3rd Party Debt

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November 25, 2024

Client Story

A company may sue someone who has not paid a debt. Old debts are sold to third parties—companies with whom you haven’t directly done business—who will then sue you to collect some or all of that debt, parties, who then sue people to collect the funds. If you don’t recognize the company which is suing you then it’s very likely a third-party debt buyer, and you’ll need to prepare yourself to meet them in court. 

Context

In the case of 3rd party debt the owner of it (the plaintiff in this legal case) isn’t who you borrowed the money from or owed it to originally. It is owned by a company which buys debts like yours for a fraction of their value and attempts to collect on those debts in court for a profit.
When you go to court, your goal will be to show that you have no contract or agreement with this company, and that they have no right to collect from you.
You MUST file an answer AND show up to your court date. If you do not do both of these things, the plaintiff will win a default judgment against you. This will allow them to garnish your wages & bank accounts or otherwise collect the money from you.

Requirements

Steps

Step 1: File the Answer

The deadline to file your answer will depend on the court in which you are being sued. Check the 
top center of the document you were served: it should say either “Small Claims,” “District Court,” or “Circuit Court.”

If you are in Small Claims or District Court, you have 14 days from when you were served to file 
your answer.

If you are in Circuit Court, you have 30 days from when you were served to file your answer.

The Answer to Complaint form is a single page document which you will use to give your reply.

You will need to list the case number, located on the upper right corner of the Complaint that has been served to you. You will also need to indicate which court and county you are being sued in. 

Since you are the one being sued, you are the “Defendant” and the company suing you is the “Plaintiff.”

Carefully read the options listed on the form. One of them should say “I deny I am responsible at all.” This is usually the box you want to check; by filing this answer, you indicate that you have an issue with the claim made against you and want to contest it in front of the court.

Be aware: if you choose the option which reads “I admit everything and do not want a trial”, you will not be given a court date. The plaintiff—that is, the 3rd party who owns your debt—will be given everything they asked for by the court, including the power to collect money from you. Only choose this option if you agree fully with the debt that the plaintiff claims you owe and expect to pay it just as they request. In most circumstances, you should not choose this option.

Sign the “Answer to Complaint” and date it.

Make a copy of the form for yourself, and another which you must give to the Plaintiff. To get the copy to the Plaintiff, deliver or mail the form to the address listed on the Complaint you were served with. Once you have done that, fill out the “Certificate of Service” at the bottom of the form.

Last, take the original copy of the Answer to Complaint to the Court Clerk by the deadline.

Step 2: Attending Court

If you file your answer before the deadline, the court will mail you a notice with the date of your trial. You must go to your trial date, otherwise the Plaintiff will get a default judgment against you.

When you arrive at the courthouse, find the courtroom that belongs to the judge who is handling your case. The letter telling you your court date will also tell you the judge with whom you will have it.

You will likely arrive alongside others who have court dates with the same judge on the same day. Sit on the benches in the back half of the room (furthest from where the judge sits). When the judge arrives arrives, it is polite to stand and wait to be asked to sit. Wait until your case is called before moving to the front of the room. Try to avoid fidgeting on your phone, or making noise which would be disruptive to others’ proceedings.

When a company like a 3rd party debt collector sues you, they must send an employee of the original company with whom you had a contract to serve as a witness. Only a witness—not the plaintiff’s lawyer—can present evidence to the judge that you owe them money. Furthermore, a witness can only present evidence that they have personal knowledge of; this means that a witness cannot present evidence from a company that they do not work for.

If the company suing you cannot or chooses not to send a witness, you may be able to win your case outright. They won’t be able to present evidence against you, even if their attorney brought it.

Settlement

The judge may ask you to go in the hallway to try to settle your case. Generally, you should always step outside to speak to the other party.
If the Plaintiff’s attorney doesn’t have a witness present, they may let you know that they will dismiss the case or otherwise settle it with you.
Only agree to settle the case if you agree you that owe the money, and you are sure you can afford the payments for the settlement they offer you. In most cases, you should not settle your case despite going out of the courtroom to discuss it–especially if the Plaintiff does not have a witness. 

Trial

When the Plaintiff is speaking, do not interrupt—even if what they’re saying sounds untrue or is rude towards you. The rules of the court guarantee that you will be given a chance to speak.
Be aware that in Small Claims court, because of its relaxed rules of evidence, attorneys are allowed to present a signed letter from an employee of the company rather than call a witness. If your trial happens in small claims court, they will be allowed to present documents to the judge. If the attorney presents documents, you will be given the chance to review them.

Objections to Make Based on the Plaintiff’s Documents

  • Affidavits/Letters
    • If in District or Circuit Court, testimony cannot be given by a piece of paper, therefore there has to be a witness from the company physically present.
    • The letter must come from an employee of the company that created the records. A letter from a Midland Credit Management employee cannot be used to verify records from Discover Bank, for example.
  • Bill of Sale (Purchase Agreements)
    • The Bill of Sale is only a part of the whole Purchase Agreement, which likely includes the terms and conditions of the purchase. With only part of that document, it is unclear what they have a right to do with what they “purchased.”
  • Business Records
    • Business records that were made by the original creditor cannot be claimed by the 3rd party company as their business records in court because they did not create them, they essentially adopted them from the original debtor, so they cannot testify as to their accuracy or their creation.
    • Additionally, business records are not proof of the original, signed obligation (original contract). To prove that you are bound by the debt, the original, signed obligation is needed.

Step 3: The Decision

The court will decide on your case. Some judges will tell you their decision that day, while others will mail you a court order. Make sure the clerk’s office has your updated address. 
If the Plaintiff wins, they may attempt to collect money from you in various ways including:

  • Garnishing wages
  • Seizing assets, such as bank accounts, cars, or your home

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