One thing I often find myself saying to clients is, “Don’t throw away anything!”, particularly if they are being pursued by a debt collector or collection attorney. Although people being sent threatening letters likely have little interest in reading them, those letters constitute some of the core evidence that can be used against collectors in court. Moreover, in certain instances where a debtor has failed to properly respond to a complaint, their mail may include notice of a default being entered against them, along with information on how they may stop the default from being converted into a default judgment (which, at the district court level, can be very difficult to set aside). Nobody likes to receive bad news in the mail, but that “bad news” may be crucial in determining if a client’s rights under state and federal law have been violated.
There is a common misconception among debtors, lawyers, and judges that when someone is sued on a debt, say medical or consumer debt, that they not only owe that debt, but they have no valid defenses or counterclaims against the party suing them. In today’s late-capitalist environment, debt collection is a massive industry, albeit one with shockingly few internal safeguards. For instance, law firms that take on debt collection suits will sometimes file thousands upon thousands of such suits each year with only a minimal number of attorneys on staff. What that means is that their debt-collection complaints are often cookie-cutter forms with few facts accompanied by little-to-no documentary support. For instance, it is not uncommon to find complaints filed in Michigan district courts alleging breach of contract or account stated (i.e. an assertion of an amount owed) with no proof that there was a valid contract or any documents (including affidavits) asserting that the accounting of what is owed is in any sense accurate.
Objections to the availability of bankruptcy are bountiful, with a majority relying on implicit “moral” arguments that too often miss the point. In the commercial realm, anti-bankruptcy arguments tend to be a bit more sophisticated. For example, in an era of global trade in goods and services where state-backed subsidies are typically frowned upon, Chapter 11 bankruptcy protection in the United States is perceived as “cheating.” For instance, in the realm of air services trade where European states have long publicly subsidized their respective air carriers, the U.S. has cried foul since its airlines are ostensibly exposed to the forces of raw competition without recourse to the public piggyback when times get tough. While the creation of a common aviation market within the European Union has reduced the availability of subsides for Union member state carriers, these airlines argue—with some plausibility—that Chapter 11 operates in much the same way as a subsidy, shielding U.S. airlines from the natural effects of competition, namely exiting the market altogether.