Filing a counterclaim is probably the single most important thing you can do in defending yourself from a lawsuit brought by a debt collector. In this article and video, we discuss the importance of filing a counterclaim in general and whether you can do so in your case.
Counterclaim – Why So Important?
In most jurisdictions, which is a fancy way of saying most courts and places, the person bringing the lawsuit is allowed to drop the case if it want to. And usually at any time it wants to. This isn’t true of federal court, where you have to get permission, but in most state courts it seems to be true. And debt cases are pretty much always brought in state courts.
That means that the debt collector could get tired of you and just dismiss the case at any time.
That’s cool! That’s just what we want and what I’ve been saying you should go for, right?
Yes, but if the debt collector simply dismisses your case, it could also sue you again later. Or it could sell the debt to someone else who would sue you later, and that is definitely not cool! You need the case dismissed “with prejudice” to keep it from coming back. You also need it dismissed with prejudice if you want to repair your credit report.
Counterclaims Give you Some Control
So how do you keep them from dismissing the suit and refiling the suit later? You do this by filing a counterclaim against them. A plaintiff can dismiss its own claim against you, but not your claim against it.
Unless you agree.
If you have a counterclaim, if they want to dismiss the case against you they either have to settle the case with you, or they’re still left defending your counterclaim. They never do that, because then they’d be bound to lose money one way or another. They’d either have to pay you or their lawyers (or both) — without the chance of collecting anything from you. They won’t do that. Instead, they’ll settle the whole case with you.
So a counterclaim gives you power over the plaintiff and lets you keep it around till they agree to destroy the debt (or “extinguish” it, as it is called). A counterclaim means you can put the harassment to an end. And sometimes your counterclaim can be worth a lot more than their lawsuit against you was in the first place.
Who Can File a Counterclaim
Counterclaiming became more complicated in 2017 thanks to an important Supreme Court ruling. Two things are necessary for you to file one: some legal wrong, and a “debt collector.” The legal wrong under the FDCPA is pretty broad and includes fundamental unfairness or deception. But whether the person suing you is a debt collector under the Act is more complicated.
To help figure out whether you have a counterclaim against a debt collector, go here. Who is a Debt Collector after Santander.