Words have power. Didn’t you know that? Some words have power to do the unthinkable. Some words can even get you out of debt! Find out how.
I had a chance to listen to This American Life’s rerun of Magic Words the other day. One segment touched on the magic words that people should be aware of in case they are sued in court over a debt. The reporter, Jake Halpern, that was interviewed on the show authored the book, Bad Paper: Chasing Debt from Wall Street to the Underworld. It’s a story about the dirty underbelly of the crooked debt collection industry.
In his segment, he talks about the story of a couple who are able to elude a debt they are being sued for in court. How are they able to do it? They utter the magic words.
Before I dish on what they are, I should give you some background so that you will know how and why these words work.
According to Halpern, the initial holders of debt (the original creditors) sell off bad debts to places like debt collection agencies for pennies on the dollar. Many times, the debt is at a stage where it is very unlikely to be recouped. Perhaps the debt is old, the person is bankrupt or there are other circumstances that make the debt bad. When the debt sale happens, the original paperwork usually does not accompany the account information. The collection agency may simply get a spreadsheet with names, phone number and amounts. According to law, unless a creditor can produce the original promissory note or loan agreements, the debt is considered as invalid and the creditor loses their right to collect on the debt. (This is my layman’s summary. Talk to a lawyer if you want the real-deal legal version what to do when you are being sued in court for a delinquent debt.)
When the creditor decides to sue a debtor, they are banking on a few things:
- You won’t show up to court (80%-90% of people being sued don’t even bother showing up!)
- You won’t know the magic words and therefore won’t use them to make them drop the case (and the debt claim) against you
Enough suspense already! What are these magic words? According to Halpern, the defendant must say something to the tune of, ” Your Honor, I don’t recognize that amount. Can the plaintiff show me how they arrived to that amount for the debt I allegedly owe? I would like to see the original loan agreement I signed for that amount.”
This works because most of the time, the creditor won’t have the paperwork! I actually have a friend whose second mortgage to the tune of $10,000 or so got cancelled because of this phenomenon. It actually happens.
Before you go using this at every turn keep this in mind: it would be unethical if you know that you owe the bill in the amount they are asking for. The problem is these amounts do get padded, exaggerated and simply fabricated. So you really should ask to see how they arrived at the amount. Even if it’s high and it’s true, accept it. Accepting it doesn’t mean you have to pay it. Try to negotiate it down if you can. Most times they will settle, because again, the likelihood of them getting any money was small anyway. Though we weren’t getting sued, were able to negotiate a $12,000 bill down to around $3,600. Miracles do happen.
Moral of the story: ask for evidence of the amount along with corroborating paperwork. If they can’t produce it, they can’t hold you responsible!
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