Don’t be a Verification Sucker – Request for Verification is NOT a Substitute for an Answer
Debt verification (also called “validation”) of your debt is an important right. If the debt collector brings suit, though, it’s too late. Demanding validation will NOT prevent a default judgment if you try it after the debt collector brings suit. In fact, a lawsuit does NOT trigger the right to verification at all.
People in debt trouble hear a lot about debt validation, and it can be a valuable right. Even though it requires little from the debt collector, making the demand seems to cause some debt collectors to go away. It will at least send a signal to the debt collector that you will defend your rights.
If the debt collector has filed suit, you must defend the lawsuit and file an answer (or appropriate motion) in court. If you don’t answer, the debt collector usually gets a default judgment. That effectively ends your rights to fight the debt.
That’s because, under the Fair Debt Collection Practices Act (FDCPA), filing suit is not an “initial contact” for purposes of verification. Validation is designed to keep debt collectors from suing the wrong people. After they file suit, it’s too late for that. Instead, the courts will decide.
Or so goes the legal precedent. The debt collectors know – and we all know – that most people do not protect themselves in court.
Make sure you do. You have to file an answer or the appropriate motion to do this.
When a debt collector (or creditor) files suit against you, you will have to file an answer in court to avoid a default judgment. Many people think all they have to do is “dispute the debt and request verification.” The right to verification, however, applies only to collection efforts that are not part of a lawsuit. Don’t be a verification sucker – file an Answer and defend yourself.
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
Three are two kinds of verification. Knowing and using them both can help protect your rights. Both the FDCPA and the Credit Reporting Act give you rights of verification. They are different, though, and you can use both. You probably should.
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. What we have usually meant 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, in defending yourself from the debt collectors and in repairing your credit.
Verification under FDCPA and FCRA are Different
The two kinds of verification are different rights. They apply in different circumstances, to possibly different “persons” under different circumstances. They also 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 you need to make sure that the response you get is appropriate for the specific right you invoke.
Rights under the FDCPA
Under the FDCPA, when a debt collector first contacts you it is required by law to notify you of your right to dispute the debt and require “validation.” The two words (validation and verification) are used interchangeably, and the requirement is quite simple in general.
First, the debt collector must notify you within five days of your right to dispute within 30 days. It must also give the “mini-Miranda” warning – that anything you say may be used for collection of a debt.
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. However, 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. 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 for the debt collector. 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. You can still can use it to fight debt collectors, thought. It is the validation provided for by the Fair Credit Reporting Act (FCRA).
This is your right to “dispute” a harmful 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 the Credit Reporting Act 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 telling credit reporting agencies is true.
What FCRA Accomplishes
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, so that may be good for you. 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. If the debt collector does not verify under the FCRA, you can clear your credit report.
FCRA Dispute May be Helpful to Debt Defense
If a debt collector DOES try to validate, it will probably give you information that it would object to having to provide in a law suit. So it’s a shortcut to some discovery in that situation.
Using FDCPA and FCRA
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.
Despite what some courts have held, foreclosure is a form of debt collection in the real world. To put it simply, creditors sell something of yours to pay a debt they claim you owe. This is not, as some legal theory would hold, merely a transference of title back to the “true” owner.
To understand why this is so, you need to know some history and law.
Debt Collectors sometimes threaten to repossess and auction off property that secures a loan unless you pay them, 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 secured an unpaid debt. 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 rather than possession, however. It involves the termination of at least one person’s ownership in favor of another person. 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 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 owns it in another, and the tenant also has certain ownership rights. 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 you could own your home have it subject to a mortgage and also various sorts of liens.
We are primarily interested in the mortgage and liens because these are subject to “foreclosure.”
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. But people can place liens on your house in other ways, too. The state can for taxes or judgments, to name two examples, and there are others.
All liens can be foreclosed. Mechanically what happens is that the foreclosing party causes the property interests to be divided and paid off. The way that is accomplished is by selling the property and splitting the money up according to the priority of interests.
There is a hierarchy of interests. The money goes to pay off the higher interests before the lower interests get anything. Eventually, if there is enough to pay every creditor with money left over, the property “owner” would get that. Or to put it another way, being the property owner means that you get whatever is left after paying all the other interests off.
You get 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 and B each own houses worth $100,000 on the open market. That’s what they would sell 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 someone forecloses, 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, so the bank takes that. Because the home was security for the home equity loan and mechanic’s liens, the foreclosure breaches the contract with the lender. It intervenes (legally) in the foreclosure and demands its money and gets it before anything goes to A. Because the lien was “subject” to the other agreements, the money goes to pay the lien before A gets anything.
In B’s situation, the bank gets all the money. The other lenders get nothing, but keep their claims against B. The sale extinguishes their security interests in the property, and chances are good they’ll lose everything they 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. 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.
Social Security recipients face a risk not only from their own debt troubles but also those of the people that take care of them. If you receive Social Security or take care of someone who does, you should know about this.
Secret Danger of Garnishment to Social Security Recipients and Others
As I have pointed out in my video about garnishing Social Security, Social Security benefits are exempt from most forms of garnishment. The notable exceptions to that rule is that they may be garnished by certain government entities and for child support.
Although Social Security benefits are exempt from most forms of garnishment, collectors sometimes attach and take them. When a collector garnishes a bank account, the bank holds the funds for a time to allow you to fight the garnishment. In plain English, they “freeze” the account, and you can’t get your money.
As a practical matter, you may be unable to fight the garnishment. Thus if you have paid for bills with an account that holds Social Security benefits, it makes sense to switch those benefits to another bank if that creditor later gets a judgment against you. Once they get a judgment, the debt collector will look for your assets. It will try to garnish any assets in a bank they have on file for you.
I realize this can be difficult or disruptive, but if you have paid an original creditor or debt collector out of an account, you must expect that account to be garnished – seized and taken away from you – if the debt collector manages to get a judgment.
If the debt collectors seized an account, you may or may not be able to get the money back. There will certainly be a delay, and all the money in the account, up to the amount of the judgment, will be held by the bank and unavailable to you.
Debt collectors sometimes garnish the accounts of Social Security recipients because of their caretakers.
Social Security recipients are often elderly or disabled, needless to say. Many of these people need other people to do shopping for them. Or to hold their assets in one way or another to use for their benefit. This money is held in trust and should not be available to debt collectors going for the caretaker’s money.
Here is an example that might make it clearer. Assume that Tom is taking care of Mary, his 70 year old mother. She suffers from Altzheimer’s. Mary and Tom will frequently find it helpful to allow Tom to use Mary’s account to pay her bills. If Mary’s account contains only Social Security benefits, it should be beyond the reach of any creditor. And because the money is not Tom’s at all, it should never be reachable by Tom’s creditors.
However, sometimes debt collectors will discover that Tom is paying bills using Mary’s account. If his name is on the account, or if he writes checks upon it, the debt collectors may attempt to garnish the account.
This is not as “evil” as it may first appear. From the debt collector’s point of view, how do they know what bills Tom is paying with the account? People often hide assets from debt collectors by using other people’s accounts. The law lets creditors go after the debtor’s money regardless of whose name it is in.
On the other hand, the impact on Mary of seizing her account for Tom’s debt can be devastating. Remember, the banks will freeze the account for a while to determine whether the debt collector can take it. During that time, the elderly person cannot pay her bills. She may be evicted, be unable to pay for medicine, or face other, life-threatening and disrupting events.
Get Legal Advice
If there is a judgment against you, seek the advice of a lawyer specializing in debt collection before linking anyone’s accounts to you in any way. In my opinion, the risk extends beyond just having your name on the account. If you sign checks for someone else and have a judgment against you, you may be putting this person at risk. Get legal advice and protect them and you.