When you get sued you hang your head.  You feel like the battle is lost when the Sheriff delivers the court summons to your door. 

But getting sued is not the end of the battle. No, getting sued may be the best thing the other side did to equalize the playing field.

Yes, getting sued is a serious thing. You are out of your comfort zone and you face a professional litigator.  But there is something you are overlooking.

Lawsuits empower you to:

  • Demand an accounting of all charges and payments.
  • Demand a copy of all their documents. (“Motion to Produce Documents”)
  • Demand answers to written questions, what lawyers call “Interrogatories.”
  • Schedule face-to-face meetings with the people who sued you (the “Deposition”).
  • Ask the court to appoint an arbitrator or mediator to facilitate a settlement.

You see, litigation is a two-way street. 

The other truth of debt collection lawsuits is this: debt collection attorneys are not used to being confronted. Nine-five percent of their lawsuits wind in up Default Judgments, meaning the other side never bothered to file a response and they won a judgment by default.  The remaining defendants who file a response are washed away in Summary Judgment motions.

Collection attorneys almost never face an organized, informed and diligent opponent.  They don’t face such competition because the poor defendants don’t know the rules.  They don’t have the tools. And they don’t have the experience.

But here is another fact.  You are an expert in your own case. You know the facts.  You know the dentist is not entitled to his $1,500 fee since the implant was not installed correctly and you have suffered infections and jaw pain ever since.  You know the doctor’s office was supposed to file a claim with insurance but they didn’t do it in time to get paid.  You know the car lot sold you a lemon that started for just 3 days before dying. You know basic facts of the case better than the collection attorney. 

You are frustrated because they don’t answer questions. You are frustrated because they say all the money is due now and they won’t accept payments.  So you quit paying.

It’s time to change your mindset and go on the attack.  Demand answers.  Demand documents.  Demand the answer all your questions.  Schedule meetings–i.e., depositions–with the creditor who sued you.  Go face-to-face.  They didn’t want to answer your 2 minute phone call?  Schedule a half-day deposition with Dr. Arrogant and see how he likes his afternoon golf game canceled. 

Getting sued is nerve racking. But it is also an opportunity.  It is an equalizing event.  Get busy. Get organized.  Demand answers.  And along the way, you might discover that settlement offers come your way, payment plans become possible, and getting sued was the best thing that ever happened to you.

Image courtesy of Flickr

If you were sued on a debt you have 30 days from the date you are served the paperwork to file a written response with the Clerk of the Court.

Let’s review:

  • You have 30 days to respond.
  • The response must be written
  • The response must be filed with the Clerk of the Court.

How do you respond? What form do you use?

Here is a link to the Answer and General Denial form provided by the Nebraska court system.

The form is very simple. Enter the following information:

  • State whether you were sued in “County” or in “District” court. (In most cases this is County court.)
  • The name of the County.
  • Name of the Plaintiff (the person who filed the lawsuit).
  • Name of the Defendant (your name).
  • Case Number (for example: CI 23-1234)
  • Sign the form at the bottom
  • Enter your address, phone number and email address.

That’s it. You don’t have to write an essay of why you do not owe the debt. You do not have to explain that Amazon mailed you the wrong color sweater or that the doctor amputated the wrong toe.

This court form is a “General Denial.” You hereby dispute the debt. It does not matter why you are denying the debt.

Of course, it may matter to you. And if the doctor amputated the wrong toe you can certainly add that information, but you don’t have to. That big empty space in the middle of the form that seems to invite you to tell your life story and all the wrongs the Plaintiff committed is optional.

Affirmative Defenses.

If you have an affirmative defense, you do need to state that in the response. For example, if the debt collector is suing on an expired debt, you will want to assert a Statute of Limitations defense. If you don’t assert the defense in writing it is lost.

What happens after you respond to a lawsuit?

The plaintiff’s attorney will typically request additional information from you (called Discovery) or they will schedule the matter for a Summary Judgment hearing.

Filing the written answer has prevented a Default Judgment from being entered, but it does not resolve the lawsuit. There is work to be done. Start contacting the plaintiff’s attorney. Request a payment plan if that is your goal. Offer a settlement of the debt. Get a conversation going.

If you are disputing the debt entirely, now you need to prove your case. Start gathering evidence. Demand documents (Motion to Produce Documents). Send written questions to the plaintiff’s attorney (Interrogatories). Schedule a deposition (live questions before court reporter) of the opposing side. Gather the facts to submit to the judge at a hearing.

The second great power of Discovery is the Motion to Produce Documents.

When a bill collector sues for nonpayment of a debt, they also open themselves up to answer questions–finally!!–and to provide documents.

What type of documents? Well, any document relevant to the debt.

Sued on a medical debt?

  • Demand to see the invoices and the claims filed with the health insurance company.
  • Demand the intake forms.
  • Demand copies of all correspondence with the medical insurers.
  • Demand a copy of the Master Service Agreement between the hospital and the insurance company to see if the hospital had a contractual duty to file a claim.

Sued on a on a credit card account?

  • Demand a copy of the written contract.
  • Demand a copy of all billing statements.
  • Demand a copy of all notices of interest rate changes.

Rule 26 of the Nebraska Rules of Civil Procedure requires all parties to a lawsuit to provide requested documents with in 30 days.

Does the bill collector have these documents? Probably not. In fact, about the only thing a bill collector has is a list of names and amounts owed by each customer. A bill collector typically has nothing other than your name, address and the amount you owe. They have no actual proof of the debt.

What does a bill collector do when you demand documents?

  • They ask their client to provide them.
  • They slow down and start looking–actually looking–at the lawsuit.
  • They think about all the time it will take to provide the documents.
  • They start thinking about accepting a settlement of the debt.

What if the bill collector cannot provide the documents? Sometimes a creditor does not provide documents because they are not available. They can’t get them. All they have is a list of the debts, but no actual proof of the debt. No contracts or statements or payment histories. In short, they have no proof of the debt.

Sometimes they just ignore the request for documents. Then what? A few options exist.

  • File a Motion to Compel Discovery to demand the documents and schedule a hearing with the court.
  • File a Motion for Summary Judgment. If they cannot produce the documents then there is no proof of the debt. Had the debt truly existed they would have documents to prove it, but since they don’t have the documents the court may dismiss the entire case.

Requesting documents is a powerful tool bill collectors do not want you to exercise. Collection litigation firms are not designed to prove the existence of debts. Rather, they process debt cases with no proof at all. It’s all about process and not proof. That process is premised on consumers not fighting back.

Demand those documents. Fight back!

Image courtesy of Flickr

You were sued on a collection lawsuit and managed to file a written response with the Clerk of the Court within 30 days. Congratulations, you have stopped the entry of a default judgement.

But now what? What is your plan of action after filing a response to the lawsuit?

The next phase is to get answers, especially if you do not agree with the creditor’s claim.

  • They say you owe a large medical debt, but didn’t health insurance pay a large portion of the bill?
  • Did the hospital forget to file a medical insurance claim?
  • Did the credit card lender give you credit for all the payments you made?
  • What is the interest rate on the contract?
  • Was the contract written or verbal?

Collection agencies don’t like to answer questions. They are focused on filing lawsuits, obtaining judgments by default, and garnishing paychecks.

They don’t answer questions about why you owe the money, unless you make them provide anwers.


Any party may serve upon any other party written interrogatories to be answered by the party served. Nebraska Trial Rule §6-333

Interrogatories are written questions you can make the other side answer. There is no special format you must use, but there are some guidelines to follow to make the process work:

  • Mail the written questions to the attorney representing the collection agency.
  • In the memo of the letter, write the work Interrogatories and reference court Rule 33.
  • Advise the other side that they have 30 days to respond to the Interrogatories.
  • Ask specific questions.
  • Ask one question at a time.
  • Number each question.
  • Ask for a list of all persons having knowledge of the lawsuit, their address and phone numbers.
  • Ask for a list of the persons they will call as witnesses at trial.
  • Ask for a list of all documents they will introduce at trial.
  • Request a list of all charges on the account.
  • Request a list of all payments made on the account.

Lawsuits are your opportunity to finally get answers. Make them answer questions.

Image courtesy of Flickr and womencandoit

If you bothered to file a written response to a lawsuit with the Clerk of the Court, what is the next step?

What happens after you respond to a lawsuit?


The next step in litigation is called “discovery.” It is your opportunity (and the creditor’s opportunity) to get answers to questions. Unfortunately, this tends to be the most powerful tool in the debt defense arsenal that most people are clueless about using.

Discovery is powerful. It includes these legal tools:

  • Interrogatories. These are written questions you can make the creditor answer.
  • Motion to Produce Documents. You can demand a creditor provide all documents relevant to your case.
  • Requests for Admission. You can demand a creditor admit or deny specific facts. (Example, please admit or deny you received check #313 in the amount of $414 on or about April 1, 2018).
  • Depositions. A deposition is testimony you can obtain from anyone with knowledge of the case that is usually recorded on video or written down by a court reporter.

All of the court rules available to someone sued on debt can be found in Article 3 of our Nebraska court rules.

In the next blog posts we will explore each of these powerful tools you have at your disposal to get the facts straight.

High volume collection attorneys base their entire practice on the fact that few defendants fight back. If defendants fought back and demanded proof of their debt, the entire collection field would collapse.

Over 95% of judgments are obtained by default when defendants fail to respond to the lawsuit. Of those that do bother to file a response, few are equipped to take the next step.

It’s time to take the next step. Demand answers. Demand documents. Ask questions. Interview the other side.

When you make the other side work, that’s when cases get dismissed or settled. Roll up your sleeves and get to work.

I read this comment from another bankruptcy attorney today:

“Help me understand why the home value (Z)estimates from a company that lost nearly $1 billion of its own money by relying on those (Z)estimates to play in the house flipping market are reliable.”

Home values provided by Zillow are important in bankruptcy cases, even if those values tend to be inflated.

The first thing I do when speaking to a prospective client who owns a home is to type their address into a Google search. Up pops a list of home valuations, and Zillow is almost at the top of the list.

Why do we search the Zillow value? Because only $60,000 of a home’s equity is protected in a Nebraska bankruptcy case, and it is extremely important to get an accurate valuation of a client’s home.

County assessor values tend to be low. Clients tend to underestimate their home’s value. So it is very important that a bankruptcy attorney look at outside sources.

We look at the county assessor’s webpages, Zillow, Realtor.com, and other valuation sites to get an idea of a home’s value.

What you should know is that the bankruptcy trustee also looks at these valuations as well.

If a Chapter 7 Trustee sees a Zillow value that is substantially higher than the value listed on the bankruptcy schedules, problems will arise. The Trustee may have a real estate agent inspect the home to see if it is worthwhile to sell the home.

Chapter 7 Trustees are paid a commission to uncover undervalued real estate and to sell homes if more than $60,000 of equity exists. That’s why we cannot ignore those Zillow valuations (“Zestimates”).

Problems with Zillow Values:

  • Damage to homes. Zillow does not know if your home has a cracked foundation or a leaky roof.
  • Deferred Maintenance: Zillow does not see if you have kept the home up to date with regular maintenance.
  • Dissimilar Neighborhoods. Perhaps your home is next to a fancy neighborhood, so the sales price of those homes tends to artificially inflate the Zillow value.

Are Zillow values accurate? Sometimes yes and sometimes no. But they are always relevant and must be addressed.

Explain Why Zillow is Wrong:

If a Zillow value overstates a home’s value, the bankruptcy schedules must address that issue. The home description should list the Zillow value and then explain why it should be ignored. (“Zillow value is inaccurate due to crack in foundation and leaky roof.”)

Online valuations are part of the new bankruptcy landscape. It’s a factor we cannot ignore.

Image courtesy Flickr and ajay_suresh

An email from a client (edited to preserve confidentiality):

“Good morning. On October 31, 2022, [my husband] had to have surgery to remove his gallbladder. The hospital is requiring payments of approximately $400 a month on the $5,049.97, a sum I am unable to accommodate with our budget. My husband’s income makes us ineligible for an adjusted payment plan. The representative offered to help us apply for a loan facilitated by the hospital through a local bank, but I informed her that I can’t consider any loan without speaking to you. What, if any, actions should be taken in regards to these bills as relates to our bankruptcy?”

This seems to be a new trend with hospitals. They help customers to get loans to pay the medical debts.

I told my client the loan helps the hospital, not them. A loan involves interest, late fees, etc. How does this help my client?

My client is in the middle of chapter 13. I informed them that the hospital could send the account to collection and they may be sued, but their wages could not be garnished until the bankruptcy was over.

Push back, I told them. Tell them the court will not approve the loan. This is not like getting a car loan, something you need for work. This just changes the name of the creditor from Hospital to Bank.

I told the client to review their budget and pay what they can afford. Just make payments and don’t worry about pleasing the hospital.

“The hospital is requiring payments of approximately $400 a month.” Requiring? How are they “requiring” this? This is just old-fashioned arm twisting. My client is in Chapter 13. Post-petition wages are considered to be property of the bankruptcy estate and cannot be garnished until the case is completed.

Creditors are always demanding full payment or monthly payments that are not affordable. They give the false impression that they will not accept smaller payments. Don’t believe them.

Bill collectors accept every payment you send them. The hospital demands $400 per month. Can’t afford that? Send them $200. Keep sending the payment. They will accept every dime you send them.

Image courtesy of Flickr and dreamingofariz.

The client runs a decent sized construction operation.  Revenues in excess of a quarter million per year.

But he has no accounting system.  He just takes his bank statements, receipts and chicken scratch notes to the tax man once a year to crank out a tax return.

No monthly bank account reconciliations.

No computerized records.

No accounting journals or ledger reports.

The entire system is basically a daily glance at the banking account balance and then just fly by the seat of his pants.  It’s dancing on a hot plate.

Who needs paid this week?  What blows up if I don’t pay it today? Do workers walk off the job? Do suppliers stop extending credit? Will the tax people start garnishments?

But the business is good, right?  Money is rolling in.  Big projects lined up.  If we can just get this next job done then things will start to straighten out. Then we can hire the good accountant.  That bookkeeper who cleans up the details.  After all, accounting is just a detail.  It’s an afterthought.  It’s what you do when all the real work is done.  Don’t worry honey, I’ll get to that later.

Yet, we never seem to turn that corner, do we? Things never quite get organized.  And even though we know this is the wrong approach, we can’t ever stop the madness of flying blindfolded.  Budgets.  Planning.  Profit and Loss analysis.  Is the project actually making us money?  Does it just leave us in more debt?  Yes, bills need paid, but are we making progress or just working to pay overhead?

At what point do you stop the madness? When do we stop driving blindly on twisting roads at night?

Your shoebox system is not working.  You have no system.

Just stop.


Image courtesy of Flickr and Don DeBold

There is a marriage penalty in bankruptcy law.  Unmarried couples receive favored treatment, especially on the six-month income calculation called the Means Test.

A married debtor who lives with his or her spouse must list all gross income of their spouse on the income schedules.  However, an unmarried debtor who lives with a partner must only show that person’s regular contribution to the household income.

This difference represents a significant disparity of treatment. Unless the bankruptcy trustee investigates the income of a debtor’s partner, a debtor may be able to claim their income is below median income levels and thereby qualify for Chapter 7, even if the partner has a six-figure income.

All Income vs. Regularly Contributed Income:

Reporting all income versus just reporting regularly contributed income.  That difference is massive.

Bankruptcy Form 122-A is where we report a debtor’s household income received in the prior six months. This form determines who may enter the gates of Chapter 7.

Notice how Form 122-A requires a debtor to list the gross income of his or her spouse on Column B, however there is no requirement to list the gross income of a live-in partner, even if the debtor and his or her partner share children, real estate, debts, bank accounts and other financial obligations.

What is required is that a debtor report all regular income contributed to the household by the partner. But how can we be sure the debtor is reporting the correct contribution? Why is a live-in partner who is basically a spouse in every way treated so differently? How is this difference in treatment fair or proper?

Difficulty in Measuring Non-debtor Partner’s Contribution to Income:

Measuring the “contribution” of the debtor’s unmarried partner is difficult.  The partner is not filing bankruptcy and is not the client of the bankruptcy attorney.  Getting information from such individuals can be difficult.

How is the bankruptcy attorney able to accurately measure the income of the debtor’s partner?  The unmarried partner signs no documents to verify income.  The partner may very well maintain a separate bank account and the debtor may actually be unaware of the partner’s true income level.

So how does the attorney measure the contribution?  We look to several factors:

  • Bank Statements.  We examine the deposits listed in the debtor’s bank statements and the expenses paid by the debtor from these accounts.
  • Monthly Bills.  Attorneys gather information on the total household rent, utility, food, insurance and educational expenses.
  • Educated Guess: If the total monthly expenses of a household is, for example, $3,000 and the bank statements of the debtor show $1,500 of payments towards this total, it is reasonable to assume the debtor’s partner is regularly contributing the remaining $1,500.

Fairness Issues:

What if the debtor is paying the majority of household bills but the non-debtor partner earns a significantly higher income that they keep in their separate bank account? This arrangement has the effect of minimizing the “regular contribution” towards household income that is disclosed on the Means Test.  Is that fair and correct?

The means test does have a Marital Deduction for expenses of the non-debtor spouse, but those expenses are limited to completely separate expenses and cannot include expenses of the household.  For example, if the non-debtor spouse pays for an expensive medical treatment, that expense cannot be claimed as a marital deduction since it is limited by the household expense limits of Form 122-A.  However, if the non-debtor spouse contributes a large amount to their 401(k) account that deduction is allowed since it is not a shared fund. These distinctions tend to be technical.

The bankruptcy marriage penalty is stiff.  Married debtors are more likely to be forced into filing a 5-year repayment plan in Chapter 13.  Unmarried debtors can manipulate the system to report only “regularly contributed” income of their partner and thus qualify for Chapter 7 cases by hiding income from the court.

It seems like the US Trustee should focus more efforts to ensure the treatment of married couples is no different than the treatment of unmarried couples who share children, homes, accounts and debts together.


Image courtesy of Flickr and Shelley Rich

One of these days I’m going to write a post on how shitty we treat married couples in this county.  From a financial perspective, is it better to be married or to shack up? I’m going to write a list. There are some legal benefits to being married, but from what I see its more of a financial burden.

Maybe I’m just getting old and cranky, but it seems like you can avoid a lot of financial regulations and limits by just living together.

Need an example?  Well, if you are married you are responsible for the medical debts of your spouse, but not if you just live together.  In fact, some couples actually divorce just to avoid the medical debt that comes with being married. How is this fair? Where are the “Family Values” folks when it comes to correcting this inequity?

The Bankruptcy Reform Act of 2005 was designed to address this issue.  It was designed to require a debtor to report all “household income” received in the past six months, regardless of whether a debtor was married or not.

I can read a case and smell unreported income, and that really ticks me off. Why? Because I don’t do that. I list all household income. I question debtors carefully and report the income they are inclined to hide.

And because I take this job seriously and report all household income, this forces some clients into 5-year Chapter 13 repayment plans instead of Chapter 7. It ticks me off when I see an attorney hide income and get away with it but my clients are forced into repayment plans.  What really gets me is that it is so obvious what they are doing. All the clues are right there in the bankruptcy petition.  So how do they get away with this?

The first trick to getting a higher-income debtor into chapter 7 is to misrepresent the size of the household.  The bigger the household the more a debtor’s income can be in chapter 7.  And since the bankruptcy code does not define household size, courts have used three approaches:

  1. Heads in Beds–Household size equals the number of people who live in the home.
  2. IRS Dependency Test–Household size is equal the debtor the dependents listed on a tax return.
  3. Single Economic Unit — A wide variety of factors are reviewed to determine household size.

The best approach is the Single Economic Unit test. The courts weigh the facts of each case.  It’s a continuum.  Do the persons in a home function more as a single unit or as separate units?

  • Married with kids living together: Single Economic Unit
  • Not married but living together, have kids together, use joint bank accounts, have joint debts and share toothbrushes: Single Economic Unit
  • Met last week at the bar, stayed the night and just haven’t left: Separate units.
  • Not married, living together, no kids in common, separate bank accounts, no joint debts: Separate units.
  • Not married, living together, no kids in common, joint bank accounts, joint assets:  Um . . . could go either way.

If the individuals living in the home form a Single Economic Unit, they all count for the household size. But if they keep everything separate and just share the same housing unit (i.e., like college roommates), they do not count towards the household size.

So, this is the game bankruptcy attorneys play.  If a debtor’s income is over the median income level, we look for additional household members.  Can we add the girlfriend? Are the kids living with the debtor enough of the time to add one or more of them to the household size? Do parents qualify as part of the household? The bigger the household size the higher a debtor’s income may be when qualifying for Chapter 7.  So, the attorney looks for bodies.

When I see “contribution from roommate” on the income statement and then I see minor kids listed in the household size, my radar goes off. Is the roommate the parent of those kids? If the “roommate” is actually a parent of the debtor’s children, shouldn’t all the gross income of the roommate be listed and not just the contribution?

When I see roommates listed as part of the household size but the income of the roommate is not listed or is minimized as a “contribution” to household income, I become suspicious that income is being hidden.

A game is being played by the debtor’s attorney.  Household sizes are being expanded to include others but income of the debtor’s “roommate” is minimized.  This is how you qualify higher-income debtors for Chapter 7: Increase the household size and limit the income of roommates to mere contributions.

Image courtesy of Flickr and Mike Prince