Defending yourself in a debt collection case against a payday lender, landlord or payday lender can feel like you are a single pawn in a game of chess. This post will give you some defensive tools that just might thwart your creditor’s efforts and help you win your case. The key tools are known as affirmative defenses.
What are affirmative defenses?
An affirmative defense is an argument you present to the court that, if proven, requires the judge or jury to dismiss the case against you even if the creditor and plaintiff’s allegations that you owed the debt are true. In other words, the creditor can prove that you owed the debt but an affirmative defense is a legal excuse that proves you don’t have to pay. The most common and well-known affirmative defense that most people think of is “statute of limitations.” The statute of limitations is the deadline by which a creditor must file a lawsuit or they cannot collect. Statute of limitations is only one affirmative defense and there are many more affirmative defenses that you can use to defend yourself against creditors.
When thinking about affirmative defenses you should also understand the term “burden of proof.” The party with the burden of proof has the responsibility in court to prove the allegation. In a debt collection case, a creditor has the burden of proof to show that you owe the debt. If the creditor does not present proof, the creditor loses the case. When it comes to affirmative defenses, the debtor has the burden of proof. Using the example of the statute of limitations, the debtor has the burden of proof to show that the statute of limitations has passed. If the debtor cannot prove that, then the statute of limitations argument fails.
How do I use affirmative defenses?
You want to tell the court and the opposing attorney what your affirmative defenses are when you file your answer to the summons and complaint. When you prepare an answer you should admit or deny each of the allegations in the plaintiff’s complaint. After your responses to the allegations, you should list your affirmative defenses. This will tell the court and the opposing attorney how you plan to defend your case. In a best-case scenario, the opposing attorney would see your affirmative defenses and see that they have no way to win the case if you present that defense and can prove it, so they drop your case. While that scenario is uncommon, it is possible!
You can also file a motion to dismiss or a motion for summary judgment using your affirmative defenses to ask the judge to throw out the case. A motion is simply a document you file with the court that asks the judge to take a specific action. A motion to dismiss asks the judge to dismiss the case. A motion for summary judgment asks the court to not just dismiss the case, but also rule as a matter of law that you do not owe the debt so the creditor cannot continue to try and collect from you. This is obviously an excellent result that could come from identifying your affirmative defenses. If you do file a motion to dismiss or a motion for summary judgment you have to not only show that you have an affirmative defense but also that there is no contradicting evidence the plaintiff can show that might disprove your affirmative defense.
Even if you cannot file a motion to dismiss or motion for summary judgment, or the judge denies your motion, you can still use your affirmative defenses at trial. These affirmative defenses will be the arguments you make to the judge or the jury when asking them to decide that you do not owe the debt.
What are common affirmative defenses to use in a debt collection case?
The following is a list of possible affirmative defenses you can use in your own case. This is not an exhaustive list but will provide you with some ideas of common defenses debtors use against creditors in debt collection lawsuits.
It’s also important to note that every state has different laws that govern these affirmative defenses such that these affirmative defenses may apply to your case if you are in one state but not another. So you’ll need to research what the law is in your state to see if each particular affirmative defense applies to you. For example, one state may have a statute of limitations of 6 years for a debt (meaning that if the debt is more than 6 years old, the creditor cannot sue you to collect on that debt), but another state may have a statute of limitations for 4 years for a debt. So it’s really important for you to figure out what the law is in the state in which you’ve been sued. You don’t want to argue that the judge should dismiss the case because the statute of limitations is 4 years when the statute of limitations in your state is really six years.
Anyway, on to the affirmative defenses:
Statute of Frauds
When most people think of contracts they think of a written document that both parties sign. While this is one form of a contract, contracts can take several different forms, including a contract that is not written at all, otherwise known as an oral contract. But under the law in many states, certain types of contracts must be in writing to be enforceable. Examples of contracts covered by the statute of frauds might includes contracts for the sale of land, contracts for the sale of goods over $500, or contracts lasting over one year. If this applies to your debt, you should include statute of frauds as an affirmative defense in your answer.
Wrong Account
The creditor in your case may think that you owe the debt but they may be mistaken (or they may be aware they’ve sued the wrong person but don’t care). The real debtor may have the same name as you, or may have lived at your current address before you. This might apply if a husband takes out a credit card in his ex-wife’s name and racks up unpaid charges. If this is the case, you should tell the court that the creditor has made a claim on the wrong account. This would apply if the account is not your account, you are not the person who placed the charges on the account, or you are not the person who incurred the debt.
Ambiguous Contract
Sometimes contracts can be so ambiguous and confusing that no reasonable person can understand what the terms of the contract mean. If this is the case, you should list ambiguous contract as an affirmative defense in your answer.
Bankruptcy
If you have filed for bankruptcy all litigation against you for your debts must cease while the bankruptcy court determines how to handle your debts. If you have filed for bankruptcy, or your debt was previously discharged in bankruptcy, you should file a motion to dismiss the case against you.
Contract of Adhesion
A contract of adhesion is a contract that is so unfair as to be unenforceable because one of the parties had such disproportionate power that the party with less (or no) bargaining power could not have possibly negotiated for better terms. If your debt is based on a contract of adhesion you should list this in your affirmative defenses.
Unconscionable Contract
An unconscionable contract is a contract that is so unfair or oppressive that the parties could not have entered into the agreement unless the creditor abused the debtor. If a court finds your contract unconscionable you would not owe the debt. If this applies to your contract you should list this defense in your answer.
Illegal Contract/Against Public Policy Contract
Some contracts may be illegal or against public policy (for example, a contract to buy or sell illegal drugs). A court will not enforce an illegal contract. If this applies to you, include it in your affirmative defenses.
Illusory Contract
An illusory contract is an agreement that appears to be a contract but doesn’t fit the legal definition of a contract. To form a legally binding contract there must be “consideration.” This means that both sides must receive something in exchange for something else. For example, there is consideration in most contracts for the purchase of goods or services. One party pays money in exchange for the other party providing the goods or services. If one side did not receive consideration, the contract is illusory and you should include this as an affirmative defense.
Contract Not Agreed To
In some cases a plaintiff may sue you to enforce a contract that you never actually signed or agreed to. If this is the case, you should include this as an affirmative defense.
Not Liable as Co-Signer
If you co-sign a contract you would be responsible for the debt in many cases, but in some contracts a co-signer may not be liable. Or in other cases, a creditor may not have properly informed the co-signer of their rights, which would invalidate any claim against a co-signer. If you are a co-signer, you might consider including this as an affirmative defense.
Contract Cancelled
You have had a contract with the creditor at one point, but you or the creditor legally cancelled the contract under the terms of the agreement. If either side had cancelled the contract before the debt came due, you should include this as an affirmative defense.
Plaintiff Lacks Debt Ownership
Sometimes creditors don’t want to bother chasing down all the money people owe them so they will sell their unpaid debt to debt purchasers for pennies on the dollar. The debt purchasers will then sue for the debts. They make their money by recovering more money in the lawsuits than they paid for the debt. But debt purchasers often rely on the hope that the debtors will ignore the lawsuit allowing the purchaser to obtain a default judgment. When they purchase debt they will often receive a single page of paper listing dozens of unpaid accounts with no details other than the debtors name and the amount owed. So if a debtor challenges the claim in court, the debt purchaser cannot prove the debtor owes the debt, since they have no documentation of the original contract. If you believe this might be the case, this would be an affirmative defense. This affirmative defense typically applies when the party suing you is not your original creditor.
Debt Paid or Excused
If you have already paid the debt or the creditor has previously agreed you do not have to pay the debt (like as part of a previous settlement agreement), you have an affirmative defense. This is sometimes known as accord and satisfaction, discharge, waiver or release.
Fraud or Duress
If you entered into the contract as a result of fraud or duress, a court will not enforce the debt. This might happen because the creditor lied to convince you to sign the contract, or threatened or physically forced you to sign the contract. If this occurred you will want to make this affirmative defense. This is also sometimes called fraud in the inducement.
Goods or Services Not Received As Promised
If a merchant sues you for non-payment of goods or services, but you never received the goods or services, you do not owe the debt. This would also apply if the goods or services were given but not in the way provided. For example, the goods may have been defective, or the creditor may have damaged your property when delivering the goods or services. If that has happened to you then you should make this affirmative defense.
Doctrine of Laches
To make a laches affirmative defense you must show that an unreasonable amount of time has passed since you incurred the debt such that the delay impacts your ability to defend the claim. If a creditor waits too long to file the lawsuit, witnesses may die or become lost, documents may be lost or destroyed, and witness memories can fade. This is similar but different to statute of limitations. The statute of limitations is a hard deadline by which a plaintiff must file a case. Laches is case-specific and will depend on the specific facts of your case. But if you can make the argument, you should include this as an affirmative defense.
Estoppel
Estoppel means that a judge can stop a debt collector from collecting anything from you because it would not be fair based on the debt collector’s prior actions or prior court cases. For example, the creditor may have already sued someone else for the debt and won, and estoppel would stop the creditor from collecting twice.
Unclean Hands
If the creditor did something illegal or unethical, they may have unclean hands in regard to how they handled your contract. A court may find that those unclean hands invalidate the contract.
Loan Acceleration Not Permitted
If you owe money for a loan and you miss a payment or two, a creditor could try to sue you not just for the missed payments but for the entire loan. But the terms of your loan will govern whether or not they can accelerate the loan, or make you pay the entire loan early if you miss one payment. If the terms of the loan or another state law prohibits loan acceleration, this would be a good affirmative defense.
Mitigation of Damages
A creditor may claim that they suffered damages as a result of non-payment. But if those damages occurred because the creditor failed to take any action to minimize the amount of the debt when they had the power to do so, you would not owe any amount for those damages that the creditor could have avoided.
Failure to State a Claim on Which Relief Can Be Granted
This affirmative defense is often used in a motion to dismiss. It means that in reviewing the creditors complaint, even if we assume that all the allegations in that complaint are true, the defendant does not owe the debt.
Offset
You may have credits on your account or you may have made partial payment for the debt. If this is true and the creditor sues you for the full amount owed, you should argue that the final judgment should be offset by the amount you have already paid and for which you have credits.
Failure to Perform
If a creditor sues you for an unpaid debt but failed to perform their end of the bargain, you should list this as an affirmative defense.
Res Judicata
If you or someone else has already been sued for the alleged debt, the claims would be barred. For example, maybe the creditor sues you once and you win but then tries to sue you again for the same debt. You should then file a motion to dismiss under the basis of res judicata. Or if you co-signed on the loan and the creditor already sued and recovered against your co-signer, the creditor cannot also sue you.
Sale of Property Not Done in Commercially Reasonable Manner
If a creditor repossessed your property and sold it to recover the debt owed, but sold it without properly advertising it or for less than it was worth, and is now suing you for the balance, you can claim an affirmative defense that what you owe is offset by the amount of what the property was actually worth.
Failure to Give Notice of Sale of Property
If a creditor repossesses your property but does not give you proper notice of the date, time and place of the sale, you may be entitled under this affirmative defense to offsetting statutory damages.
Statute of Limitations
States set time limits by which a creditor must file a lawsuit or lose the ability to collect on the debt. If that deadline has passed, you should file a motion to dismiss the case.
There may be other affirmative defenses that apply to your case or that may be unique to your state. You should include in your answer as many affirmative defenses as apply, and make these arguments when you go before the judge.
If you need help in identifying which affirmative defenses apply, how to include affirmative defenses in your answer, or don’t know how to prepare a motion to dismiss, Debtbrief can help. We have form answers with affirmative defenses included, with a guide that teaches you how to prepare the answer. The forms also come with a motion and instructions on how to prepare that motion so you can ask the judge to dismiss your case. Click here to purchase.
Are there any other affirmative defenses you’ve used that have worked against creditors? If so, leave us a note in the comments and maybe we’ll add them to this post.
