided tour” of where you need to go and what you need to do. It will save you a lot of time, wasted energy, and anxiety. And you’ll come out of it with a good idea of what you’ll need to do to set things straight.
If you are being sued, we can help you get oriented to the case. People ask us all the time whether they should file a motion to dismiss or Answer, and whether or not there are any potential counterclaims to the lawsuit. If those are the sorts of questions YOU have, this is a way to get a head start on figuring out the answers.
Being Harassed or Called or “Dunned”
But what if you aren’t being sued and have just received a phone call or two, or letter? We do have a lot of information on the site to help you evaluate your situation yourself and figure out how to protect your rights, but if you’d like something a little more specific, you can now use this service, too.
We have products and information you will need in the earlier stages of debt problems. The most important thing to remember is this: anything you do that makes it easier for them to sue and win also makes it more likely that they WILL sue you. What does that mean? It means that if you admit owing the debt, having made payments or anything like that, and if you tell them where you work or bank, you make it more likely you will be sued. You might think you are being “responsible” and appropriately cooperative, but it works differently in law and debt.
You will find materials on site that will help you navigate this stage of the problem, but if you want some more specific guidance on what to do given the things they are telling and send you, this product is for you.
If You Need Help
If you need one of these services, just click on this link and select the service you need. Note that clicking on the link will take you to our “home” site, Your Legal Leg Up. If you need a “rush” job (service in under 72 hours), be sure to go to the products page and order that as well. You will be given instructions with your receipt on what to send and how to do it – we will need images of the documents you have received as well as answers to certain questions. After you give us that information, we will have an analysis back to you within 72 hours (three days). If you need faster than that, you can order the “rush” service, although we do ask that you NOT do this unless you need it.
Verification under the FDCPA and FCRA – Use Both to Protect Your Rights
The information in this article and video is designed to help people being bothered or sued by debt collectors, or who are concerned about their credit reports and wish to take action to protect their rights.
Two Kinds of Verification and How to Use them to Protect Your Rights
We have spent much of our time talking about “verification” on our site and videos, and what we have meant in most of that has been the “verification” process provided by the Fair Debt Collection Practices Act (FDCPA). But there is another kind of validation you can use – validation as permitted by the Fair Credit Reporting Act.
We talk about that below and discuss how you can use both forms of validation, together or separately, to your advantage in defending yourself from the debt collectors and in repairing your credit.
The two kinds of verification are different rights. They apply in different circumstances, to possibly different “persons” under different circumstances, give different rights, and have different time requirements.
You can use them both, but they are completely separate. It is important to keep them straight.
Make sure you keep track of everything you do under either statute, and make sure that the response you get is appropriate for the statute you used for the specific right you invoke.
Rights under the FDCPA
Under the FDCPA, when a debt collector first contacts you on a debt, it is required by law to notify you of your right to dispute the debt and require “validation” or “verification.” The two words are used interchangeably, and the requirement is quite simple in general:
First, the debt collector must notify you of the right to dispute within 30 days (along with giving you the “mini-Miranda” warning – that anything you say may be used for collection of a debt) within five days of first contacting you.
And then, the debt collector must “verify” the debt if you ask within the thirty days provided.
Just to make clear, it is YOU who have 30 days to dispute after getting the notice of your rights. The debt collector does not literally even have to do anything at all and also has no time limit. It’s just that, if you dispute and request verification, it cannot make further attempts to collect on the debt until it has verified it.
Exactly what verifying it is, is not exactly clear.
It would appear that contacting the original creditor and “establishing” that the debt is yours would be enough. That’s because the purpose of the requirement is not to require a separate lawsuit, but just to protect consumers from harassment based on typos or mistaken identities. The debt collector has to take some action to connect you to the debt if you dispute it under the FDCPA.
Even this low burden often seems to be too much, and possibly that is because the second owner of the debt (if there is one) has no relationship to the original creditor and simply cannot get the debt verified. Whatever the reason, asking for verification is often enough to make them go away. If they try to collect without having verified, that violates the FDCPA. And that in turn might allow you to stop a lawsuit brought against you.
Remember, however, that when the debt collector immediately files suit against you, this is not a “first contact” which triggers your right to notice and dispute. If you get served, you have to answer (or move to dismiss). It is not enough to request verification.
Disputing under the Fair Credit Reporting Act
There is another kind of validation, and it is completely different from the FDCPA, although you can use it to fight debt collectors, too. It is the validation provided for by the Fair Credit Reporting Act (FCRA).
This is your right to “dispute” an item on your credit report.
You do this after looking at your credit report and seeing something that is not positive. Let’s say you see a debt collector reporting that you owe a debt. Remember your right to verification under the FDCPA comes when the debt collector first contacts you to try to collect the debt. You can dispute a line item on your credit report at any time.
There are rules, and there are better and worse ways to do it. But it does not depend on the other side being a debt collector or having tried to collect the debt. It simply requires that they have put some bad information on your credit report.
When you seek verification under the FDCPA, the debt collector has to verify the debt before making further attempts to collect. When you “dispute” the debt under the FCRA, it doesn’t affect collection. Instead, you are forcing the company to “investigate” the debt and show that what it is saying to the credit reporting agencies is true.
If the company reporting you cannot validate the debt, it is just required to withdraw the offending credit reference. But it could still try to collect the debt.
If it does keep trying to collect the debt after withdrawing a bad credit reference, that might be a type of admission that it can’t prove the debt if the case goes to a lawsuit.
But it probably isn’t controlling on the case because “validation” of a credit report is not
the same thing as proving that the debt is valid.
A Helpful Strategy
Here’s a strategy that might be helpful. If you receive a bill from a junk debt buyer – a company that bought your debt from the original creditor, in other words – you should
send a request for verification under the FDCPA right away. Then you should and get your credit report and look at it.
If the debt collector is reporting your debt on your credit report, you will want to dispute the credit report and seek validation under the FCRA. Separately.
Remember these are completely different rights. Your sending two different disputes may confuse the debt collector, but remember that under the FDCPA it must provide proof as to your identity and its right to bug you, while under the FCRA it must explain why the information it put on your credit report was correct. The debt collector may not verify under the FCRA, in which case you can clear your credit report.
If it DOES try to validate, it will probably give you information that it would object to having to provide if it were suing you for the debt – so it’s a shortcut to some discovery in that situation.
You should not try to do the FCRA verification first because it takes too much time.
To do the credit dispute right you have to get your credit report and dispute it with the credit bureau before you dispute it with the debt collector under the FCRA if you want to protect all your rights. You don’t have time to work your way through the FCRA before asserting your FDCPA rights.
On the other hand, if the company does not verify under the FDCPA, that would be worth mentioning as a basis for your credit dispute.
We should add that when you get the first letter from the debt collector you may not even know whether it is reporting you on your credit report. They often do not, so you won’t know whether or not you will have anything under the FCRA. But if they are contacting you, you have the right under the FDCPA. Since it only lasts for 30 days, you need not to delay in disputing.
We always recommend sending your disputes by certified mail (and keep all the proof). You don’t have to do this legally, but these things often come down to a question of what you can prove, and having proof from the postal service is a very good investment.
If you would like to get a personalized evaluation of your situation, follow this link: https://yourlegallegup.com/pages/evaluation. (Note that this link takes you to our “home” site, YourLegalLegUp.com, which has many more resources on these issues.
Foreclosure is a form of debt collection in the real world. Debt Collectors threaten to repossess and auction off property that secures a loan unless that loan is paid, or else they actually repossess and sell off the property, in order to pay the debt. This video and article discuss the way the process works.
What Foreclosure Does
Foreclosure is designed to allow for possession (or repossession) of property that was used to secure a debt that was subsequently unpaid. Most people simply think of foreclosure as “getting kicked out of your house,” and in many situations that is an appropriate understanding. In reality foreclosure addresses ownership rights rather than possession, however. It involves the termination of at least one person’s rights of ownership in favor of another person, and this can, but does not always, lead to eviction.
English Law and the History of Foreclosure and Property Rights
We don’t think of it very often, but one of the great inventions of English law was the division of property into different property “interests” or rights that could co-exist in the same property. The state “owns” physical property in one way, the landowner in another, and the tenant also has certain ownership rights, for example. If the landowner is married, both spouses will have rights in the property, and it is possible to divide the rights up in many other ways, too. Another form of coexisting rights is the way the same property could be owned by you, but subject to a mortgage and also various sorts of liens.
It is with the mortgage and liens we are primarily interested here, because these can be “foreclosed.” It is worth remembering that while most people (including the courts) only think of “purchase-money mortgages” (the mortgage you take out in order to buy your house) when they analyze foreclosure, there are other ways liens can be placed on your house (by the state for taxes or judgments, to name two), and all liens can be foreclosed. Mechanically what happens is that the foreclosing party causes the property interests to be divided and paid off – and the way that is accomplished is by selling the property and splitting the money up according to the priority of interests.
There is a definite hierarchy of interests, and the higher interests must be completely satisfied before the lower interests get anything. Eventually, if every interest is satisfied and money is left over, this would go to the property “owner.” Or to put it another way, being the property owner means that you get whatever is left after all the other interests are paid off (you are entitled to the “equity”). But usually, if there is not enough to cover all the secured interests, you will owe the secured parties money personally.
Two Examples of Foreclosure
Let’s consider two examples. In the first, Owner A each own houses worth $100,000 on the open market. That’s what it sells for.
Owner A has the following liens against the property: a purchase money mortgage of $35,000, a home equity loan of $10,000, and a mechanic’s lien of $1,000.
Owner B has the following liens against the property (in this order – the order of liens is beyond the scope of this article): a purchase-money mortgage of $110,000 (the house is “underwater” because the loan remaining is more than the house is worth); a home-equity loan of $10,000, and a mechanic’s lien of $1,000.
If neither one can pay off the purchase money mortgage, go into default, and are foreclosed, here’s what happens.
Results of Foreclosure
A loses possession of the house, and all security interests in the property are “extinguished.” The money is enough for the mortgage, and that is subtracted and given to the bank. Because the home equity loan and mechanic’s liens was “secured” by the house, the foreclosure breaches the contract with the lender. It intervenes (legally) in the foreclosure and demands its money and gets paid before anything goes to A. Because the lien was “subject” to the other agreements, it gets paid afterward, again before A gets anything.
In B’s situation, the bank gets all the money, and the lenders are left with claims against B. Their security interests in the property are extinguished, and chances are good they’ll lose everything they had lent.
Why Debt Collectors Often Do Not Foreclose
What if, instead of not paying the bank, A and B had failed to pay the home equity loan? In that situation, the Home Equity lender could foreclose on the loan. Lower level security interests can foreclose on the loan. It would be conceivable that any other person with an interest in the property, including the mechanic, might take some action to intervene in order to protect its interests, although in B’s case, especially, this is unlikely. The bank will get all the money, and the home equity lender will get nothing even though it is the one that foreclosed.
This explains why debt collectors rarely foreclose on a house. It will cost them money but get them nothing. But that isn’t to say they couldn’t or that it would never make sense for them to do or threaten to do.
About Your Legal Leg Up
Your Legal Leg Up is a business dedicated to helping people fight debt collectors without having to hire expensive lawyers to do it. We offer you everything you need to defend your rights – with special help through our membership services to help make the process smoother, easier, and less worrisome. YourLegalLegUp.com has been in operation since 2007. Before that, Ken Gibert practiced law representing people being sued for debt among other types of consumer law.