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ScottyMacEsq
ScottyMacEsq, Attorney
Category: Legal
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Experience:  Licensed Texas General Practice Attorney
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How do I properly use lack of privity in response to a debt

Customer Question

How do I properly use "lack of privity" in response to a debt collector lawsuit?
Submitted: 5 years ago.
Category: Legal
Expert:  ScottyMacEsq replied 5 years ago.
You don't. There is not a lack of privity, most likely. On the underlying debt, you agreed to let them assign the debt should they want to. What that means is that they have the right to assign their right to be paid under the debt to another company, and even though you did not enter into a contract with this third party, you are still legally required to pay them (but only under the same terms and conditions as the original contract; nothing but the payee changes in that contract). I wish that I could give you better news, but this is the law, and the courts are not going to turn over hundreds of years and thousands of cases of established precedent now. This is literally the law all over the world. If they have the right, contractually, to assign the interest to getting paid, then they can do that.

Now you might have some other defenses, such as statute of limitations. This varies depending on the debt, but for instance, if it is an open account (such as a credit card) then if it has been more than 4 years from when you stopped paying until when the collections company sued you, then you can claim the defense of statute of limitations.

Otherwise, if the lawsuit was filed during the statute of limitations, then based on the limited facts that I have, you're not going to have a valid defense to stand on here (to absolutely win, that is).

I know that this is probably not what you want to hear, but it's the law. I hope that it clears things up anyway. Good luck to you!
Customer: replied 5 years ago.
This is true even if he original creditor "has no further interest in the account?" What about this plaintiff admitting to purchasing bad debt. I have no contract with this company.
Expert:  ScottyMacEsq replied 5 years ago.
That is especially true. When one party assigns their interest to another, then that interest does not "double". There can't be two claims against you. So if a creditor decides that he doesn't want to go after you, they can "write off" that debt as bad. Tax rules allow companies to do this, and claim them against their profits. Another company, thinking that they can recover some money from you, comes in and buys that debt from the original company, for pennies on the dollar sometimes.

This literally happens all the time. Companies write off bad debt, sell it to these companies for pennies on the dollar, and these companies try to recover as much as they can. If you buy a debt for 5 cents on the dollar, if you have a 10% chance of recovery, that's still a good investment. So the debt was "bad" in the sense that the original company didn't want to pursue it, but in doing so, they did not give up the right to pursue it in the future. They instead sold that right to pursue the debt to the company that is now trying to recover against you.

That being said, this company is trying to make money. If they think that they're not going to get much out of you, even with a judgment, then they will be more likely to work with you. You can call them up and threaten bankruptcy, unless you can come to some sort of settlement. If you go into bankruptcy, they might not get anything, and if they do, it could be a long way down the road. A buck now is better than a small possibility at two later on. Something to think about here.

I hope this clears things up, even if it doesn't help much.
Customer: replied 5 years ago.
Yes, this company bought my 7K debt for pennies on the $ and I shouldn't owe him more than pennies on the dollar!!!! you haven't really told me anything I didn't know. I don't really think the courts want to force people like me, No assets...into bankruptcy...there's got to be another way!!!!
Expert:  ScottyMacEsq replied 5 years ago.
I am sorry if I haven't told you anything you don't already know. That's just the law. Contract law is not about compassion, it's about two parties making an agreement, and if either side doesn't abide by the agreement, for whatever reason, the court is going to enforce that agreement. I agree that they don't want to force you into bankruptcy. Even the attorney and the people working for the collection company don't want to force you into bankruptcy. They're just trying to make some money collecting against a valid promise that you made (to pay back money to the original debtor).

Again, I'm truly sorry that there's not some trick that I can give you, but there's not. I would call up this company and see what you can work out with them. Otherwise, if they take you to court and get a judgment, they WILL come after you with that judgment.

I truly wish you good luck, and hope that you find relief.

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