How to Beat Junk Debt Buyers in Court and Win
You can beat junk debt buyers in court by responding to lawsuits, demanding proof of debt, and using arbitration clauses. Most junk debt buyers lack proper documentation and will settle for much less than the full amount. Never ignore a debt lawsuit or you'll face wage garnishment and asset seizure.
Answer Your LawsuitBeing sued for debt feels terrifying. You might think you have no options.
But here’s the truth: many attorneys representing junk debt buyers lack proper documentation to sue you. They send out summons and complaints hoping you won’t fight back.
Respond to Junk Debt Buyer Lawsuits in 15 Minutes
Don't let junk debt buyers win by default. File your Answer now and protect yourself from wage garnishment and asset seizure. Your deadline to respond is approaching fast.
Respond to Lawsuit NowYou can challenge them. You have rights that can help you win.
In US courts, the party suing you must prove you signed a credit agreement. Most junk debt buyers don’t have this proof. They assume you won’t ask for it.
Understanding your rights gives you power. You can beat junk debt buyers in court.
Our partner Solo helps you respond to debt lawsuits and protect your rights.
What Is a Junk Debt Buyer?
A junk debt buyer purchases old, charged-off accounts from creditors at steep discounts. They then try to collect the full amount from you.
These companies buy portfolios of defaulted debt for pennies on the dollar. They profit when consumers pay the full balance.
The practice is aggressive and often relies on intimidation tactics. Many consumers don’t know they can fight back.
How Your Debt Reaches Junk Debt Buyers
You opened your credit card or loan with good intentions. Financial hardships happen to everyone.
When you miss payments for about 180 days, the creditor charges off the account. They write it off as a loss.
The original creditor then has several options:
- Clear the bad debt from their books
- Take a tax write-off
- Collect from bad debt insurance
- Sell the debt to a collection agency
When they sell, junk debt buyers purchase portfolios containing hundreds or thousands of accounts. They buy these accounts for roughly 4 cents per dollar of the original amount.
If you owed $1,000 to a credit card company, the debt buyer paid only $40 for it. When they collect the full $1,000 from you, they make massive profits.
Is Buying Debt Legal?
Yes, buying and selling junk debt is legal. The practice is inconvenient for consumers.
The debt buying industry receives the most consumer complaints of any sector. Many courts are clogged with these cases.
Some debt buyers use illegal tactics to maximize profits. The Fair Debt Collection Practices Act (FDCPA) protects you from unfair practices.
Know your rights under the FDCPA. You can fight illegal collection attempts.
Debt buying became popular during the late 1980s savings and loan crisis. The government auctioned off $500 billion in unpaid loans to private collectors.
Today, debt buying is a multi-billion dollar industry. The practice continues to grow.
How Junk Debt Buyers Select Accounts to Purchase
When debt gets charged off, you still owe it. You just owe a different company now.
Buying and selling debt happens online through specialized marketplaces. Sellers maintain updated portfolio lists.
Buyers register, sign NDAs, and purchase entire portfolios. They must be licensed debt collectors in their operating states.
Junk debt collectors receive electronic files with basic account information. They often lack individual contracts and statements for each account.
Your account gets grouped with similar debts in a portfolio. Categories include credit cards, payday loans, auto loans, and more.
Buyers purchase these portfolios for a fraction of the original debt. They then sue you for the full amount plus interest, court costs, and attorney fees.
How to Negotiate With a Junk Debt Buyer
If you acknowledge the debt and want to avoid court, consider settlement negotiation. The debt collector may accept less than the full amount.
Don’t ignore the lawsuit. Hoping it disappears won’t work.
Taking proactive steps can get the junk debt buyer to accept significantly less. Follow these three steps:
- Respond to the pending debt collection lawsuit
- Determine what you can afford to pay
- Send a settlement offer
If you reach an agreement, get everything in writing. Document all settlement terms before paying anything.
Many debt collection agencies settle for less than the original amount. They bought your debt for pennies, so they still profit.
Our partner Solo makes it easy to start the settlement negotiation process.
How to Beat Junk Debt Buyers in Court
A junk debt buyer typically knows little about your debt. They have thousands of names on a spreadsheet.
They don’t need proof if you ignore the lawsuit. Ignoring it is the worst mistake you can make.
If you ignore the lawsuit, a default judgment will be placed against you. The junk debt buyer can then garnish your wages and freeze your assets.
Challenging the lawsuit and demanding proof dramatically improves your chances. You can beat the lawsuit or settle for less.
Because they purchased your debt cheaply, they’re often willing to settle. They still make money on their investment.
Use Arbitration Clauses to Beat Junk Debt Buyers
Most credit card agreements contain mandatory arbitration clauses. You can use these clauses to your advantage.
You can force the plaintiff to withdraw from court. The case moves to private arbitrators instead.
Arbitration offers several benefits in debt collection cases:
- Arbitration increases collection costs for the junk debt buyer
- Arbitration is informal, allowing you to represent yourself
- Debt buyer attorneys are often unfamiliar to arbitrators
- Arbitration doesn’t appear on your public credit report if you lose
Why Filing a Motion to Compel Arbitration Works
Debt collection lawsuits are cheap and effective for collectors. Arbitration is expensive.
Arbitration is carried out by a private arbitrator. Most credit card arbitration agreements require the debt buyer to pay all fees.
These fees are extremely expensive compared to court lawsuits. The debt buyer cannot recover costs in the arbitration award.
Arbitration costs cannot be shifted to you even if you lose. Many debt buyers drop the case entirely.
If they don’t drop the case, you have better leverage for settlement. You can negotiate settlements as low as 30% of the total amount.
If you settle, ensure the agreement includes these conditions:
- Do not sign an agreed judgment
- Delete the trade line from your credit report
Benefits of Arbitration
In arbitration, the debt buyer cannot turn junk debt into a “super debt.” No default judgment can be placed against you.
You avoid wage garnishment and asset seizure. The statute of limitations continues to run.
Arbitration isn’t the best choice for every lawsuit. Examine your options and consider the pros and cons.
Always send a legal response, called an Answer, to the debt buyer first. Our partner Solo helps you file your Answer quickly.
The Statute of Limitations Protects You From Junk Debt Buyers
Junk debt buyers sometimes purchase and collect debts past the statute of limitations. They hope you don’t know your rights.
The statute of limitations is the time period a debt collector has to sue you. Once it expires, they cannot take you to court.
The statute of limitations on debt varies by state. It’s generally around six years.
If a creditor doesn’t sue within the limited time, they lose their right to sue. Some debt buyers bank on your ignorance.
They trick you into making a payment or promise. In many states, this resets the statute of limitations clock.
Check the statute of limitations on your account first. If it has expired, do not pay anything.
Do not make promises to pay. In some states, promising to pay restarts the clock.
Armed with knowledge about arbitration and statute of limitations, you can beat junk debt buyers in court. You have the power to fight back and win.