You’ve been hounded by debt collectors and then one sues you. It all starts when a process server shows up at your door with a dreaded summons. You don’t really know what to do at this point, and you start to wonder if the debt collector will allow you to negotiate a payment plan. You don’t realize that the first step is filing an Answer (you can buy a form to do so here!), so instead you call the lawyer. A paralegal answers the phone and agrees to a payment plan for less than the total amount owed. But you don’t require them to give you anything back in return. So you make your payments until you reach the agreed-upon amount. The next time you hear from them is when you get your paycheck from work, and they’ve garnished your wages.
How can this happen? Didn’t you have an agreement? This is absolutely a worst-case scenario. Not only do you pay them your hard-earned money, but they go ahead and take even more than are entitled to take.
There is one thing you need to do to avoid this scenario, and that’s to obtain a dismissal “with prejudice.” Obtaining a dismissal with prejudice is the only surefire way to avoid the debt collector from chasing you down for more money after you’ve settled the debt.
When a judge dismisses a case, they usually do so in one of two ways: with prejudice or without prejudice. A dismissal “without prejudice” simply means that the judge is ending the case, but the plaintiff can choose to re-file it at a later date. Dismissals without prejudice are common when the parties don’t move the case forward and the judge wants to remove it from the docket, or when a plaintiff voluntarily chooses to not pursue the case but wants to keep open their options to pursue the case later. If a judge dismisses a case without prejudice, you’re not really in the clear until the statute of limitations runs.
On the other hand, a dismissal “with prejudice” means that the case is done forever. The plaintiff cannot re-file it. The court considers all of the issues resolved. In other words, it is a surefire method of keeping the debt collector from coming after you again for that particular debt. When a judge dismisses a case with prejudice, the final order dismissing the case will note that the case is dismissed “with prejudice.” This particular language on the final order is critical, since without it, a judge will usually consider a case dismissed “without prejudice.”
So how do you get a dismissal with prejudice? You do this by negotiating for it in exchange for payment of the debt. When you negotiate a settlement or a payment plan, think about it as if you are entering into a contract with the debt collector. A contract requires that both parties give the other party something in exchange for something that they get. In this case, the debt collector gets a payment (whether it’s full payment, partial payment, or a payment plan). You, on the other hand, get a dismissal with prejudice. If you fail to get a dismissal with prejudice, you aren’t really getting anything in exchange for giving the debt collector money.
The first step in obtaining a dismissal with prejudice is to negotiate a settlement. Once you’ve agreed with the debt collector on a dollar amount (and payment schedule, if applicable), then you let them know you’ll only pay if they agree to dismiss your lawsuit with prejudice. This is such a basic request in lawsuits, that if the debt collector won’t agree to it, you should consider this a giant red flag. If the debt collector agrees to the dismissal with prejudice in exchange for payment, the second step is to memorialize your agreement. This means you put it down in writing. Although you can do this informally, even by email, the best practice is to draft a settlement agreement and have both parties sign it. If you need help knowing what to put in that settlement agreement (and you want language favorable to you, not the debt collector, check out our settlement agreement for sale in our store here. Your written agreement should clearly state that in exchange for payment, the debt collector will ask the court to dismiss the lawsuit with prejudice.
Once both parties have signed the settlement agreement, the next step is to enforce the agreement. This means that once you pay, the debt collector should ask the court to dismiss the case by filing a motion to dismiss. The motion should clearly ask the judge to dismiss the case with prejudice. If the motion doesn’t ask for a dismissal with prejudice, you should file your own motion clarifying with the court that your settlement agreement requires a dismissal with prejudice. If you need a form to file such a motion, you can find one here. Likewise, if the debt collector fails to file a motion to dismiss with prejudice, you can file the motion yourself and ask the court to dismiss with prejudice. Make sure to attach a copy of your signed settlement agreement as an exhibit to your motion so the judge knows you’ve reached an agreement with the plaintiff.
Finally, wait for the judge to rule he motion. When the judge rules, he or she should issue an order that clearly states that the case is dismissed with prejudice. If the order doesn’t clearly state that the case is dismissed with prejudice, file another motion asking the judge to clarify the ruling.
Once you have the final order, if a debt collector ever tries to file the case again, you can file a motion to dismiss, attaching a copy of the order dismissing the prior case with prejudice, and ask the judge to dismiss again.
In most cases this won’t work unless you’ve negotiated for a dismissal with prejudice. For example, if you file a motion to dismiss because you weren’t properly served with a summons, and you win that motion, the judge will probably dismiss the case without prejudice, allowing the debt collector to re-file the case and serve you again. You can always ask for a dismissal with prejudice, but courts typically won’t grant them unless there is a legal basis to do so, or the parties have agreed (through a settlement agreement). If you want to find another legal basis to dismiss a case with prejudice, you’ll need to research your court’s rules of civil procedure.
So next time you want to negotiate a settlement with a debt collector, make sure you get something back from them in return: a dismissal “with prejudice.”
If you need help memorializing your settlement agreement, or starting settlement negotiations, check out our store for our package settlement offer letter and settlement agreement. The agreement was drafted by a lawyer with language specifically designed to be favorable to someone sued by a debt collector. You can get that package here.
If you need other court forms, like an answer or a motion, you can get those here.
And if you need any more help, I teach people how to defend a lawsuit against a debt collector without an attorney. Sign up for a time to meet with me on a 1:1 video call and I’ll teach you everything you need to know to defeat your debt collector. I’ll include all the court forms you’ll need to get this done. You can sign up here.
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