What is a defense?
Generally, a defense is a reason why the plaintiff (creditor/debt buyer) should not win its case.
In a debt collection lawsuit, a defense would be (1) the plaintiff failed to prove its case or (2) you do not owe the money. If one of your defenses is successful, the plaintiff will lose and you will win.
What is NOT a defense?
- The reasons why you fell behind on your bills.
- The reasons why you cannot pay the debt today.
- The fact that the creditor or debt collector refused to accept reasonable payment from you.
- Your statement that you want to settle the case or make a payment agreement.
So, if you file answer to a collection complaint using any of these excuses, the court will not decide in your favor. SO DON’T DO IT!
Do most defendants have legal defenses to collection lawsuits?
Yes. Several common defenses outlined below may apply to your case. The defenses outlined below — if applicable to your case – are legitimate reasons why the plaintiff should lose and you should win. If you have questions about whether a particular defense might apply to your case, call the Law Offices of Rex Anderson PC at (810) 653-3300.
What is the best way to present your defenses to the court?
To tell the court about your defenses, you must list them in your answer. We provide you with examples of standard “Affirmative Defenses” which should be asserted as part of your initial answer to the creditor’s complaint.
You can download the answer form online [INSERT LINK] or get it at the civil court clerk’s office. You can also ask the clerk for limited assistance preparing your own Pro Se Answer. You can also contact me for assistance in preparing your answer and filing other pleadings in your case. I charge a minimal fee to look over your documents and assist you in protecting yourself from unscrupulous creditors and debt collectors who do not have sufficient and proper evidence to obtain a judgment from you.
Defense 1: Improper Service (no personal jurisdiction)
The defense of improper service applies if (1) you never received the summons and complaint at all (commonly referred to as “Sewer Service” or flushed down the toilet service) ; or (2) you received the summons and complaint, but the manner of service was not correct.
Under Michigan law, a process server must try to make personal service or substitute service. Personal service occurs when the process server hands the summons and complaint to you in person. Creditors can also obtain “substitute service” by moving the court to allow them to publish notice of the lawsuit in a local legal newspaper. This supposedly satisfies the due process requirement of our US constitution.
Here are some common examples of improper service:
- Leaving the summons with your neighbor, who lives in a different apartment.
- Sending the summons to an old address where you no longer live.
- Throwing the summons on the floor in the lobby of your apartment building.
- Sending the summons to you by mail only.
If you want to get a case dismissed for improper service, there are a few things you have to do:
- You MUST RAISE the defense in your answer the first time you appear in court.
- You need to GET A COPY of the “affidavit of service” from your file in the courthouse. In fact, you should a complete of the file especially if you wish to retain my services to counsel you. The affidavit of service is a sworn statement by the process server that describes how you were served. The plaintiff will rely on this document to claim you were served correctly.
- You MUST FILE YOUR ANSWERS AND ASK the court to dismiss the case for lack of jurisdiction within 21 days of BEING SERVED or finding out that you have been sued. Sometimes this means that you will have to file special papers, called a “motion to dismiss,” before your first court date is scheduled. For a small fee you can purchase a motion to dismiss on my web site and then file it and argue it on your own (in pro per).
- You MUST SCHEDULE AND ATTEND a special hearing on your motion to dismiss for lack of proper service. At this hearing, the judge will hear from both sides to determine whether you were properly served. If the judge decides that you were improperly served, he or she will dismiss the case.
- You also need to GATHER EVIDENCE to present at your hearing. This evidence could include witnesses or documents that support your claim of improper service.
If your case is dismissed for improper service, the plaintiff can sue you again. You have to decide, based on the facts of your case and the strength of your other defenses, whether it is worth it to go through with this hearing.
Stand up for your rights
The plaintiff’s attorney and court personnel will often try to discourage you from pursuing a defense of improper service. They will tell you that the defense will not help you because the plaintiff will only sue you again. But improper service is sometimes your best defense. If so, do not be afraid to insist on your right to a dismissal based on improper service hearing! Remember that the court has no power to issue a judgment against you if you were not served according to law.
Stand up for your rights
Sometimes process servers lie when completing the affidavit of service. For example, a process server may falsely claim to have left the summons with someone at your home. You can detect this false statement by looking at the physical description of the person the process server claims to have met at your home. Does it sound like someone you know? You can file a complaint against a lying process server with the Michigan Attorney General.
Defense 2: Identity Theft or Mistaken Identity
These defenses apply when you believe that the debt for which you are being sued is not your debt. Identity theft occurs when somebody steals your name and personal information and opens up credit accounts in your name. Mistaken identity occurs when you have been confused with somebody else who has a similar name or other identifying information. Remember that the burden of proof is on the plaintiff to establish that you made or authorized each and every charge. You do not have to prove that the debt is not yours. NEVER agree to a settlement if you are a victim of identity theft or mistaken identity. If you’re not sure how to proceed call me.
Defense 3: Statute of Limitations
A statute of limitations is a time limit that a creditor has to file a lawsuit against you. It runs from approximately the last time you made a payment. Michigan has a six-year statute of limitations for credit card debts (Michigan Law, general contract law).
Importantly, the statute of limitations on credit card account stated or an automobile financing is only four years. A lot of debt buyers do not file their lawsuits until after this 4 year statute has run. They often have difficulty proving a breach of contract case because they do not have the signed applications or sales transaction slips. So the debt buyer is relegated to asserting an Account Stated claim. You can purchase my “brief” explaining this statute of limitation defense and citing Michigan law in support which is located on this website.
If the statute of limitations has expired, you have an absolute defense – the court must dismiss a case if the debt is past the statute of limitations. Any payment, no matter how small, can reset the statute of limitations. To be safe, NEVER make a payment if you want to assert the statute of limitations as a defense. ALSO SEE SECTION ON HOW TO OBTAIN A FREE LAWYER FOR SUING ON A TIME BARRED DEBT – BELOW.
Example #1: Let’s say you had a ABC Bank credit card. The last time you made a payment was in January 2005. You therefore “defaulted” in February 2005 (you usually “default” on a credit card debt about 30 days after your last payment). The statute of limitations starts running from your default, in February 2005. ABC Bank sues you in a Michigan court in August 2012.
Question: Has Big Bank waited too long to sue you?
Answer: YES. Because Big Bank waited more than SIX years to sue you on the credit card debt, the statute of limitations has expired, and the court must dismiss the case. This same rule applies even if you are sued by a debt buyer on a credit card debt and not by the original creditor.
Example #2: The same facts as in Example #1, except now, instead of ABC Bank suing you, a debt buyer called XYZ MIDLAND has sued you on your ABC Bank credit card.
Question: Has XYZ MIDLAND waited too long to sue you?
Answer: YES. Since XYZ Funding waited more than SIX years to sue on the ABC Bank credit card debt, the statute of limitations has expired, and the court must dismiss the case.
Defense 4: You Were Only an Authorized User
This defense may apply if you are being sued for a card that you shared with someone else. The defense hinges on the difference between a cosigner and an authorized user. If another person gave you permission to use his or her card, and you never agreed to be responsible for paying for that card, you were an authorized user. As an authorized user, you cannot be held responsible for that credit card debt.
However, if you signed a credit card agreement in which you agreed to be jointly responsible with someone else for a credit card, you are a cosigner, and this defense does not apply to you. As a cosigner, you can be held responsible for the debt, even if none of the charges were yours. Many creditors and defendant buyers attempt to illegal re-characterize these individual debts as having been joint spousal debt from the beginning.
Its an illegal attempt to collect a debt when a debt buyer report an individual debt as being joint to the credit reporting agencies. If the creditor illegally reports to the credit reporting agencies – that also violates state and federal law. Call a free consumer lawyer if this is happening to you and your spouse.
Defense 5: Payment
If you have paid all or a part of the debt, and you believe you have not been credited for the payment, you can raise the defense of payment.
Defense 6: Dispute the Amount of the Debt
If you believe that the amount of the debt is incorrect, you have the right to dispute it. Remember that the plaintiff has the burden to prove that you owe the amount for which you have been sued. The plaintiff must prove that the principal, interest, collection costs, and attorneys fees are all correct, agreed to in your contract, and lawfully charged.
You always have the right to insist that the plaintiff come up with your original contract, account statements, and even purchase receipts, to prove the amount of the debt. IF THE plaintiff cannot produce the contract stating the terms i.e. interest rate, penalties and attorney fees, then they are limited quantum Merit or unjust enrichment claims where they cannot add these extra costs.
Defense 7: No Business Relationship with the Plaintiff (lack of standing)
This is a defense that applies when the plaintiff is a debt buyer, not your original creditor. In other words you have never heard of the plaintiff who now owns the original credit card account. Because you never signed a contract directly with the debt buyer, you have the right to challenge the debt buyer’s right to sue you (also known as “standing”). The plaintiff will not be able to prevail unless it can prove to the court that it owns your debt.
To do this, the debt buyer will have to produce a contract of sale (also known as an “assignment”) that mentions your debt specifically. If the debt buyer bought your debt from another debt buyer, it has to provide a chain of assignments going all the way back to the original creditor. If the debt buyer cannot or will not provide these documents, the court must dismiss the case. See Michigan case law – Palisades v Taylor and Gregory in our “free Law” section.
Defense 8: Bankruptcy
If you previously declared bankruptcy, and the debt for which you are being sued was discharged as part of that bankruptcy proceeding, you do not owe it anymore. Bankruptcy is an absolute defense to a debt collection lawsuit. Suing on a discharged debt is violation of the bankruptcy discharge order and as long as the creditor and debt account were properly listed on your bankruptcy schedules, you would be entitled to your attorney fees for straightening this out either in bankruptcy court or as a Fair Debt Collection Practice Act (FDCPA) case.
Defense 9: Collateral Was Not Sold at a Commercially Reasonable Price
This is a special defense that applies in auto loan cases. When you default on an auto loan, the bank will usually repossess the car and sell it — often for far less than the value of the car. When the proceeds of the sale do not cover the entire auto loan, the bank may sue you for the remainder (called the “deficiency”).
However, the bank cannot pursue you for a deficiency unless it obtains a fair price for the car (a fair price is known as a “commercially reasonable price”). The burden of proof is on the bank to establish that it sold the car at a commercially reasonable price. Because a bank rarely, if ever, obtains a commercially reasonable price for the car, this is a very strong defense that should be raised in every auto deficiency case.