The student loan default crisis has seen a major uptick in legal action against borrowers, which means borrowers need to be prepared if their account is in default. This normally triggers around nine months after the last payment has been made, and lawsuits are rarely brought against debtors right when the loan enters default. In fact, lenders usually pursue alternatives to legal action long before they consider a lawsuit. And if the lender is the federal government, it can take years before the debtor is sued.
But eventually, that lawsuit may come. When it does, don’t panic. It’s true that the lawsuit will take some time to deal with, and that the judgment may not be in the debtor’s favor. However, ignoring the lawsuit will do much more harm than good.
It’s important to react quickly. Review the complaint, which officially signals the start of legal action, as it will detail how much is owed and by whom. If there are discrepancies here, make sure to note that, as it will likely serve as the linchpin in a defense. It is wise to seek representation from a debt defense attorney, as an attorney will ensure all court proceedings and paperwork are followed and filed properly. A debt defense attorney can also craft their client’s case and represent them in court and during settlement.
There are numerous defenses available to defendants, but which ones are effective will depend on the particulars of the case. In many debt collection lawsuits, it’s often a game to see who will blink first. Even if a lender could demonstrate their right to payment and provide an exhaustive library of information on the borrower, that kind of effort may not be something the lender is interested in. A lot of cases are dismissed in this fashion because collectors know they can get most people to pay if they exert a little pressure. If a defendant shows a willingness to fight and wrestle over every detail, the lender may not consider it worth its time.
Specifically, these are some of the defenses that people can deploy during a student loan collection lawsuit:
1. The lender has mistaken the defendant for someone else – Stolen identity and poor recordkeeping can result in the wrong person being sued altogether. The lender isn’t going to roll over, though, just because the defendant asserts this, so the defendant must demand the lender show critical information that identifies them properly. Inevitably, the lender will not be able to.
2. The collector doesn’t have the documentation it needs to sue – Even when the defendant has been named correctly in the lawsuit, that doesn’t mean the collector is out of the woods. Student loans are some of the most nomadic in the financial world, meaning they almost always change hands eventually. When they do, it’s common for the loan’s new owner to miss an important document. It’s surprising how extensive this issue can be, with collectors suing people even though they don’t even have a copy of the promissory note on hand. Without that paperwork, the collector will not have the authority to go after the debt using litigation, even if they truly own the loan.
3. The collector has provided an inadmissible affidavit – In most states, there are strict rules in place regarding how business records are kept, and how they are presented in court. This includes the important records, like payment records and promissory notes. Before any of this documentation can be used in a lawsuit, they must be verified through a qualified party, and one that can prove they have thoroughly reviewed the account’s details.This is another surprising area where lenders and collectors frequently trip up. Many cases have been dismissed because the collector used an unqualified person to develop an affidavit. An emerging trend among collectors that file lawsuits en masse is the robo-signing process. During robo-signing, hundreds, even thousands of affidavits are put together quickly and rubber stamped. As anyone providing an affidavit must demonstrate comprehensive familiarity with the account, the robo-signing process violates the very idea of what an affidavit is. This is a new phenomenon, but it has already been seen in a large number of student loan collection lawsuits.
4. The debt is no longer within the statute of limitations – Consumers are protected by the statute of limitations in their state regarding debt. After a certain amount of time has passed following the last payment (in Texas, this is four years), the debt can no longer be the subject of a collection lawsuit. Collectors usually know this when they file the lawsuit, hoping that the defendant chooses not to answer, and therefore the court hands over a default judgment to the collector. If the debt has passed out of the statute of limitations, don’t let the collector get that default judgment.
5. The collector isn’t willing to comply with a request for more information – This is where lenders and collectors often just throw up their hands and move on. Accounts with a long history have a lot of information tied to them, and defendants have a right, within reason, to see that information. This is especially true if there is a potential discrepancy, as the court can request more information or even a witness to testify on the collector’s behalf. At this point, the collector must decide if it’s worth it dedicating more resources to this one case. In many cases, the answer to that is “no.” In fact, the collector may not even respond to the court at all, and just let the lawsuit be dismissed without further attention. Even when a creditor could prove everything they need to, the defendant can still come out on top.
Being sued over a student loan can be stressful, but with experienced legal representation from a debt defense attorney, there are always options available to defendants.