Dealing with a debt collection lawsuit can be a scary and confusing process. This is especially true in Minnesota where the initial stages of the case often take place outside of court oversight. Hopefully, this post will shed some light on the collection litigation process and allow you to make a more informed decision about how to get your case resolved as quickly and painlessly as possible.
Before we begin...
This post describes the basic steps of a debt collection lawsuit in District Court in Minnesota. Every state has different laws and procedures. What happens in a Minnesota lawsuit may be very different from what happens in a collection lawsuit in another state. If your collection lawsuit is not in Minnesota, then you shouldn't rely on anything I've written here. And if your case is in Minnesota Conciliation Court, or small claims court, then the steps are different than what I've described here.
Step 1 -- Service of the Complaint
In Minnesota, a debt collection lawsuit begins when the consumer is served with the Summons and Complaint. The Summons is a notice that a lawsuit has started and contains basic instructions about what to do next. The Complaint details what claims are being made. The Summons and Complaint are not required to be filed with a court and most debt collection lawsuits will not be filed at the time they are served. Accordingly, the Summons and Complaint will not have a court file number on them. There is a lot of information on the internet that suggests that a Complaint without a file number is invalid. This may be true in other states, but it isn't true in Minnesota.
I'm often asked what it means to be "served." Served essentially means "notified." In Minnesota, the most common way to serve a defendant with a Summons and Complaint is to personally hand it to the defendant. Another common method of service is to hand the Summons and Complaint to a person of "suitable age and discretion" that lives with the defendant. This is usually a spouse, older child, or roommate. In Minnesota, it's possible to serve a Summons and Complaint by mail, but the defendant must sign an acknowledgment that they've received the complaint or it's not effective service. It's also possible to serve a defendant by publishing notice of the lawsuit in a newspaper or similar publication, but this is very rare in debt collection lawsuits.
Step 2 -- Answer the Complaint
Once a debt collection lawsuit is served, the defendant has 20 days to respond with an Answer. An Answer is a formal, written, legal document that specifically responds to each of the allegations in the Complaint and lists any defenses that the defendant has. Phone calls or letters are not considered Answers under the court rules.
If the defendant does not answer a lawsuit within 20 days of being served, then he is in default and a judgment may be entered against him. In a debt collection lawsuit, a default judgment is a final court order that the consumer owes the money. If a default judgment is entered, none of the steps below will take place and the case will be over. A default judgment is granted not because the creditor has better evidence or arguments, but because the consumer didn't participate. It happens administratively and no judge will ever see the case. If you want to protect your rights and force the creditor to prove its case in front of a judge, then you must answer the lawsuit within 20 days of being served. This is especially important if you've been sued by a debt buyer.
Step 3 -- Initial disclosures and discovery plan
After the Answer is served, the parties are required to confer about the case and develop a plan for discovery (Step 4, below). This conference, which can be by phone, is required to take place within 30 days of the original due date for the Answer. Most debt collection law firms will send a letter to set up the conference.
The parties are also required to disclose all known witnesses and supporting documents, as well as to itemize the claimed damages and describe any insurance coverage for the claims, at this stage of the case. These are known as Rule 26 initial disclosures and must be sent to the other side within 60 days of the original due date for the Answer.
Both the initial disclosures and discovery conference and plan were added to the court rules in 2013.
Step 4 -- Discovery
Once the discovery conference takes place , the next step in a debt collection lawsuit is discovery. If the case has not been filed with the court, there is no explicit time frame for discovery to happen and the parties are free to serve discovery whenever they wish. Once the case is filed with the court, the court will issue a deadline for discovery to be completed by.
Discovery is simply an opportunity for the parties to exchange information about the claims and defenses involved in a case. Discovery is not compulsory and a party is only required to provide information if they're properly asked. The most common forms of discovery in a debt collection case are Interrogatories, Request for Production of Documents, and Requests for Admission. Interrogatories are basically just questions that one party asks of the other. Requests for Production of Documents, as the name implies, requires that certain documents related to the case be produced. And Requests for Admission are essentially true or false questions about the claims or defenses in the case.
To request discovery, a party has to properly serve their Interrogatories, Requests for Production of Documents, or Requests for Admission. Written discovery is usually served by mailing the requests to the other side. The other party then has 30 days from the day the discovery was served to respond fully. Simply mailing a letter to the other side asking them to provide information about the case is not sufficient and doesn't trigger the other side's duty to respond.
Requests for Admission are probably the most critical part of discovery, because if they are not responded to within 30 days, they are considered admitted. Creditors write their Requests for Admission carefully so that if the consumer doesn't respond to them, they will end up admitting each element of the creditor's claims. I've seen cases where the only evidence that the creditor put in front of the judge was the consumer's failure to respond to the Requests for Admission.
The bottom line: if you receive discovery requests, you must truthfully respond to them in writing within 30 days. If you don't, you risk losing your case on a technicality and being penalized by the court. And if you want to ask questions of the other side and see what documents they have, you must mail them proper discovery requests. If they don't respond within 30 days, you can ask a court to make them respond and penalize them if they don't.
Step 5 -- Filing the case with the court
In 2013, the court rules were changed to require that cases be filed with the court and brought under court supervision within one year from the date the Complaint was served. If the case isn't filed within the one-year time limit, it is automatically dismissed with prejudice and can't be re-started. The rules allow the parties to agree to extend this deadline, but there rarely is a reason for a defendant in a debt collection lawsuit to agree to extend this deadline.
To file the case, each party must file their initial pleading (ie. the Complaint or the Answer) and pay the court filing fee, which is about $325. The parties also have to file their discovery plan from Step 3 above. Once the case is filed, it will typically be assigned to a judge and the court will issue a schedule with deadlines for the case.
Step 6 -- Summary Judgment Motion
The next step in the majority of debt collection lawsuits is the creditor's summary judgment motion. This is a hearing in front of a judge where the creditor will offer all of its evidence and legal arguments and ask the judge to give them a judgment. Defending a summary judgment motion is a complicated and involved process, but essentially it requires the consumer to file a brief with his legal arguments, any written testimony that he wishes the court to consider, and any documents that he wants the court to review. There is a hearing where the judge will have an opportunity to ask questions of both sides. The judge then considers all of the arguments and evidence and decides whether the creditor is entitled to a judgment. If the judge rules in favor of the creditor, a judgment is entered and the case is over. If the judge rules against the creditor, then the case will proceed to trial.
Defending against a creditor's summary judgment motion is probably the most difficult thing for a consumer to do himself. There are a myriad of rules, procedures, and deadlines that must be strictly followed. Many summary judgment motions are won by the creditor on a technicality rather than on the merits. For this reason, a consumer faced with a summary judgment motion should strongly consider hiring an attorney. If you want to hire an attorney to help you at this point, you should hire one immediately after getting notice of the creditor's summary judgment motion. There are strict deadlines to file your response and an attorney will need as much time as possible to get up to speed. Don't wait until the week before the hearing to call an attorney.
Step 7 -- Mediation
In most cases, the court requires the parties to engage in mediation. Mediation involves a neutral third-party, sometimes a retired judge, that tries to help the parties resolve their differences and settle the case. The parties usually have to bear the cost of hiring a mediator, although more and more courts are offering low-cost mediation for qualifying cases and parties. The mediator can't require you to settle the case, but they can help you see the benefits of settlement and propose different settlement options.
Step 8 -- Pre-Trial and Trial
If you're fortunate enough to defeat the creditor's summary judgment motion and the parties don't settle at mediation, the next step in a debt collection lawsuit will be a trial. The judge will issue detailed instructions about the time leading up to trial. There are so many variables at this point that it's difficult to describe all the potential scenarios. If you get to this point, you would benefit greatly from discussing your case with an attorney. You have a great deal of leverage to get the case resolved if you defeat the summary judgment motion and an experienced consumer attorney can help you maximize that leverage to get the best possible outcome.
Settling a debt collection lawsuit
At any point during a debt collection lawsuit, the parties may agree to settle the case. Usually, this means that the consumer will pay an agreed-upon amount of money and, in exchange, the creditor will dismiss the lawsuit. The amount of money that the creditor will agree to settle for depends on many factors, but generally speaking, the better your legal defenses, the better deal you can get. A document financial hardship can also help facilitate a manageable settlement. Here are some tips for getting the best deal possible.
A final word -- the Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act is a federal law that regulates what debt collectors can and can't do when collecting debts. The FDCPA applies even if you owe the debt. If you're involved in a debt collection lawsuit, you should to educate yourself about the FDCPA. This post is a good place to start. Basically, a debt collector can't harass you, lie to you, or use any unfair collection tactics. If a debt collector violates the FDCPA, you can sue it for up to $1,000, plus any actual damages. The debt collector also has to pay your attorney fees and costs if you win your FDCPA case. A FDCPA claim can often be brought as a counterclaim in a debt collection lawsuit, which often will give you additional leverage to get the suit resolved.