What is a “Dismissal for Want of Prosecution”?

A potential client recently called our office. He said that he has learned that he is being sued for a debt. However, this potential client has not actually been formally served with the lawsuit paperwork. After looking at the online county civil records docket sheet, he noticed that a “Dismissal for Want of Prosecution” (DWOP) hearing is set in the case. He wanted to know what that means.

Whenever a lawsuit is filed with a civil court, the court sometimes immediately sets that case for a DWOP hearing in the near future. (Sometimes, this hearing is simply called a “Dismissal Hearing” or a “Dismissal For Failure to Prosecute Hearing” or something similar.) This type of hearing allows the courts to keep cases moving and allows their dockets to run smoothly. Whenever a DWOP hearing is set, the court is telling the plaintiff to go out there and serve the defendant with the suit; otherwise, the court may dismiss the case from the docket due to the plaintiff’s failure to do so. Texas law mandates that the burden is on the plaintiff — not the court — to make sure that the defendant is properly served with the suit. The DWOP hearing, therefore, is an incentive for the plaintiff to keep the case moving forward, notify the defendant that they have been sued, and diligently prosecute their case. The DWOP hearing is very common in Dallas courts (especially County Courts at Law and District Courts), where it may be set as early as 2 months after a case is filed. On the other hand, I have seen where a DWOP hearing is set 9 or 10 months after a case is filed. The DWOP hearing does not happen as frequently, or as quickly, in Denton or Tarrant counties.

Judgment debtor bank accounts are being garnished…..

If you have had a judgment entered against you as a result of a credit card lawsuit, beware of bank account garnishment. It seems that, based on some recent calls to our office, several of the more aggressive consumer debt collection law firms in the state of Texas have stepped up their post-judgment collection efforts. Bank account garnishments — perhaps the scariest thing for a debtor-Defendant who has had a Judgment entered against them — are being filed in our courts right now.

Garnishment is a fairly antiquated post-Judgment remedy for creditors. It is “a statutory proceeding whereby the property, money, or credits of a debtor in the possession of another are applied to the payment of the debt.” Bank One v. Sunbelt Sav., 824 S.W.2d 557, 558 (Tex. 1992). In reality, garnishment is a lawsuit against the holding bank, not the Judgment debtor, for the assets held on behalf of the debtor: the money in the account. The holding bank, called the garnishee, is formally served the Writ of Garnishment. The debtor must be served “as soon as practicable following the service of the writ.” One Court has said that a 15-day delay in serving notice to the debtor is insufficient. Lease Fin. Group, LLC v. Childers, 310 S.W.3d 120 (Tex. App. Fort Worth 2010).

A little more information about bank account garnishment:

*** Your bank account can be seized as soon as the Court renders Judgment against you and, in some very limited circumstances, before or simultaneously with the filing of a civil lawsuit.

***If your bank account is garnished and you have direct deposit whereby your wages are deposited into the account automatically, funds that are directly deposited into the account after the account is frozen in the garnishment action are frozen, also.

What are your options if this happens to you? There are a few things you can do:

(1) Consider filing bankruptcy. This is likely stop the garnishment in its tracks because of the powerful “automatic stay,” a Federal bankruptcy rule that provides that most creditors must cease all collection activity while the bankruptcy case is pending. The difficulty with filing for bankruptcy is that you will need to act very quickly to file.

(2) Attempt to settle the Judgment. Perhaps call the Judgment creditor and try to work it out before the funds are taken from the account. Many creditors will settle, even at this late stage, especially debt buyers.

(3) Fight the garnishment. You can contest the garnishment action, but it will be an uphill battle. Unless the garnishing creditor has failed to follow the exacting procedural notice or filing requirements or you have a clear exempt source from which the funds in the account derived, you can at least buy yourself some time while the garnishment is pending even if you ultimately have your account zeroed out.

First steps in defending a debt lawsuit…

So you had a debt that you quit paying on some years ago. Perhaps you lost a job and couldn’t pay it. Perhaps a tragic medical situation left you without funds to pay seemingly harmless bills like this one. Or maybe you noticed that your minimum monthly payment amount skyrocketed because of an increased interest rate over which you had no control and decided to protest by not paying. Or maybe some other financial struggle left you with a tough decision to make: let the debt go.

Since you last paid on the account, you may have sought the advice of a debt settlement or credit repair company, but have been frustrated with the results of clearing up the debt. You have felt guilty about owing but not paying, but have not forgotten that it was there (since the negative sign on your credit report will not allow you to forget..) You’ve received, but ignored, lots of collection calls. And here lately, you have gotten some letters from attorneys threatening legal action and offering settlements that you cannot afford. But now a strange person has found you and handed you some paperwork which says you have been sued and tells you, “you have been served.”

What do you do?

First things first, do not overreact. Do not freak out. Stay calm. While no one likes to be sued and you probably do not understand what the court system will be like or what is the worst that could happen to you, you should understand that this kind of thing happens to people all the time. According to judges in our north Texas courts, as many as 60% of all cases filed annually are comprised of debt collection lawsuits. You are definitely not alone: not alone in owing money, not alone in getting sued. This happens to more people than you think.

Second, do not get upset with the person who served you with the lawsuit papers (in Texas, these papers are collectively called the Petition). This person is called a “process server” and their job is to find you and hand you the Petition. That is what they get paid to do. The process server is not the person suing you and is not affiliated with the company bringing its claim against you. The process server is literally the messenger, so don’t hurt or annoy the messenger.

Third, sit down and begin reading through the Petition. The first page, usually called the summons or citation, should read as follows: “You have been sued. You may employ an attorney. If you or your attorney do not file a written answer with the Court… then a default Judgment may be rendered against you.” You will either have 10 or 20 days to file a written response with the Court. This written response is called an Answer. The Answer is your first responsive pleading to the Court; it is your first chance to defend yourself in the lawsuit. You may assert a denial to the creditor’s claims and, depending upon your particular situation, you must include certain things in the Answer like specific affirmative defenses, a plea to the jurisdiction, special exceptions, a special appearance, and other things.

Fourth, you should read the Petition to determine what discovery you must respond to and the deadline to respond to it. Discovery is defined as the “efforts of a party to a lawsuit…to obtain information before trial through demands for information… The theory…is that all parties will go to trial with as much knowledge as possible and that neither party should be able to keep secrets from the other…” In other words, discovery is the process within a lawsuit where a party can gather information and evidence about the other party.

In most of our debt collection cases, the lawsuit paperwork will contain any of four popular forms of discovery: (1) requests for admission, (2) requests for production, (3) request for disclosure, or (4) interrogatories (these are simply written questions which require an answer to be stated under oath, or signed in front of a notary public). If the Petition contains any of these requests, you must respond to them. The deadline for responding to these requests depends upon whether the Petition with which you were served contained these requests. If the requests are contained within the Petition, your responses are due 50 days after you were served. If the requests are served to you after you were served with the Petition, they are due 30 days after you are served with the requests.

There is a lot more to the process, but these are the first steps in defending against a debt collection lawsuit.

Resources for Consumers or Wolf in Sheep’s Clothing

I have a love/hate relationship with all that the internet has to offer.  I preach daily on the importance of information and for consumers to become informed about their rights and the remedies that are available to them. However, the internet is filled with all kinds of misinformation. What used to be a grand source for knowledge and discourse is now run amuck with advertising, promotion and scams. Sadder is that many people are really craving hope and some sites will whisper the words that a consumer craves to hear, but in reality it is just another falsity.

So where should people turn to find the good information? You would think I would say, lawyers…but…well, sometimes the jokes are true (not me of course…).  There are all kinds of valuable trustworthy resources.  First and foremost is the Federal Trade Commission’s website. You can find wonderful materials on every aspect of consumer protection.  For businesses, the FTC provides guides on compliance and for advocates such as myself, you can even order in bulk educational material to provide clients.

Bulletin boards and forums may provide you with comfort with discussing the wrongs that have been done to you, but rarely are you going to find good information about how to protect yourself.  That is one of the reasons why this site is here, but you don’t need to take my word for it, just go to the Federal Trade Commission or your State’s Attorney General’s website and become empowered by the education that is there.

 

 

Notorious debt buyers…

Debt buying companies make lots of money preying on debtors whose delinquent accounts have been charged off by original creditors. They sue people for the full amount of the debt that the consumer owed his or her original creditor, even though the debt buyer paid a cheap price for the rights to sue on the account. How cheap? In many cases, debt buyers pay virtually nothing for the accounts they buy. While the rumors abound as to how little they actually pay, rest assured that it is not very much. I have heard that if a debt buyer pays 12 cents on the dollar for a batch of accounts, they got a “bad deal.”

In our line of work, we see some repeat offenders. Some of the bigger, more nationalized companies sue thousands — perhaps tens of thousands — of debtors per year. These are some of the biggest:

— Midland Funding, LLC

— Equable Ascent Financial, LLC

— Asset Acceptance, LLC

— CACH, LLC

We see massive filings of lawsuits across the state of Texas from these companies. In Collin County, for example, Asset Acceptance filed 19 lawsuits during the month of October, 18 in December, 12 in January, and 12 this month. Midland Funding filed at least 86 different lawsuits in the Denton County court system during the last three months of 2011.

If you are “working” with one of these companies, getting annoyed with their collection efforts, or even getting sued by one of them, you need to understand how they operate. These companies work from a global perspective, dealing with millions upon millions of dollars in charged-off debt and hundreds of thousands of consumers across the nation. You are but one in a million. You are definitely not alone.

Why does that creditor want you to sign an “Agreed Judgment”?

Probably because you do not know what that means.

Whenever a civil lawsuit is filed, the plaintiff wins the case by obtaining a “judgment” against the Defendant. A “judgment” is the final determination by a court of proper jurisdiction of who wins the case. Sometimes, after a creditor files a civil suit to collect money from you, they will ask if you want to settle the debt by entering into an agreed judgment. An agreed judgment is as good as a regular judgment — except, of course, you have agreed to it. An agreed judgment, like a regular judgment, resolves the lawsuit.

The difference is that there is typically a settlement agreement that goes hand in hand with the agreed judgment that stipulates that you are to pay the creditor a certain sum, X, in order to satisfy the judgment amount, Y. By the completing the payment amount (or settlement amount), X, the creditor agrees that you will have satisfied the judgment amount, Y. In exchange for your promise to pay the discounted amount, X, the creditor promises not to “execute” or act upon the judgment, i.e. initiate bank account garnishment or seize nonexempt assets.

The danger in agreed judgments is that if you default in making the payments, the creditor, according to the terms of the settlement agreement, has a judgment against you for the full judgment amount, Y (minus payments that were made towards it, of course).

The Emotional Ties to Debt

My perception of debt and human nature has been forever changed by representing the plight of those who society has forgotten: the debtor.  There is such a stigma against someone who owes money and typically it is the debtor, himself (or herself) who applies the stigma.  It is this very stigma that keeps debtors from taking action against those who break the law.  They feel that they do not deserve help or that the problem is one of their own making.  Guilt takes over.  Many times even when the debtor is sued, they do nothing because they feel that they deserve some sort of punishment because they were unable to pay their bills.

I have seen over the years, that debt is not created out of frivolity but rather out of necessity.  In an overwhelming amount of cases that I see, the debt was created because of  bad event: illness, job loss, divorce, etc.  Moreover, people defaulted on the debt because of another bad event.  As a result, the debt bears a baggage of the emotional situations that created the debt and then defaulted the debt. Every phone call and every letter reminds a person of the emotional situation that started this cycle.  It is for this reason, that laws exist to protect consumers from harassment.

I am constantly asked by other lawyers about how I sustain financially a dedicated consumer practice that focuses so predominately on defending people when they are sued over a debt. My response is simply that somebody needs to.  These types of cases have grown more difficult over the years, requiring more work and more risk. My clients have taught me so much about how there are good people in this world and those good people are just trying to make it from point A to point B.  My cases are not about getting someone out of there debt, but rather about moving someone down this roller coaster in such a way that no matter the outcome, they don’t harbor any additional regret.

I strongly believe that our judicial system should be available to the individual and that the system should not apply different standards for a debt case than it would over companies battling over millions.  The evidence rules are the same.  The procedure rules are the same.  The law is the same. Therefore, the attention and justice should be the same. Yes, my clients owe money but that does not mean that a creditor is automatically entitled to the judgment.

Robo-signing in the debt buying industry…

According to study out of New York, “researchers found that over the course of a year, one debt buyer’s affiant identified himself as the custodian of records in 47,503 affidavits, thereby claiming to have personal knowledge of the facts of each and every case” (The One Hundred Billion Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof in Debt Buyer Cases, Peter A. Holland, http://ssrn.com/abstract=1875727).

We see this kind of problem all the time. Just last week, we represented a consumer in a suit brought by a company which allegedly purchased the debt owed by our client. At trial, the debt buyer sought to introduce into evidence an affidavit of an employee of the debt buyer. However, amongst the dozens of pages that comprised the affidavit was yet another affidavit of an employee of a mid-stream buyer of the debt. The primary affiant claimed in its sworn statement that the account changed hands a total of 3 times: from original creditor to debt buyer A, from debt buyer A to debt buyer B, and then from debt buyer B to the company suing our client. The affidavit of the mid-stream buyer, however, said in her sworn statement that the account changed hands only twice, not three times. The Judge sustained our objection to the affidavit, resulting in a take-nothing judgment in favor of our client.

If you are getting sued by a debt buyer, you should always investigate the chain of title. Moreover, look closely at the statements made by the affidavits in the case. Do they conflict with the chain of title documents? Are there inconsistencies between affiant testimony as to who owned the account and when? If so, chances are the debt buyer may not be able to prove their case in court.

Car Dealer Must Pay $103,000.00 to our Client

We are very happy to report that Lesser & Jordan obtained a $103,000.00 judgment against a “buy-here-pay-here” car dealer for violations of the Texas Debt Collection Practices Act and the Article 9 of the Texas Business and Commerce Code.

Our client became behind in their car payments because of a job loss. The car dealer took steps to repossess the vehicle and in the process sent our client a text message which was harassing and offensive. To add insult to injury, the car dealer then took furniture belonging to our client as “collateral” for the car. It was a mystery to me as to how a creditor can steal a debtor’s property that is completely unrelated to debt.

Your Tsunami of Credit Card Debt

Tsunamis are dangerous because people don’t see the wave building until just before it crashes on the shore and wipes everything out. You may not realize it, but your credit card debt is just like that.

Over and over again, our clients tell us that they had everything under control until they lost a job or someone got sick or they had some other unexpected event. In fact, they didn’t have things under control. They just didn’t understand that their credit card debt was designed to rise up and wash them away at just such crisis points in their lives.

To credit card companies, the most profitable customers are the slow pays, the ones who regularly incur late fees and penalty rates but continue to pay. These folks are also the balance surfers. When they can’t afford a payment on one card because of a penalty rate, they’ll transfer the balance to another card that has a lower rate. The trick for the credit card companies wanting to maximize their profit is to turn as many of their cardholders as possible into these slow paying, balance surfing customers.

The credit card companies start the tsunami by playing a game of musical chairs. When a good paying customer slips a little, they ratchet up the game by imposing penalty rates and extra fees. They hope the consumer will continue to pay or if he can’t, surf to other cards so their competitors take the losses. When they’ve pushed too hard and the consumer is in danger of defaulting, they pull their chairs out by jacking up interest rates and/or minimum payments to such a level that the consumer has no choice but to surf. At some point however, the balance transfer offers dry up and the music stops. The last cards in the game are the ones that don’t get paid. When the credit card companies see this happening, they race to get their chairs out of the game. The consumer is washed out before he even knows what happened.

What does this mean for you? As long as you are charging your cards and making the minimum payments, everything seems fine, but when you hit a crisis, even just a short term one, the tsunami starts to build. Your interest rates go up, you get hit with fee after fee, and your minimum monthly payments start to climb. If you’re lucky, you can get out of the water before it gets dangerous, but for lots of people, the game moves too fast for them to do anything about it and they’re flooded with multiple credit cards that they just can’t pay back.

This game may be legal, but it is immoral and disgraceful. Do not be ashamed if you find yourself in this position. Be indignant. Recognize that the credit card companies knew this would happen to you when they started the game. They used your hard work and your belief that you should always pay your debts to drive you to your financial breaking point.

The new credit card law is not going to stop this game. It will slow it down a bit for the consumers who may stumble every once in a while, but for the consumers who have serious crises, the chairs will keep getting pulled out from under them. They’ll just receive a little extra paper to document the fact that they’re getting screwed.