Defending a lawsuit

How to answer a collection lawsuit in Minnesota

Before I explain how to answer a collection lawsuit, it's important to understand that Minnesota is a unique state because a lawsuit is started by serving the defendant. It is not required to be filed with a court at the beginning of the case. Because of this quirk, a lawsuit in Minnesota will almost never have a court filing number. And the courts will not have a record of the lawsuit until the creditor files the lawsuit and pays the filing fee. But this doesn't mean the lawsuit isn't legitimate. If you're served with a lawsuit in Minnesota, you must answer within 20 days. If you don't answer the lawsuit, it's likely that a default judgment will be entered against you without a court hearing. So the first step to respond to a collection lawsuit is to answer it. An answer is a formal legal document that responds to each of the allegations in the lawsuit. A phone call or letter isn't sufficient. Here's how to answer a collection lawsuit in Minnesota:

Fill out the caption

Overall, your answer should be formatted much like the collection lawsuit itself. Start by filling out the caption at the top of the lawsuit. 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 this directly from the lawsuit. Just change the title of the document from "complaint" to "answer."

Respond to all of the allegations in the lawsuit

The body of your answer is where you respond to the allegations in the complaint and list your defenses. It's best to number each paragraph of your answer to correspond with each numbered paragraph of the complaint. There's basically three responses to an allegation: (1) admit; (2) deny; and (3) deny based on a lack of information.

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 would deny the 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. When you've finished responding to every allegation, sign and date the answer.

Serve the answer by mail

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, or the debt collector itself if they don't have a lawyer. It's best fill out a sworn statement, called an affidavit of service, to prove when you served the answer. Here's a form affidavit from the Minnesota Court website.

Keep  the second copy of your answer for your records. Hang on to the original answer for filing with the court, but you don't have to file it until the debt collector does if you don't want to.

Knowing how to answer a collection lawsuit isn't enough

Now you know how to answer a collection lawsuit in Minnesota. But answering is just the first step. There will likely be discovery to answer and a motion to respond to. When you get these things from the collector, it's probably best to talk to a consumer lawyer right away. Responding to discovery  or a motion is complicated, there are strict deadlines, and it's possible to lose your case based on a technicality if you don't follow the court rules.

What you need to know about the collection of old debts

If you're facing debt collection on a debt that is more than a couple of years old, the first thing you should do is figure out how long the statute of limitations is. Remember, 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 debt collection lawsuits is six years. This means that the lawsuit only has to be started within six years. It doesn't mean that the lawsuit has to be finished within six years.

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, 2011, the creditor must start the lawsuit against you no later than December 15, 2017.

If the creditor doesn't start the collection lawsuit within the statute of limitations, it loses its ability to use the judicial process to collect the debt. This doesn't necessarily mean that the creditor can't call or write you to collect the debt. In Minnesota, a debt collector may collect a debt that is past the statute of limitations. But it can't threaten to sue you or sue you for an old debt that is past the statute of limitations. And if the debt is more than seven years old, it can't be reported to the credit bureaus.

If the debt collector brings a lawsuit on a debt that is past the statute of limitations (or time-barred as some courts say), you have an absolute defense to the collection lawsuit. You need to raise this defense in your answer or it may be waived. Also, it's your burden to prove that the statute of limitations is up and you may need to gather some evidence first. But this is a powerful defense that, if proven, will result in the debt collector's case being thrown out.

In addition, many courts have held that a debt collector violates the FDCPA when it threatens to bring or brings a lawsuit for an old debt that is past the statute of limitations. When a debt collector violates the FDCPA, you have the right to sue them and the law provides that the collector has to pay you up to $1,000, plus any provable actual damages--such as emotional distress. Further, the debt collector has to pay your attorney fees and costs. So if everything goes your way, you could get the debt wiped out and get some money back from the debt collector.

A quick summary of the law on the collection of old debt

(1) In Minnesota, a debt collector can attempt to collect a debt past the statute of limitations through phone calls, letters, or similar methods. This rule may be different in other states.

(2) A debt collector in Minnesota cannot, however, threaten to sue you or sue you for a debt that is past the statute of limitations. This is also true in most other states.

(3) A debt collector cannot put a debt that is more than seven years old on your credit report. This is true everywhere. I would also take the position that a debt collector cannot even threaten to report a debt that is past the statute of limitations.

Sued by a debt collector? Avoid these defenses.

When you're sued by a debt collector, you must respond to the lawsuit with an answer within 20 days or a default judgment will be entered against you. An answer is a written legal document that responds to the allegations in the lawsuit. A default judgment often leads to bank garnishments, wage garnishments, and other involuntary collection efforts. So while it's critical to respond, there are some defenses that should be avoided.

Lack of a signed contract

Many people believe that debt collectors must produce a copy of the contract that the account-holder signed to prevail in a debt collection lawsuit. But there are alternative theories used by debt collectors, such as account stated, that may allow them to prevail by merely introducing credit card billing statements. Account stated is an equitable theory where the debt collector must show that the consumer "assented" to the account by receiving billing statements and not objecting to them within a reasonable period of time. Although there are defenses to this argument, particularly if the plaintiff is a debt-buyer, the point is that a signed contract doesn't have to be produced.


Unfortunately, the fact that you cannot afford to pay the alleged debt is not a defense when you're sued by a debt collector. The issue in a debt collection lawsuit is whether you are legally obligated for the debt, not whether you can afford to pay the alleged debt. That fact that you are unemployed, receive public assistance, or are otherwise "judgment proof" may mean that the debt collector will never collect any money from you. But it is not a legal defense to a lawsuit.

Attempted to pay

While frustrating, the fact that the debt collector refused to work out reasonable payment arrangements with you is not a legal defense to a debt collection lawsuit.  Courts do not have the authority to force the debt collector to accept the payment plans or settlements.

Ex-spouse responsible for payment

Just because your divorce decree ruled that your ex-spouse is solely responsible for payment of a joint debt, doesn't mean you cannot be sued for the account by a debt collector. Divorce courts do not have the power to modify contracts between you and a third-party debt collector. You may, however, be able to sue your ex-spouse to repay you for any money you are ordered to pay the debt collector.

Good defenses when you're sued by a debt collector

Now that you know how not to defend a debt collection lawsuit, here are some good potential defenses: statute of limitations, unauthorized and/or fraudulent use of the account; identity theft; incompetent or insufficient evidence; and lack of valid assignment of the debt (usually only applicable in debt buyer lawsuits). This is not an exhaustive list and these defenses may or may not apply to your particular case. Consult with a consumer lawyer in your area for specific advice about your case.

Why judges need to scrutinize debt buyers' evidence more closely (and how to do it)

One prominent defense against a debt buyer collection lawsuit is to challenge the admissibility of the debt buyer's evidence. Credit card billing statements and other account documents are generally considered hearsay under the rules of evidence. Although there is an exception for business records, a debt buyer must first provide specific testimony--from someone with personal knowledge--that demonstrates that the business records are accurate and reliable. Debt buyers are very good at providing the precise testimony required to trigger the business records exception. But admissibility shouldn't be about whether a debt buyer has recited verbatim the requirements of the exception. These requirements have been cheapened to the point of meaninglessness by debt buyers' boilerplate affidavits that are robo-signed by low-level employees who don't know the first thing about the legal concepts that they are testifying to. Rather, admissibility should be about whether the evidence is actually reliable.

Although a few judges focus exclusively on whether the debt buyer has met the technical requirements of the hearsay exception, in my experience the overall reliability of the evidence is the primary concern of most judges. Fortunately for debt buyers, many judges (not unreasonably, perhaps) believe that credit card billing statements are inherently reliable and are therefore willing to overlook technical deficiencies in a debt buyer's evidentiary foundation. I'm not blind to the other challenges that judges face when handling collection cases. In many contested cases, the consumer doesn't have an attorney and may not even challenge the admissibility of the debt buyers' evidence. When the consumer does raise the issue on his own, it's often in a poorly researched and incomprehensible brief obtained from a questionable source on the internet. Judges probably can't raise the reliability issue sua sponte, because then they risk veering from impartial decision-maker into the consumer's advocate. I also understand that budget challenges have placed enormous pressure on judges to get cases off their docket. An busy trial judge can be forgiven for holding her nose and granting a debt buyer's summary judgment motion, despite its evidentiary shortcomings, rather than scheduling a $2,500 collection case for a trial.] But alarming evidence has recently surfaced that suggests that these judges' perception of the inherent reliability of credit card statements might be misplaced.

A March 2012 story by American Banker reported that

JPMorgan Chase & Co. took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years, current and former employees say.

In a similar story on Bank of America, AB discovered that

In the "as is" documents Bank of America has drawn up for [sales to debt buyers], it warned that it would initially provide no records to support the amounts it said are owed and might be unable to produce them. It also stated that some of the claims it sold might already have been extinguished in bankruptcy court. B of A has additionally cautioned that it might be selling loans whose balances are "approximate" or that consumers have already paid back in full.

Read the American Banker stories for yourself. They offer detailed, on-the-record information the provides a glimpse into the profit-at-all-costs mentality that plagues some banks' legal collection departments. At the very least, there is enough in the stories to cast serious doubt on the reliability of the banks' records. And debt buyers rely heavily on the perceived reliability of the banks' records because they don't have any way to independently verify records that they didn't create.

So what's the solution? Courts and legislators should resist the temptation to create a more comprehensive list of factors a debt buyer must establish to admit business records into evidence. It's far too easy for debt buyers to create another self-serving, boilerplate affidavit to meet any new requirements and have them robo-signed by the thousands. Instead, debt buyers should be required to provide specific testimony about why the records are accurate and reliable. This needs to be more than a vague and unverifiable statement that the debt buyer is familiar with the records, has reviewed them, and that they're accurate. To truly evaluate reliability--especially in light of the troubling allegations uncovered by American Banker--courts need much more specific testimony. What type of software is used? How often is it audited? When was the last audit? What was the error rate? What is the industry standard for acceptable error rate? This testimony should come from someone with actual knowledge of these systems--not a robo-signer who claims to have such knowledge--and the affiant should explain in detail how they came to possess such knowledge.

Sure, this heightened reliability analysis may slow down the freight train that is legal debt collection. But debt buyers, and the banks that they buy debt from, have earned the additional scrutiny after cutting corners with relative impunity for so long.

Can I be sued for my spouse's debt after divorce?

People going through divorce often wonder what's going to happen to their and their ex's debt. If they haven't resolved it before the divorce, people going through divorce will need to deal with their debt after divorce. In many divorce decrees, debt can be allocated--for example, the husband agrees to take responsibility for the Capital One card, while the wife agrees pay the B of A Visa. Life is good. But here's something that people often forget to tell you. If you were jointly liable on the Capital One card before the divorce, the divorce decree doesn't get you off the hook. Even though a judge ruled that you don't have to pay Capital One, the divorce decree doesn't change your legal obligation to CapOne. If your ex stops paying his monthly payments, the credit card company can still sue you. In addition, they can come after the full amount of the debt, not just half the balance, or just the purchases you made.

This doesn't mean you can't enforce your divorce decree and go after your ex for the money, but if your ex had the money to pay the card, wouldn't he have paid it to Capital One?

If you were wondering why divorce is one of the three biggest causes of bankruptcy (the other two are medical emergency and job loss) this might be a clue. If you're dealing with debt after divorce, going through divorce, or you're being sued for an ex-spouse's debt, give us a call.

Different time limits on store credit cards may protect consumers

As we mentioned in another post, the statute of limitations for a credit card debt is six years in Minnesota. This means that a debt collector can only sue a consumer on a credit card debt within the six years after default on the card. Once six years have passed, there's very little a collector can do to get the money. Not very many people know that there is a separate, shorter statute of limitations of four years for store credit cards. This is because store cards are governed by the Uniform Commercial Code (UCC), a set of laws that govern installment sales of goods, among other things. So figure out whether the shorter limitations period applies, we need to figure out whether the card was a sale of goods (four years) or money loaned (six years). Some cards are tricky--for example, Walmart has both a store credit card and a Visa card. To figure out which limitations period applies, we ask the following questions:

  • Did the card have a Visa/Mastercard/Amex/Discover logo? If not, the four-year period may apply. If it's been years since you cut up the card and you can't remember whether there was a logo on it, we can generally use the card number to find out. Amex cards begin with the numbers "34" or "37." Visa cards begin with 4. Mastercard begins with 5. Discover begins with "6011" or "65." If the account number began with any other numbers, it most likely was a store card.

  • Did you apply for the card at the cash register? If you did, it's easier to argue that you bought goods on installment and therefore it was a store card. If you applied for the card from home, it may be more likely that it was a credit card.

  • Could you take a cash advance on the card? Store credit cards don't allow you to take cash advances. Credit cards generally do. If you couldn't take a cash advance, the four-year period may apply.

If a collector has sued you after the end of the limitations period, not only is it a defense to the lawsuit, but in some cases it is a violation of the Fair Debt Collection Practices Act if they knew that the debt was too old to be sued on.

Answering a debt collection lawsuit? Don't make unnecessary admissions.

In July of 2013, Minnesota made some much-needed changes to the language on its summons. The summons, of course, is the notice that comes with the lawsuit that tells the defendant how long he has to respond. The new summons is written in plain-English and very clearly explains that the defendant must answer the lawsuit within 20 days of service or a default judgment will be entered.

Since the state rolled it out, I've often wondered what effect the new summons language would have on debt collection cases. It's well-known that the majority of debt collection lawsuits result in a default judgment because consumers don't respond. Would the clear explanation provided by the new summons result in more consumers answering the lawsuit?

According to at least one debt collection attorney that I've talked to, more consumers are now answering the complaint, but not in a way that helps them defend against the lawsuit. This collection attorney told me that since the new summons went into use, his firm is receiving a bunch of "answers" from consumers that are really just letters admitting that the person owes the debt with an explanation about why he can't afford to pay.

I suppose it's better to send some sort of written response than to ignore the lawsuit entirely, but when you admit that you owe the debt in your answer, you're making a big mistake. Even if you believe that you owe the money, you're entitled to deny the allegations and force the creditor to prove its case in front of a judge. And if you're being sued by a debt-buyer, there are many possible defenses, even if the underlying debt appears to be valid.

If you've been served with a collection lawsuit, your best bet is to talk to a good consumer lawyer immediately. Although there are a number of forms available on the internet to help you answer a lawsuit, simply filling out a boilerplate form is no substitute for discussing your case with an attorney. If you don't fill out the form correctly--either because you make unnecessary admissions or fail to list all of your defenses--you're setting yourself up for failure. A good consumer lawyer can help you identify the issues and defenses for your case and can also help you avoid some common mistakes that consumers make when they handle the answer themselves.

How to kill 'zombie debt' using the statute of limitations

They call it zombie debt because it's so old that by the time a debt collector picks it up, you've totally forgotten about it. Creditors sell old, uncollected debt to debt buyers for pennies on the dollar--that's why you may be getting phone calls or letters on a debt you don't even remember having. Just as there are very specific ways to kill a zombie (click here only if you don't scare easily), there are specific defenses you may have against zombie debt. One of these is the statute of limitations.

Statute of limitations: The statute of limitations is the legal term for how long a party can sue you on a debt. The statute of limitations for suing for breach of a credit card contract in Minnesota is six years. This means that a creditor or debt buyer can sue you anytime up to six years from the date of your last purchase or last payment, whichever was later. There are some exceptions to this, so you'll want to consult an attorney.

Special statute of limitations: There may be a shorter statute of limitations if the debt was a store credit card. It's a store card if you could only use it at one store (store-branded cards with Visa or Mastercard logos don't count.) Those lawsuits are governed by a different law, called the Uniform Commercial Code (UCC), and they may have a shorter statute of limitations of only four years.

Super-special bonus statute of limitations: Minnesota has a borrowing statute. In short, this means that if a legal claim "arises" in another state with a shorter statute of limitations, that shorter statute of limitations may apply. This may be relevant for credit card companies based in states such as Delaware, which has a three-year statute of limitations. But be warned, the law is tricky on this. We would recommend you only try this defense under supervision of an experienced attorney.

Served by a debt collector? You must respond within 20 days.

In Minnesota, a debt collection lawsuit begins when the defendant is served. "Served" is just a fancy legal word that basically means "delivered". There are two main ways you can be served by a debt collector: (1) by having the lawsuit handed to you personally; or (2) by having it left at your home with someone of appropriate age. Once you've been served, you have 20 days to answer the lawsuit. An answer is a formal legal document that responds to the allegations in the complaint. If you don't respond within 20 days of being served by a debt collector, they can apply for a default judgment. The court considers all of the allegations in the complaint to be true and gives your opponent whatever they are asking for. In other words, your opponent wins 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 judge ever seeing the case. Debt buyers love to get default judgments against consumer because they don't have to present any evidence to a judge.

A judgment, whether entered by default or otherwise, is a court ruling that you owe the money. And once a debt collector has a judgment, they have the power to garnish your bank account and your paycheck.  Although judgments can sometimes be overturned, for the most part they are final. That's why its so important to answer the lawsuit within the 20 days. If you don't, you no longer can raise any defenses and will probably have to either negotiate a settlement or payment plan with the debt collector or, if the situation is serious enough, consider bankruptcy.

How to defend a repossession deficiency lawsuit

After your lender repossesses your car, they will sell it and apply the sale price to the amount remaining on your loan. In most cases, there is still a deficiency remaining on your loan after applying the sale proceeds. 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:

  • 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 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. Often, the chain of title is either incomplete or does not specifically identify your account, but rather a large batch of accounts.

  • 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.

  • The creditor accepted your car as a full satisfaction of the loan. Occasionally, creditors tell people that if they turn over their car voluntarily, they will not pursue the person for a deficiency. Creditors may later deny making this promise. Some courts have held that promising not to pursue you for a deficiency if you turn over your car voluntarily bars that creditor from pursuing 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.

Why you must answer a debt collection lawsuit

So you've been served with a debt collection lawsuit and don't know what to do? The first step is to answer the lawsuit in a timely manner. In Minnesota, for example, you must answer the lawsuit within 20 days of being served. Other states may have different deadlines. Check with a consumer lawyer in your area if you are unsure. This post will walk you through the process of answering the lawsuit. If you don't answer the lawsuit within the required time, it is likely that a default judgment will be entered against you. In most states, including Minnesota, this means that the court will enter a final judgment against you based on your failure to answer the complaint, not the merits of the debt collector's case. You will not get a chance to be heard at a hearing and in most cases a judge won't even review your case.

Even if you believe you owe the debt, you are entitled to answer the lawsuit and force the creditor to prove its case. Remember, the creditor has the burden of proof and must prove that you agreed to be liable for the account and that you owe the precise amount of money they are seeking. This is even more important when the creditor in your case is a debt buyer.

A debt buyer is a business that purchases delinquent accounts from the original creditor and then sues consumers to collect the debts. Because the debt buyer did not originate the debt, it must rely on the original creditor to provide it with evidence to prove its case. In some cases, the original creditor doesn’t provide the debt buyer with any evidence of the debt. And when the original creditor does provide evidence, it often is just a single billing statement that was generated long after the account became delinquent. Even though they often have insufficient evidence to prove their case, debt buyers still sue out thousands of cases every month because they know that most people won't respond to the lawsuit. Somewhere in the neighborhood of 90% of collection lawsuits proceed by default and result in judgments being entered against consumers without the creditor having to prove its case.  This basic premise is why collecting purchased debt is a thriving sub-industry. Debt buyers know that they can obtain thousands of judgments without having to produce a single piece of evidence.

So if you are served with a collection lawsuit, you need to answer it in a timely manner. This will force the creditor to prove its case. Sometimes they can't, particularly if the creditor is a debt buyer.