The complete guide to collection judgments in Minnesota.

Part 1 — Debt Collection Judgment Basics

what is a judgment?

A debt collection judgment is a court order that you owe the creditor money. The judgment is the final decision in a collection lawsuit. Most judgments are entered by default after the defendant fails to properly respond. This is why it's so important to answer the summons and complaint.

What can the creditor do with a judgment?

Once a creditor has a judgment, it has the ability to garnish both your bank account and paycheck. It also creates an automatic lien against any real estate that you own, which you’ll have to pay off if you want to sell or re-finance. And in some cases, creditors will seize some of your personal property and have it sold to pay the debt.

how does a creditor find my bank or employer for garnishment?

A judgment creditor may issue a Demand for Disclosure, which requires you to disclose all of your assets. There are signficant penalties—including an arrest warrant—for not complying.

Judgment creditors may also call you in for an interview—called a deposition—and ask you questions about your assets.

how long does a judgment last?

Judgments last for ten years and then can be renewed for another ten years. There is no limit to how many times a judgment can be renewed as long as the creditor takes the appropriate steps every ten years. So a judgment against you will potentially last forever.

does a judgment accrue interest?

Judgments currently accrue interest a 4% annually under Minnesota law. This might actually be a relief if your debt was accruing a higher interest rate before the judgment.

WILL IT BE ON MY CREDIT REPORT?

The major credit bureaus—Equifax, Experian, and TransUnion—do not currently report judgment information. However, other credit reporting agencies, such as LexisNexis, do report judgments, so your ability to get credit, housing, and employment might be affected.

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Part 2 — Dealing with a Collection Judgment

option #1 — If you can afford it, negotiate a settlement

For many people, the best choice is to negotiate a settlement of the debt collection judgment. Settling the judgment allows you to avoid the stress and inconvenience of garnishments and liens.

It’s important to understand that great deals are hard to come by after judgment because you've lost most of your leverage. But if you can demonstrate a significant financial hardship, or have a lump sum of cash available, you may be able to get the creditor to knock a decent chunk of the balance off.

It’s also important to be realistic: if the judgment is for a lot of money, or if you have several judgments, can you really afford to settle?

option #2 — if you meet the necessary criteria, vacate the judgment

If the judgment was obtained by default, you may be able to get it vacated or undone. Vacating the judgment doesn’t make the debt go away, it just sends the case back to the beginning and gives you a chance to defend yourself.

In our experience, vacating a judgment is a long-shot option for most people for three reasons:

• First, you must provide strong evidence that you never received the creditor’s lawsuit or that you had a good reason for not responding. Just telling the judge “I never got it” or “I didn’t know I needed to respond” isn’t going to cut it. 

• Second, you have to show the court that you have a valid defense to the debt. 

• Third, in most cases you have to vacate the judgment within one year of its entry. 

Because of these challenges, the vast majority of people would be better off choosing one of the other three options to deal with the judgment.

option # 3: If all else fails, bankruptcy may be your best option

If you can’t afford to settle and aren’t able to get the judgment vacated, your best choice is probably bankruptcy. Bankruptcy puts an immediate stop to garnishments and other collection activity. It allows you to remove judgment liens from your property. And it wipes out any other debts lurking out there.

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Ready to talk to a lawyer about a judgment?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans deal with lawsuits, judgments, and garnishments. His work has saved his clients millions of dollars and many sleepless nights. Clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

What is wrongful repossession?

what is repossession?

When you buy a vehicle on credit, the contract will give the lender the right to take back the vehicle if you fall behind on your loan payments. In Minnesota, most repossessions are done by “self-help,” meaning without any court oversight.

How to know if a repossession is wrongful

In a self-help repossession, the lender has to follow certain steps, otherwise the repossession may be illegal:

• You must be behind on payments. Seemingly, this would go without saying, but we occasionally see cases involving people who weren't late on their payments when their vehicle was repossessed. I've also heard of situations where the vehicle was repossessed even after the loan was paid in full.

• If your lender has accepted repeated late payments, they must send you a letter first. In Minnesota, this is called a Cobb letter. The letter must give you notice that although your lender has accepted late payments from you in the past without repossessing, it now requires you to strictly comply with the payment due dates or it may repossess. This notice requirement may be unique to Minnesota.

• The repo agent can't breach the peace during the repossession.  Although there isn’t a bright line definition of a breach of the peace, it typically occurs when the repo man has to resort to force or threats of force to take your vehicle.

• The repo man can't break into a locked garage. Minnesota law forbids the repossession agent from breaking into your garage to seize your vehicle. However, this rule is a little fuzzier if you share a garage with other people, like in an apartment building.

• The police can’t actively help the repossession. Sometimes, the repo company enlists the local police department to stand by during the repossession. As long as the police merely stand by to keep the peace, it’s probably not illegal. However, if the officers actively engage in the repossession, the repo may be against the law.

  Most of the courts that have looked at this issue have found that the police may act to diffuse a volatile situation, but may not aid the repossession agents in such a way that the repossession would not have occurred but for their assistance. If the police threaten you with arrest or command you to turn over the vehicle, they've probably crossed the line from keeping the peace into active involvement.

If your vehicle was wrongfully repossessed, you can sue for damages.

If the repo company wrongfully repossess your vehicle, you can sue them (and the lender) for damages. Depending on the circumstances, the defendants may have to pay your attorney fees and court costs.

What to watch for after your vehicle was legally repossessed

Even if the repossession was strictly by the book, there are a number of things you need to know about the post-repossession process. In most cases, once your lender repossesses the vehicle they will sell it at an auction and apply the sale proceeds to your loan balance. Keep an eye on a few things during this process:

• The lender must send you a letter before and after the sale. The pre-sale letter must tell you when, where, and how the vehicle will be sold. It must also tell you how much money you have to pay to get the vehicle back. The post-sale letter must tell you how much the vehicle was sold for and explain whether you still owe money on the loan.

• You may get sued if there is still a balance on your loan. This is called a deficiency lawsuit. It happens in cases where the auction sale proceeds were not enough to pay off the full balance of the loan. In this case, the lender may sue you to recover the remaining balance. Fortunately, there are a number of ways to defend a repossession deficiency lawsuit.

What to do if your vehicle hasn't been repossessed yet

If the lender is threatening to repossess, but hasn't seized your car yet, there are some options to avoid the repossession:

• Can you re-finance the loan so that you can better afford the payments? Credit unions may offer better rates than more conventional auto lenders.

• Can you sell the vehicle to a private party and get enough cash back to repay the loan? This is probably a long shot, but may be worth exploring just to cover all your bases.

• Is filing bankruptcy an option? Both Chapter 7 and Chapter 13 bankruptcy may provide you with a number of attractive solutions to avoid repossession.

If you’ve explored all of these options with no luck, and repossession seems like a sure thing, here are some tips. First, keep all letters and documents related to the repossession, including the envelopes. Second, remove any non-essential personal property from your car (don’t forget the glovebox and trunk). Make a detailed list of stuff that you must keep in the car, like jumper cables, child seats, flashlights, tools, etc. Or better yet, take pictures or video. Finally, keep in mind that you don’t have to consent to the repo man entering your house or garage. But never use violence against the repo man. Keeping your car isn’t worth risking a dangerous confrontation.

Be very careful about hiding your vehicle to prevent a lawful repossession

Under Minnesota law, it may be a crime to refuse to disclose the location of, or otherwise conceal, a vehicle that your lender is legally entitled to repossess. The penalties include a hefty fine or even imprisonment. It’s fine to park your car in your garage, but be really careful about hiding or concealing it somewhere else to evade a lawful repossession.

Ready to talk to a lawyer about a repossession in Minnesota?
Schedule a free consult with attorney Todd Murray.

Since 2009, Todd has been helping Minnesotans combat wrongful repossessions and defend repo deficiency lawsuits. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

Debt collectors cannot lie to you

The Fair Debt Collection Practices Act forbids a debt collector from making any false or misleading statements when they are attempting to collect a debt. If a debt collector lied to you, here's what you need to know about your rights under the FDCPA.

The FDCPA applies to “debt collectors” collecting “consumer debts”

The FDCPA only covers a debt collector that is collecting a debt for someone else. It does not apply to a creditor collecting its own debts. So if the false statement was made by a bank or credit card company that is collecting its own debts, the FDCPA doesn’t apply. But the FDCPA does apply to collection agencies, debt buyers, and law firms who are collecting debts for someone else.

In addition, the FDCPA only applies when the debt being collected is a consumer debt. This is a debt used for personal, family, or household purposes. If the debt was incurred for a business, the FDCPA doesn’t apply.

Common debt collection lies

Although the FDCPA is clear that virtually any false statement is a violation, there are some collection lies and misleading statements that seem to happen frequently. These include:

• Telling you that you owe a debt that you already paid or that was discharged in bankruptcy

• Threatening to sue or garnish you after the statute of limitations has expired;

• Incorrectly reporting information on your credit report;

• Mis-stating your rights in student loan collections;

• Claiming that you personally owe a debt you have no obligation to pay, such as a debt for an ex-spouse or a deceased relative;

• Incorrectly stating the balance of your account (possibly because of unauthorized fees or uncredited payments);

• Suggesting that they are affiliated with an attorney when they are not;

The false statement probably has to be "material"

Although the FDCPA doesn't say anything about it, many courts have adopted a rule that the false statement has to be "material." This generally means that it's not enough to show merely that the debt collector lied to you. You must also show that they lie impacted your ability to evaluate your options in some way. In my opinion, any statement about the balance of the account, the legal status of the account, your legal rights, or the collector's legal remedies should be considered material.

If a debt collector lied to you, hold them accountable under the FDCPA

The FDCPA gives consumers the power to sue a debt collector that violates the law. It’s a great way to stop collection harassment cold and to hold the debt collector accountable for its illegal conduct. Under the FDCPA, a successful claim gets you:

• Up to $1,000 in statutory damages (even if you’ve suffered no monetary loss);

• Provable actual damages (including for emotional distress);

• Your attorney fees and court costs must be paid by the collector

Most consumer lawyers, including me, handle FDCPA lawsuits on a contingency fee. This means that you don’t pay us any fees unless I recover money for you and those fees come from the collector’s pocket, not yours. Congress wrote the FDCPA this way to incentivize people to enforce the FDCPA and help the government regulate debt collectors and ensure compliance with the law.

How to defend a repossession deficiency lawsuit

If you’re being sued for a repossession deficiency, use our Minnesota Collection Lawsuit Guide to familiarize yourself with the process.

After your lender repossesses your car, they will sell it and apply the sale proceeds to your loan. In most cases, there will still be a deficiency remaining. More often than not, your lender will then sue you for that deficiency. If that happens, here are some possible defenses to the deficiency lawsuit:

• Total amount of credit provided was less than $7,500. Under Minnesota law, if the total amount of the loan was $7,500 or less, than the creditor cannot chase the borrower for a deficiency.

• Statute of limitations. In most Minnesota debt collection cases, such as credit cards, the statute of limitations is six years. However, the statute of limitations for a repossession deficiency claim is likely four years. If the creditor brings the deficiency lawsuit over four years after you made your last payment, the statute of limitations on the claim may have passed.

• Incomplete or ineffective assignment of the loan. Like credit card debts, many repossession deficiency accounts are sold to third-party debt buyers. The debt buyer must be able to provide a complete and detailed chain of title of ownership of your account.

• The sale of your car after repossession was not commercially reasonable. The general rule is that every aspect of the sale of a car after repossession must be commercially reasonable. This essentially means that the creditor must act in good faith and use its best efforts to get a fair price for your car.

• The lender failed to send you the required pre- and post-sale notices. The pre-sale letter must tell you when, where, and how the vehicle will be sold. It must also tell you how much money you have to pay to get the vehicle back. The post-sale letter must tell you how much the vehicle was sold for and explain whether you still owe money on the loan. Failure to send these letters may prevent the lender from collecting a deficiency.

It's also possible that the creditor may not have followed the proper procedures when they repossessed your car. This may allow you to bring a counterclaim against them in the deficiency lawsuit. While a counterclaim is not technically a defense to a deficiency lawsuit, a valid counterclaim can often lead to a reasonable settlement of the deficiency claims or even offset the deficiency claim altogether.

Ready to talk to a lawyer about a Minnesota deficiency lawsuit?
Schedule a free consult with attorney Todd Murray.

Since 2009, Todd has been helping Minnesotans combat wrongful repossessions and defend repo deficiency lawsuits. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

The Minnesota Guide to Chapter 13 Bankruptcy: Part 4—The Process

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 3—How Your Plan Payment is Calculated

HOW DO I GET STARTED?

The Chapter 13 process starts when you hire a lawyer. We offer consultations by phone or video for your convenience. Once you decide it’s time to move forward, we’ll send you a services agreement to review and sign electronically. We also accept electronic payments. Our online questionnaire is easy to use and can be completed at your convenience.

What Does Chapter 13 cost?

In Chapter 13, you pay a flat fee out-of-pocket. When you're in financial trouble, you want predictability. You don't want your lawyer to run up the bill on you. That's why we quote you a flat fee at the beginning of the process, and that's what you pay. We agree on it at the start so you can plan for the expense.

Unlike Chapter 7, you don't need to pay your whole fee upfront in Chapter 13. In fact, in many cases Chapter 13 costs less up front than Chapter 7. We generally require a minimum of $1,000 before filing in a Chapter 13, but this can depend on your case.

What happens after you file your case?

As soon as the case is filed with the court, your bankruptcy protection begins. No creditors can call, write, or sue you, and any pending foreclosures, repossessions, or garnishments must stop immediately. After that, you’ll get a date for your bankruptcy meeting of creditors.

What is the meeting of creditors?

A meeting of creditors is a short interview that happens in person, or by phone/video. The bankruptcy trustee will go over your assets, debts, income, and expenses with you, and make sure you’re paying an appropriate amount to your creditors. Once we get the trustee and your creditors to agree to the plan, your case will be on track to get confirmed.

What happens after the plan is confirmed?

Once your case is confirmed, there’s not usually much to do in your case other than make your plan payments. We’ll generally check in every year around tax time, and you’ll have to let your lawyer know if you are having trouble making your payments so you can get some help. Because of your bankruptcy protection, your creditors will be breaking the law if they contact you after you file Chapter 13, so you should let your bankruptcy lawyer know right away if a collector is calling. We can put a stop to the calls and may even be able to get them to pay you for breaking the law.

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 3—How Your Plan Payment is Calculated

The Minnesota Guide to Chapter 13 Bankruptcy: Part 3—How Your Plan Payment is Calculated

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 4—The Chapter 13 Process

Chapter 13 involves paying your disposable income to creditors over a three or five-year period. Whatever isn't paid during that period is wiped out. But to figure out whether Chapter 13 is a good option, you need to know exactly how much your monthly payment will be. Here’s how we figure that out.

First, We predict your future income

To figure out your Chapter 13 payment, we need to predict your future income. We start by averaging out your income over the past six months. This amount can then be adjusted to account for changing circumstances, for example if you have just taken a pay cut or you know you won't be receiving the same amount of overtime.

Next, we predict your future expenses

Next, we figure out your expenses. We look at all the expenses that are necessary to take care of your family's needs: food, rent/mortgage, car payment, utilities, etc. We also look at things that you know you’ll be spending, like car repairs, home maintenance or dental work. Then we look at things you should be spending on, but haven't because you've been in financial trouble. This can include health insurance and other medical expenses, sometimes a 401(k) or life insurance, etc. If there's something that's not on our list of ordinary expenses, that doesn't mean we can't deduct it, as long as we can explain why it’s reasonable and necessary.

Once we count all these expenses, we subtract them from income and we get an idea of your disposable income.

Your attorney will help maximize your expenses

As your attorney, it’s our job is to protect the money that’s necessary for you to take care of yourself and your family. So we ask for two things: 1) verification of your expenses, so we can prove that you actually need to spend that money; and 2) information on why your expenses are reasonable and necessary.

For example, one client had an $800 monthly bill for auto fuel. This may seem unreasonably high, until we realized that the client lives 60 miles from where he works. If we can explain to the court why an expense is reasonable, there is a better chance it will be allowed.

THe payment has to be enough to cover required debts

Chapter 13 payments must be large enough to pay certain required debts. For example, if you are trying to get current on a mortgage, your total plan payments must cover the amount of your mortgage arrears. Plan payments also must cover any secured debt (car loans) that end within the plan period. Also, plan payments must cover any priority debt, such as some tax debt or government penalties within the plan period. If the total plan payments are enough to pay all of these required debts over the plan period, then your plan can be approved.

The payment has to treat your creditors fairly

If you have non-exempt property that you’re looking to protect in a Chapter 13, your Chapter 13 payments must be at least the value of your nonexempt property. In other words, in Chapter 13 your unsecured creditors can't receive any less in the plan than they would have received in Chapter 7 if your nonexempt property was liquidated.

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 4—The Chapter 13 Process

The Minnesota Guide to Chapter 13 Bankruptcy: Part 2—Benefits of Chapter 13

Part 1—Chapter 13 Basics
Part 3—How Your Plan Payment is Calculated
Part 4—The Chapter 13 Process

There are many benefits of Chapter 13 bankruptcy versus a Chapter 7. A few of them are obvious, but some are a little more hidden. Here are a few:

You get to keep your stuff

In Chapter 13, you don’t have to worry about losing your car to pay your creditors. Instead of giving up your stuff, Chapter 13 allows you to keep everything as long as you’re paying enough to your creditors.

You can stop foreclosure permanently

Both Chapter 7 and 13 bankruptcy allow you to pause the foreclosure process. In Chapter 7, however, once the bankruptcy is done the mortgage company can go right back to foreclosing. In Chapter 13, you can take mortgage arrears and spread them out over a three to five year period. As long as you can pay your mortgage arrears back over this time, you can stop the foreclosure permanently.

You can deal with tax debt, mortgage debt, and domestic support in flexible ways

Chapter 13 helps people deal with delinquent tax debt, mortgage debt, and past-due child support or alimony by allowing the filer to pay the debt over a longer period of time and get out of default immediately. Once the Chapter 13 is over, those debts will be paid in full.

It hurts your credit score less

Chapter 13 bankruptcy stays on your credit report for seven years, rather than the ten years a Chapter 7 stays on your record. Also, Chapter 13 has less negative impact while it’s on your credit report, because you’re paying part of your debt back instead of wiping it all out.

Attorney fees are more flexible

In Chapter 7, you’ll need to pay the entire attorney fee up front before filing. In Chapter 13, the majority of your attorney fee is taken out of your monthly payment. This means in a lot of cases, you pay very little before filing and the rest of your attorney fees is come out of your creditors’ pockets.

Part 1—Chapter 13 Basics
Part 3—Stopping foreclosure in Chapter 13
Part 4—The Chapter 13 Process

The Minnesota Guide to Chapter 13 Bankruptcy: Part 1—Chapter 13 Basics

Part 2—Benefits of Chapter 13
Part 3—How Your Plan Payment is Calculated
Part 4—The Chapter 13 Process

What is Chapter 13 bankruptcy?

Chapter 13 is a form of bankruptcy that is more flexible than traditional bankruptcy. We use it to protect assets, stop foreclosure, manage credit cards, deal with difficult tax debts, or restructure car loans. Because of its flexibility, Chapter 13 is a great tool in more complex cases.

How Chapter 13 Works

Chapter 13 bankruptcy is a monthly payment plan that pays only the portion of your debts that you can afford, with zero interest. Whatever isn’t paid by the end of the Chapter 13 plan is usually wiped out forever.

To determine your monthly payment amount, we figure out your “disposable income.” This is basically your take-home pay minus your living expenses. In many cases, your disposable income is close to what your monthly Chapter 13 payment will be. This amount is then paid to your creditors over a three-to-five-year period. Any remaining debt is wiped out at the end of the bankruptcy.

When should I consider Chapter 13?

• Your income is too high for Chapter 7

• You own a home but you're behind on your mortgage or facing foreclosure

• You're underwater on a second mortgage

• You’re behind on debt payments, but could catch up if you had more time

• You have valuable property that isn’t exempt

Part 2—Benefits of Chapter 13
Part 3—How Your Plan Payment is Calculated
Part 4—The Chapter 13 Process

The Minnesota Garnishment Guide: Part 1—Garnishment Basics

Part 2—How to Stop Garnishment
Part 3—Claiming Garnishment Exemptions
Part 4—Wrongful Garnishment

What is garnishment?

Debt collectors are allowed to garnish a consumer's bank account and wages to recover unpaid debts. Although the law permits garnishment before the entry of judgment, the majority of garnishment in Minnesota occurs after a court judgment has been entered. The law provides strict procedures that a collector must follow and if they mess up the process, their garnishment may be wrongful.

Bank Garnishment Basics

To initiate a bank garnishment in Minnesota, a debt collector first sends a garnishment summons to the bank. The bank is required to seize all funds in the consumer's bank account on the day they process the garnishment summons. Consumers do not get notice of the garnishment until after the funds have been seized, which unfortunately can result in bounced checks and overdraft fees.

Wage garnishment basics

A wage garnishment is initiated by first sending a notice of intent to garnish to the consumer. The debt collector must then wait 10 days before sending a garnishment summons to the consumer's employer. Upon receipt of the garnishment summons, an employer must seize 25% of the consumer's after tax earnings for each pay period until the debt is satisfied.

Part 2—How to Stop Garnishment
Part 3—Claiming Garnishment Exemptions
Part 4—Wrongful Garnishment

Ready to talk to a lawyer about garnishment?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans defend garnishments. His work has saved his clients millions of dollars (and many sleepless nights) in the process. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

The Minnesota Garnishment Guide: Part 2—How to Stop Garnishment

Part 1—Garnishment Basics
Part 3—Claiming Garnishment Exemptions
Part 4—Wrongful Garnishment

There are four ways to stop a garnishment in Minnesota: (1) claim an exemption; (2) negotiate a settlement; (3) vacate the judgment; and (4) file bankruptcy. Here’s an in-depth look at each of these options.

Option #1: If you get need-based assistance, claim an exemption

The first way to stop a garnishment in Minnesota is to claim an exemption. Exemptions are legal reasons why your paycheck or bank account are protected from garnishment. Exemption laws vary by state. In Minnesota, some common exemptions are:

• Creditors cannot take your social security or other need-based government aid from your bank account.

• If you received need-based government aid within the last 6 months, your wages cannot be garnished at all.

• In most other cases, creditors can only take 25% of your paycheck.

Important caveat: if you’re being garnished for child support, alimony, or many types of government debt (including federal student loans) the rules are different. 

WHO IS CLAIMING AN EXEMPTION THE RIGHT OPTION FOR?

Anyone who qualifies for it. If your circumstances allow, you should assert your exemption to stop the garnishment and get your money back. But remember, claiming an exemption doesn’t make the debt go away, it just means that your money is protected from garnishment for the time being.

Option #2: If you can afford it, negotiate a settlement

A second way to stop a garnishment is to negotiate a settlement with the collector. The idea here is to get the creditor to stop the garnishment in exchange for voluntary payment.

WHO IS DEBT SETTLEMENT THE RIGHT OPTION FOR?

Anyone who can afford to pay a reasonable settlement to fully resolve the debt. If you have many debts and can’t realistically afford to settle all of them, this option probably isn’t the best choice for you.

Also, keep in mind that if the creditor is garnishing your wages for, say, $250 a month, they’re not going to agree to a voluntary settlement where you pay $100 a month. Your best bet to settle when a wage garnishment is already in place is to see if the creditor will take a lump sum payment for less than the full balance. Some creditors prefer the certainty of having some money right away rather than waiting months to get paid in full through garnishment.

Option # 3: If you meet the necessary criteria, vacate the judgment.

Another way to stop a garnishment is to vacate (undo) the underlying court judgment. If you take away the judgment, you take away the right to garnish.

To vacate a judgment in Minnesota, you’ll have to convince the judge that you have a really good reason for not responding to the creditor’s lawsuit and that you have a defense to the creditor’s claim. Further, in most cases you have to vacate the judgment within a year of its entry. 

WHO IS VACATING A JUDGMENT THE RIGHT OPTION FOR?

Anyone who didn’t receive the creditor’s lawsuit or who had a really good reason for not responding to it. For a couple of reasons, though, this is a long-shot option for most people.

• First, you must provide strong evidence that you never received the creditor’s lawsuit or that you had a good reason for not responding. Just telling the judge “I never got it” or “I didn’t know I needed to respond” isn’t going to cut it. 

• Second, you have to show the court that you have a valid defense to the debt. 

• Third, while vacating a judgment stops a garnishment in the short term, the debt doesn’t go away--you just go back to the beginning of the case. 

Because of these challenges, the vast majority of people would be better off choosing one of the other three options to stop a garnishment.

Option # 4: If you have other debts, consider filing bankruptcy

The fourth way to stop a garnishment is to file bankruptcy. Bankruptcy stops garnishment immediately and may allow you to get the garnished money back. Plus, unlike claiming an exemption or vacating the judgment, bankruptcy also wipes out the debt itself in most cases.

Who is bankruptcy the right option for?

Anyone who has multiple debts. While you might be able to settle one or two accounts, chances are you’re not going to be able to settle multiple debts unless you have access to significant amounts of money.

Part 1—Garnishment Basics
Part 3—Claiming Garnishment Exemptions
Part 4—Wrongful Garnishment

Ready to talk to a lawyer about garnishment?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans defend garnishments. His work has saved his clients millions of dollars (and many sleepless nights) in the process. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

Learned your used car was previously in a flood? Everything you need to know.

Flooding due to severe storms or hurricanes often results in a large number of cars being immersed in water. The extent of the damage varies depending on whether the flood involved salt, fresh, or muddy water, as well as the length of time the vehicle was under water. What most people don’t know, however, is that many of these flood cars are cleaned up and resold on the used vehicle market.

How does a dealer get away with selling a flood car?

The only way to profitably sell a flood vehicle is to conceal its history from the buyer. A dealer can buy a flood car for less than wholesale price, clean the vehicle up, and sell it to an unsuspecting buyer as a clean vehicle at full retail price. Because of lax vehicle title laws, a substantial number of flood vehicles may even come with clean titles.

Why should I care if my car was previously in a flood?

Flood cars present significant performance and safety issues for unsuspecting buyers. For example, a vehicle's electrical and computer systems--including brake and steering systems--are often compromised by water damage. Water submersion may also cause damage to the vehicle's frame or structural components and often leads to mold growth in the car's interior. These problems may not appear for months or even years.

Second, even if the vehicle doesn’t have any physical problems, you almost certainly overpaid for it. A vehicle with a flood history will almost always be worth less than a clean vehicle. The reason is simple: most people won't buy a vehicle with an flood history, and they definitely won't pay clean retail price for it.

Another third reason is that it will be nearly impossible to trade in a flood vehicle. One of the first things a dealer does when evaluating a trade-in is pull a CarFax report. If the report shows a flood history, the dealer is sure to pass on your trade.

I think I bought a flood car, how do I know for sure?

The symptoms of a flood vehicle are pretty obvious, if you know what to look for. Here are the tell-tale signs:

• Musty or moldy smell;

• Rust or flaking metal on the vehicle's undercarriage;

• Electrical components, such as radio, speakers, windshield wipers, or door locks that don't work;

• Any signs of water damage, mud, sand, or silt.

You can also order a CarFax report, which contains information about a vehicle’s history. But keep in mind that these reports don’t always provide a complete picture and there is often a lag between when a vehicle is, say in a flood, and when that information shows up in CarFax’s database. When in doubt, have the vehicle inspected by an expert.

Is selling a flood vehicle illegal?

Not necessarily, at least in Minnesota. Generally, there are four scenarios that can give rise to legal claims under Minnesota law:

• If the vehicle title has a flood “brand” or stamp and the dealer doesn’t tell you;

• If the vehicle is not roadworthy at the time of sale due to the flood.

• If the dealer knows the vehicle has been in a flood and lies to you when you ask about it;

• If the dealer knows that the vehicle has suffered damage in excess of 70% of its cash value due to the flood and doesn’t tell you;

There is quite a bit of nuance to all of these scenarios and a detailed legal analysis is necessary to determine whether the dealer broke the law in your case.

Just learned you bought a flood vehicle?
Get a free consult with auto fraud attorney Todd Murray.

Since 2009, Todd has been helping Minnesotans combat fraudulent auto sales by used car dealers. His work has returned hundreds of thousands of dollars to his clients’ pockets and has improved the legal protections for used car buyers throughout the state. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

Branded title? No title at all? A guide to common used car title problems.

We frequently hear from used car buyers dealing with a problem with their vehicle’s title. In some cases, the buyer is surprised to learn that their title is branded as “salvage” or “flood.” In other situations, the buyer never gets the title at all. Here’s a quick guide to these unfortunate situations.

I received my title, but found out that it’s “branded.”

A branded title has a permanent notation on it that the vehicle has a serious defect. Here's a list of the title brands used by the Minnesota Department of Motor Vehicles:

• Prior Salvage. This is usually used to indicate that the vehicle has previously been declared a total loss by an insurance company, often because of a prior accident.

• Flood. The vehicle has suffered flood or water damage.

• Reconstructed. The vehicle has been altered by the removal or substitution of essential parts

• Rebuilt. The vehicle has sustained damage in excess of 80% of its cash value and the "Prior Salvage" brand doesn't apply

• Lemon Law Vehicle. This usually indicates that the vehicle has been bought back by the manufacturer under the lemon law.

Minnesota law requires that a dealer verbally tell you about the brand during the sales presentation--they aren't required to disclose it in writing. If the dealer fails to do this, they’ve broken the law. Even, probably, if they didn’t know about the title brand.

A related situation is where the previous owner’s title is clean, but your title comes back branded as “salvage.” This occasionally happens because the Minnesota DVS does its own prior accident database search and will brand your title even if the prior title was clean. This creates a grey area, legally speaking, because the title at the time of sale (the prior owner’s title) is clean. This means, probably, that the dealer doesn’t have to disclose anything to you about the vehicle’s title.

I never received a title at all

A particularly awful form of auto fraud is when the dealer sells a vehicle without being able to provide a title. This puts the buyer in a really bad spot. She can't sell the vehicle without the title and can't prove that she owns it if she is stopped by law enforcement of if she needs to get it back after being impounded.

Fortunately, every used vehicle sale by a dealer creates a warranty that the vehicle has a good title. This warranty of title arises by law--so it doesn't have to be in writing--and you don't have to prove that the dealer knew about the title problem. This warranty of title can only be excluded by specific language that gives the buyer a reason to know about the title defect. This means that an "as-is" statement isn’t sufficient to exclude the warranty of title.

In general, the warranty of title is breached if:

• The dealer fails to provide title after the sale. This must be more than just a delay by either the dealer and/or DMV in processing the buyer's new title. Most often, a dealer fails to deliver title to the buyer when the title is being held by one of the dealer's unpaid creditors.

• The vehicle is subject to an undisclosed lien. Most commonly, this is a lien from the prior owner's lender.

• The vehicle is stolen.

As with most warranty claims, the buyer must give the dealer notice of the breach of warranty of title. If the dealer fails to fix the problem after getting notice, the buyer will have legal claims for breach of the warranty of title.

What are my legal rights if I got a branded title or didn’t get a title at all?

In most of these cases, you will have legal claims against the dealer for your damages, which are usually the diminished value of the vehicle. In some cases, you may be entitled to unwind the sale altogether. In most cases, the dealer will have to pay your attorney fees and court costs if your case is successful.

Found out your title is branded? Never got a title at all?
Get a free consult with auto fraud attorney Todd Murray.

Since 2009, Todd has been helping Minnesotans combat fraudulent auto sales by used car dealers. His work has returned hundreds of thousands of dollars to his clients’ pockets and has improved the legal protections for used car buyers throughout the state. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

The Minnesota Garnishment Guide: Part 3: Garnishment Exemptions

Part 1—Garnishment Basics
Part 2—How to Stop Garnishment
Part 4—Wrongful Garnishment

Certain monies are protected, or exempt, from garnishment in Minnesota. For example, a debt collector may not keep most forms of need-based government aid. Some of the most common forms of need-based aid are social security, supplemental security income (SSI), energy assistance, and medical assistance (MA). Other types of assistance that are exempt include: Minnesota family investment program (MFIP), emergency assistance and emergency general assistance (EA & EGA), work first program, general assistance medical care (GAMC), and Minnesota supplemental assistance (MSA).

Another important garnishment exemption protects 75% of your paycheck. Minnesota law also provides that child support, unemployment benefits, disability, workers' compensation, veterans’ benefits, some insurance settlement proceeds, and many pension plans are exempt from garnishment.

In addition, while it's not technically an exemption, a debt collector can't keep money from a joint bank account that doesn't belong to the judgment debtor.

Claiming garnishment exemptions for wage garnishment

If you're facing a wage garnishment, it's important to know that a debt collector can only take 25% of your after-tax wages. And if you make only the federal minimum wage (or less) your wages are usually completely exempt from garnishment. Further, if you receive any form of need-based aid, such as those described above, your wages are totally exempt from garnishment. Minnesota law provides for this exemption if you currently receive need-based aid, or if you received any need-based aid in the last 6 months. This is an important provision for Minnesotans receiving energy assistance. Most recipients of energy assistance receive it from October through March, which make the recipient's wages exempt for the entire year if she re-enrolls in the program the following season.

To claim an exemption, it's important first to understand the garnishment process. For a wage garnishment, the debt collector must provide you with a garnishment exemption form notifying you of their intent to garnish and an exemption form 10 days before starting the wage garnishment. To claim exemptions from a wage garnishment, all you have to do is write the appropriate garnishment exemptions on the form and mail it back to the debt collector. It's critical to do this immediately, or at least within 10 days of receiving the form. You should also provide proof of your exemption, such as your benefit notice, with the exemption form.

Claiming garnishment exemptions for bank garnishment

For a bank garnishment, you won't get notice of the garnishment until 5 days after the bank freezes your money. Fill out the garnishment exemption form that the bank and debt collector mail to you, noting the appropriate exemption. You also need to provide proof that the funds that were seized by the bank arose from an exempt source. This last point is the cause of considerable confusion. It's not enough to show the debt collector that you receive exempt money, you also have to prove that the funds that were actually seized contained this exempt money. Debt collectors will refer to this as “tracing”. Sending the debt collector a copy of your bank statements that show the deposit of exempt funds, along with your benefit statements will usually accomplish the task.

If you merely mail the completed exemption form to the debt collector, and fail to provide the required tracing, the debt collector will probably object to your exemption and refuse to return your money. If this happens, you should schedule a court hearing in front of a judge to determine whether your funds are exempt. Court administration will help you set up the hearing and provide notice of the hearing to the debt collector. On the day of your hearing, be sure to bring proof of your exemption AND bank statements proving the funds seized were from an exempt source. Failure to do so could delay the court's decision or could lead to the court denying your exemption.

A word of caution

Finally, it's important to understand that claiming an exemption when you're not entitled to one could lead to the court ordering you to pay a penalty to the debt collector. Make sure any exemptions you claim are legitimate.

Part 1—Garnishment Basics
Part 2—How to Stop Garnishment
Part 4—Wrongful Garnishment

The Minnesota Garnishment Guide: Part 4—Wrongful Garnishment

Part 1—Garnishment Basics
Part 2—How to Stop Garnishment
Part 3—Claiming Garnishment Exemptions

The Fair Debt Collection Practices Act prohibits debt collectors from doing anything that is unfair, untrue, harassing, or abusive. It also forbids debt collectors from taking action that they can’t legally take. Here are some typical FDCPA violations related to garnishments:

Making false statements in the garnishment paperwork

This could include things like: (1) claiming that they have a judgment when they don’t; (2) misstating the balance due; (3) incorrectly describing possible exemptions; and (4) instructing your employer to hold money longer than allowed (in Minnesota, 180 days).

continuing to garnish when the collector knows you’re exempt

If you’ve claimed a valid garnishment exemption and given the debt collector complete proof of your exemption, it’s illegal for them to continue with the
garnishment process. This includes making you appear at an exemption hearing when the collector already has proof of your exemption.

Threatening to garnish all of your wages

In Minnesota, a debt collector can only garnish 25% of your wages. So if a collector is lying if they threaten to garnish 100% of your wages.

garnishing for a debt you’ve already paid

If you’ve already paid the debt in full, you can’t be garnished for more money. Similarly, if you’ve negotiated a payment plan to resolve a debt and you’re current on that payment plan, a debt collector can’t garnish you.

Court judgment was vacated

Most garnishments happen after a court judgment has been entered. What if the court judgment is vacated, though? If the collection judgment is wiped out, then the collector's power to conduct a garnishment is wiped out.

Improper pre-judgment garnishment

Although most Minnesota garnishments happen after a judgment has been entered, the law does allow pre-judgment garnishments in limited circumstances. The way to tell if it’s a prejudgment garnishment is to look at the case caption. If there’s a judgment, it will list the court file number and date of the judgment. If there isn’t a judgment, it will say something like “subject to Minnesota Statutes 571.71, subd. 2.”

Debt collectors occasionally mess up this process. I've seen cases where they do a pre-judgment garnishment even though the defendant has answered the lawsuit. I've also seen cases where they garnish without sending the Notice of Intent to Garnish.

You can sue for wrongful garnishment

If a debt collector violates the FDCPA through a wrongful garnishment, you can sue them and hold them accountable for their illegal conduct. You can sue even if you owe the debt. If you win the case, you get: (1) $1,000 in statutory damages; (2) any provable actual damages--such as out-of-pocket loss or emotional distress; (3) the collector has to pay your attorney fees; and (4) the collector has to pay your court costs. Most consumer rights attorneys take FDCPA cases on contingent fee arrangements, which means you don’t have to pay any attorney fees up front.

Part 1—Garnishment Basics
Part 2—How to Stop Garnishment
Part 3—Claiming Garnishment Exemptions

Ready to talk to a lawyer about garnishment?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans defend garnishments. His work has saved his clients millions of dollars (and many sleepless nights) in the process. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

How to settle your debts

Considering debt settlement to resolve a collection lawsuit or otherwise pay off your unpaid debts? Here are some guidelines to consider as you weigh your options.

Be realistic about debt settlement, especially if you have multiple debts

We’ve settled hundreds of debts over the years and have found that a typical range for settlement is between 40% and 80% of the full amount sought. Keep in mind that this range is for a lump-sum settlement that you pay all in one shot. Where you land in this range will depend on your negotiating skills, your overall financial picture, and whether you have any defenses to the debt. Despite what you may read elsewhere, settlements for pennies on the dollar are very rare, especially if the creditor is suing or garnishing you.

If you’re unable to afford a lump sum payment in the 40% to 80% range, most creditors will take smaller monthly payments over a couple of years. But in exchange for the flexibility of a low monthly payment, you’re going to have to pay the full balance or pretty close to it.

If you’re considering settling multiple debts rather than filing bankruptcy, be brutally honest with yourself. Do you really have the resources to pay 40% to 80% of all of your delinquent debts in a lump sum? Can you realistically afford monthly payments for all of your debts? If not, consider another solution.

When negotiating with your creditors, remember that it’s a process 

If you’ve done a sober analysis of your finances and decided that you can afford to settle your debts, the next step is to reach out to your creditors and begin the negotiation process. Target a realistic settlement amount and make an opening offer somewhat lower than where you hope to land. Remember that there will likely be some back and forth during the negotiations, so you want to have room to increase your offers as the negotiation proceeds. 

We’ve found the process is smoothest if you make the opening offer. A common negotiation technique is to open with approximately half of where you hope to finish at. Your goal should be to get the ball rolling and coax the creditor into making a counteroffer that is less than the full balance. You can then increase your offers slightly to nudge the creditor further down toward your target settlement. Consider sharing a little bit about your finances if you think it will help your bargaining position.

Get the agreement in writing before you make your settlement payment

Once you've reached a verbal agreement with the collector, ask them to send you confirmation of the agreement in writing. Read the agreement carefully to be sure that it actually contains the terms that you agreed to. Any reputable debt collector will be willing to confirm a payment arrangement in writing, so be wary of one who won't. Keep the settlement letter for your records in case there’s a problem later.

When the time comes to finally make the settlement payment, make sure to keep a copy of the payment. For example, if you're paying with a personal check, get a copy of the canceled check from your bank. Similarly, if you're paying with a cashier's check, make a copy of the check and send it using certified mail. Along with the settlement letter, your proof of payment may be needed in the future to prove that you settled the account.

Be sure to get the proper follow-up documents

The appropriate follow-up documents vary depending on what point in the legal process you’re at when you settle the debt:

• If you settle the debt before you get sued, the collector's written confirmation of the agreement, plus your proof of payment, should be sufficient.

• If you settle the account after you've been sued, but before a judgment is entered, the collector should send you (and the court if the case has been filed) a dismissal WITH prejudice. A dismissal with prejudice means that the claim is fully resolved and can't be brought against you again. Don't accept a dismissal without prejudice if you've settled the account in full because there's a possibility that you could get sued again for the same claim.

• If you settle the account after you've been sued and after a judgment has been entered, the collector should send you and the court a satisfaction of judgment. And if your wages were being garnished at the time you settled the account, the debt collector should quash the garnishment.

Consider the tax consequences of any settlement

Before agreeing to any settlement, make sure you understand the tax consequences of it. In general, forgiveness of debt is considered income and you must pay taxes on it. There are exceptions to this rule, so it’s worth talking to your tax preparer to see if any of the exceptions apply to your situation. Your tax preparer may also be able to estimate the amount of taxes you will have to pay if you go through with the settlement.

Many creditors will send a 1099-C form to you and the IRS stating the amount of debt forgiven. It may be possible to get the creditor to promise not to send a 1099, but not all creditors will agree to this.

make sure your credit report gets updated after the settlement

Once you’ve made the settlement payment, it’s a good idea to check your credit report to verify that it has been updated. We recommend waiting 60-90 days after making the payment because it can take a few months for credit reports to update.

We suggest using AnnualCreditReport.com. This is the only website where you can get a free report. Make sure to download the report and save it for your records.

Once you have your credit report, make sure that the account that you settled is being reported properly:

• If you’ve made all the necessary settlement payments, the account should be reported as "settled, less than full balance" or something similar.

• If there was a court judgment, make sure it is being reported as "satisfied.”

• If you’re still making settlement payments, it’s likely that the account is still reporting as delinquent. Check back when you've made all the payments to be sure it's been updated to settled status.

We often get asked whether it’s possible to negotiate a “pay for delete.” This means that in exchange for your settlement payment, the creditor agrees to delete the credit report trade-line altogether. In our experience, this is a rare outcome. There’s no harm in trying to negotiate it, but it probably doesn’t make sense to let the settlement fall apart if the creditor won’t agree to a deletion.

Want to talk to a lawyer about debt settlement?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans resolve their unpaid debts, saving his clients millions of dollars in the process. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

Dealing with Messerli & Kramer? What you need to know.

Who is Messerli & Kramer?

Messerli & Kramer is a debt collection law firm headquartered in Plymouth, Minnesota. Their lawyers routinely appear in court throughout Minnesota and also handle debt collection cases in Wisconsin, Iowa, the Dakotas, Nebraska, and Montana.

Messerli does collection work for some of the largest banks, credit card companies, and debt buyers in the country. They are aggressive and very effective at recovering money for their clients.

What to do if you’re being sued by messerli & Kramer

If you’re dealing with a debt collection lawsuit from Messerli & Kramer, you typically have three options: (1) defend the case; (2) negotiate a settlement; or (3) file bankruptcy.

It’s critical to familiarize yourself with the court process. Messerli knows the court rules very well and will use your lack of familiarity to their advantage in pursuing a court judgment against you. Our free Minnesota Debt Collection Lawsuit Guide is a great place to start learning more about the process.

What to do if you’re being garnished by Messerli & Kramer

If Messerli is garnishing your bank account or wages, there are four possible ways to stop the garnishment: (1) claim an exemption; (2) negotiate a settlement; (3) vacate the judgment; or (4) file bankruptcy.

When dealing with a garnishment from Messerli & Kramer, knowledge about the process and the pros and cons of each potential solution is critical. Our free Minnesota Garnishment Guide will get your started.

Need help dealing with Messerli & Kramer?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans dealing with debt collection by Messerli & Kramer. His work has saved his clients lots of money and many sleepless nights. Todd’s clients describe him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

The Minnesota Debt Collection Lawsuit Guide: Part 1—Summons & Complaint

Part 2—The Answer
Part 3—After the Answer

What is a debt collection summons?

A debt collection summons is a notice that you’re being sued to collect a debt. The summons is accompanied by the complaint, which details the allegations the creditor is making against you. We refer to a summons and complaint, collectively, as a “lawsuit.”

What does it mean to be “served” with a summons?

“Served” is just a fancy word for “notified.” Under the court rules, the defendant must get notice of the summons and complaint. This is typically done through personal service—where the summons is given directly to the defendant. A summons and complaint can also be served by leaving it with a person of “suitable age and discretion” at the defendant’s residence. In rare circumstances, a summons and complaint can be served by mail or even by publication in a newspaper.

Why doesn’t the summons have a court file number on it?

In most states, debt collectors must file a case with the court before they can serve the summons and complaint on the defendant.

In Minnesota, however, the rules are different. Here, the summons and complaint can be served on the defendant without being filed with the court. This is called “pocket filing.” Because the case isn’t filed with the court at the time of service, it won’t have a court file number on it. And if you were to call the court and ask about the case, they would have no idea what you’re talking about.

Don’t be fooled by this. Just because the summons doesn’t have a court file number on it doesn’t mean that it isn’t valid. You still have to properly respond to the summons and complaint or you will lose the case by default.

So, what do I do with the summons?

If you’re like many people, you’re tempted to do nothing and wait until you get a court date. Unfortunately, this common thinking is a huge mistake.

In Minnesota, you must answer a summons and complaint within 21 days of the date you are served. If you don’t, the creditor will apply for a default judgment. In a default case, the court considers all of the allegations in the complaint as true and gives the creditor whatever they’re asking for. In other words, the debt collector wins automatically—not because they have a better case, but because you didn't participate. In debt collection cases, a default judgment is entered administratively by a court clerk without a court hearing. In fact, in a default, a judge will never even see the case.

A default judgment is a court ruling that you owe the creditor money. And once a creditor has a judgment, they have the power to garnish your bank account and your paycheck.  Although default judgments can occasionally be overturned, for the most part they are final.

This is why it’s so important to answer a debt collection lawsuit within the 21 days. If you don't, you no longer can raise any defenses and will probably have to either negotiate a settlement or consider bankruptcy.

Part 2—The Answer
Part 3—After the Answer

Ready to talk to a lawyer about your collection lawsuit?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans defend debt collection lawsuits. His work has saved his clients millions of dollars (and many sleepless nights). Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

Debt buyer lawsuit: What you need to know.

A debt buyer lawsuit is a collection lawsuit brought by a company that bought the debt after it went into default. It's a completely different animal than a collection lawsuit brought directly by the original creditor.

What is a debt buyer?

A debt buyer is a company that purchases delinquent debts from creditors for pennies on the dollar and then tries to collect the full amount, often making a nice profit in the process. Debt buyers have strange names like Midland Funding, Cavalry Portfolio Services, or Portfolio Recovery Associates. As with any business, they come in all shapes and sizes. Some debt buyers operate nationwide and have millions or billions of dollars in accounts. Others operate regionally and have much smaller debt portfolios. Some specialize in certain types of debt, like credit cards, second mortgages, and the like.

Here's a partial list of some of the debt buyers I've come across:

• Asset Acceptance

• Cavalry Portfolio Services

• Central Prairie Financial

• Dakota Bluff Financial, LLC

• Debt Equities, LLC

• Equable Ascent Financial, LLC

• Livingston Financial, LLC

• LVNV Funding

• Midland Funding

• Palisades Collection

• Pipestone Financial, LLC

• Portfolio Recovery Associates

• Red Rock Lake Financial, LLC

• Unifund CCR Partners

Why it's critical to answer a debt buyer lawsuit

Debt buyers are notorious for filing collection lawsuits in bulk. According to a 2009 article in the William Mitchell Law Review, debt buyers obtained 2,400 default judgments a month in Minnesota. These judgments were obtained by default because the consumer didn't show up in court. In almost all of these cases, the debt buyer didn't have to present any evidence to a judge.

This last point is crucial because debt buyers acquire accounts in bulk and often don't have the account-level documents needed to prove their claims. That's why it's so important to answer a debt buyer lawsuit to ensure that a judge reviews their evidence.

Possible defenses to a debt buyer lawsuit

One good way to defend a debt buyer lawsuit is to challenge their proof of ownership. Because they didn't extend the credit, they should be required to prove their ownership of the account and their entitlement to collect the balance. The more times a debt has been bought and sold, the less likely it is that the current debt buyer can prove each step in the chain of ownership.

Another possible defense is to dispute the debt buyer's evidence. Under the court rules, if a party wants to introduce documents (like credit card billing statements, for example) it must provide testimony about the reliability of the documents. This can be difficult for the debt buyer to do properly because they didn't create the account documents in the first place.

An additional defense to consider in a debt buyer lawsuit is the statute of limitations. The statute of limitations is the length of time that a creditor has to start a lawsuit after the account goes into default. In Minnesota, it's generally six years, although there are exceptions. It's not uncommon for a debt to be bought and sold multiple times and some debts bounce around for years before a legal action is taken. These repeatedly-sold accounts are sometimes called zombie debts (because they never die) and the statute of limitations is often a powerful defense in these cases.

There are other possible defenses that are more fact specific and will depend the particular facts and circumstances of your case. It may be wise to discuss your case with an attorney experienced in defending debt buyer lawsuits before proceeding too far to see what defenses apply to your case and how strong they are.

Learned your vehicle is salvage? Everything you need to know

One of the most serious type of auto fraud is the concealment of a vehicle's salvage history. A “salvage” vehicle means one that was declared a total loss by an insurance company, often because of a serious accident or collision. It is believed that millions of salvage vehicles are patched up and sold to unsuspecting consumers each year.

How does a dealer get away with selling a salvage vehicle?

The only way to profitably sell a salvage vehicle is to conceal its wreck history from the buyer. A dealer can buy a salvage car for less than wholesale price, make cosmetic repairs, and sell the vehicle to an unsuspecting buyer as a clean vehicle at full retail price. For example:

As long as the dealer conceals the wreck history from the buyer, trafficking in salvage vehicles can be a profitable practice for a shady used car dealer.

why should I care if i have a salvage car?

There are three main reasons.

Most importantly, it’s possible that a salvage vehicle could be unsafe to drive. A serious collision can result in frame or structural problems. Once a car's structure is compromised, it may not be possible to restore its original integrity. This can pose serious safety risks if the vehicle is ever in another accident. The damaged frame will probably not perform as the manufacturer intended it to, which can expose passengers to significant injuries or even death.

Second, even if the vehicle isn’t unsafe, you almost certainly overpaid for it. A vehicle with a salvage history will almost always be worth less than a clean vehicle. The reason is simple: most people won't buy a vehicle with an accident history, and they definitely won't pay clean retail price for it. Depending on the circumstances, a salvage history may diminish a vehicle's value by over fifty percent.

Third, you’ll never be able to trade in a salvage vehicle. One of the first things a dealer does when evaluating a trade-in is pull a CarFax report. If the report shows a salvage history, the dealer is sure to pass on your trade.

I think my vehicle is salvage. How do I know for sure?

Here are a few tips for learning whether your car was previously in an accident:

• Get a vehicle history report from Carfax. These reports have alerts if there’s an accident in the vehicle’s history.

• Request a title history from the Department of Motor Vehicles. Depending on how far the title history goes back, it may reveal a salvage history.

• Get it inspected by a body shop. Tell the body shop that you suspect that the vehicle has been in an accident and that you want them to examine it to confirm. If the inspection reveals a prior accident, ask them whether there is any structural damage or safety concerns. Also ask whether the signs of the accident would have been apparent to a knowledgeable car dealer. And be sure to get an estimate for any recommended repairs.

Selling a salvage vehicle has to be illegal, right?

Not necessarily, at least in Minnesota. Generally, there are four scenarios that can give rise to legal claims under Minnesota law:

• If the vehicle title has a salvage “brand” or stamp and the dealer doesn’t tell you;

• If the vehicle is not roadworthy at the time of sale due to a safety issue.

• If the dealer knows the vehicle has been in an accident and lies to you when you ask about it;

• If the dealer knows that the vehicle has suffered damage in excess of 70% of its cash value and doesn’t tell you;

There is quite a bit of nuance to all of these scenarios and a detailed legal analysis is necessary to determine whether the dealer broke the law in your case.

Just learned you bought a salvage vehicle?
Get a free consult with auto fraud attorney Todd Murray.

Since 2009, Todd has been helping Minnesotans combat fraudulent auto sales by used car dealers. His work has returned hundreds of thousands of dollars to his clients’ pockets and has improved the legal protections for used car buyers throughout the state. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.

The Minnesota Debt Collection Lawsuit Guide: Part 2—The Answer

Part 1—The Summons & Complaint
Part 3—After the Answer

Recapping Part One: If you're served with a summons and complaint in Minnesota, you must answer within 21 days. Even if it doesn't have a court file number. Even if the court tells you there's no record of it. If you don't answer the lawsuit, the creditor will win the case automatically without a court hearing. Period.

An answer is a formal legal document that responds to each of the allegations in the creditor's complaint. A phone call or letter isn't sufficient. Here are the five steps for answering a Minnesota collection lawsuit.

Step # 1: Fill out the case caption

Start your answer by filling out the case caption. This is where the name of the county and judicial district are listed. It's also where the plaintiff and defendant's names appear. You can basically copy the caption for your answer directly from the summons. Just change the title of the document from "summons" to "answer." When you're done, it should look something like this:

Step # 2: Respond to all of the allegations in the complaint

The body of your answer is where you respond to the allegations in the complaint. There are basically three responses to an allegation: (1) admit; (2) deny; and (3) deny based on a lack of information. It's probably best for your answer to have a separate paragraph that responds to each paragraph in the complaint:

Your responses must be truthful, so if you know that the allegation is true, you have to admit for. For example, if the collection lawsuit alleges that you live in Hennepin County and you live in Hennepin County, you have to admit it. On the other hand, if the lawsuit alleges that you live in Hennepin County and you live in Ramsey County, then you must deny that allegation.

Many times, you won't know the answer to an allegation. For example, many debt buyer lawsuits allege that the debt buyer purchased the account from the original creditor. Since you weren't a party to this transaction, you have no way to know if this allegation is true or not. So it's usually best to deny the allegation based on a lack of information. You only have to admit something that you know for a fact is true.

You should also watch out for multiple allegations in a paragraph. It's possible to admit one part of an allegation and to deny another. Read each allegation carefully and be sure to respond to all of its parts and sub-parts.

Step # 3: Add your affirmative defenses

The next step is to add your defenses. These should include any reason why you don't think you owe the money or why the creditor shouldn't win the case. Here's an example:

So what defenses should you include? Keep in mind, of course, that there has to be a truthful factual basis for any defense you include in your answer. With that caveat in mind, here are four defenses that should defeat a collection lawsuit and three that won't get you anywhere:

• Good defense: Statute of limitations. The statute of limitations is the amount of time set by law for a creditor to start a lawsuit against you. In Minnesota, for example, the statute of limitations for most credit card lawsuits is six years. Other types of debt have different statutes of limitations. For example, a car loan typically has a four year statute of limitations.

  Keep in mind that the statute of limitations provides that the lawsuit has to be started within the required time. It doesn't mean that the lawsuit has to be finished within that time.

  Once you know what the statute of limitations is, you need to determine when it starts to run in your case. Generally, the statute of limitations begins to run on the first day that you are in default on your account. A quick way to figure out when your account went into default is to determine the date that you made your last regular payment. Although this won't always be a precise date that the statute of limitations began to run, it's a good estimate.

  When you know the applicable statute of limitations and the date it started in your case, the rest is just simple math. Using Minnesota's six-year statute of limitations as an example again, if you defaulted on your account on December 15, 2015, the creditor must start the lawsuit against you no later than December 15, 2021.

• Bad defense: Financial hardship. Unfortunately, the fact that you can't afford to pay is not a defense to a collection lawsuit. The issue in a collection case is whether you're legally obligated to pay, not whether you can afford to pay. That fact that you're unemployed, receive public assistance, or are otherwise "judgment proof" may mean that the debt collector will never collect any money from you. But it's not a legal defense to a collection lawsuit.

  Similarly, the fact that the debt collector refused to work out reasonable payment arrangements with you is not a valid defense. While it can be frustrating when a debt collector won't work with you, a court doesn't have the power to force a creditor to accept a settlement or payment plan.

• Good defense: Unauthorized use or fraud. Federal law provides that a cardholder is not liable for the unauthorized use of a credit card. The cardholder is not required to notify the issuer of the unauthorized charges to use this defense in a collection case. The creditor bears the burden of showing that the use of the card was authorized and the creditor probably can't meet its burden of proof by merely submitting billing statements and asserting the cardholder never objected to them.

• Bad defense: No signed contract. In credit card cases, creditors typically don't have to produce a signed contract to win the case. Instead, credit card cases are often brought under a legal doctrine called "account stated." Account stated is claim where the creditor must show that the defendant received billing statements and didn't object to them. There are defenses to this argument, particularly if the plaintiff is a debt-buyer, but the point is that a signed contract doesn't have to be produced for the creditor to win.

• Good defense: I already paid off this account. This goes without saying. If you've already paid off the account, you don't have to pay it again. In legal jargon, this defense is called accord and satisfaction.

• Bad defense: Divorce decree says my ex has to pay. Just because your divorce decree ruled that your ex is solely responsible for payment doesn't mean you can't be sued for the account too. Divorce courts don't have the power to modify contracts between you and a third-party creditor.

• Good defense: No evidence of assignment. Many collection lawsuits are brought by debt buyers. Debt buyers are companies who buy debts for pennies on the dollar and file lawsuits to collect the full balance. Because of this, it's not enough for the debt buyer to show that you owe the original creditor money. They also have to prove that they have been assigned the debt and are its current owner.

Step # 4: Sign the answer

After listing all of your affirmative defenses, you must sign your answer. When you sign, you're attesting that everything in the answer is truthful and that you're not using the answer for an improper purpose, such as to harass the other side or to commit fraud on the court. You should include your address and phone number in the signature block:

Step # 5: Mail the answer to the plaintiff’s lawyer

Once you've completed the answer, make two copies. You serve one copy of the answer by mailing it to the debt collector's lawyer. It's best fill out a sworn statement, called an affidavit of service, to prove when you served the answer. You can also just mail the answer certified with a return receipt.

Keep  the second copy of your answer for your records. You'll need to file it with the court once the creditor opens a court file.

Part 1—The Summons & Complaint
Part 3—After the Answer

Ready to talk to a lawyer about your collection lawsuit?
Schedule a free consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans defend debt collection lawsuits. His work has saved his clients millions of dollars (and many sleepless nights). Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.