New York City Debt Collection Defense Attorney

4 Reasons to Vacate your Default Judgment Before Suing under the FDCPA

Courts are in the business of reducing disputes to judgments— not revisiting issues already encompassed within judgments. Actually, that’s not entirely true. Our law practice—The Langel Firm—regularly overturns (a/k/a “vacates” or “sets aside”) old judgments based on narrow sets of facts, such as blatantly bad service or unusual prejudice suffered by our clients. The burden of proof, however, rests on judgment debtors (our clients) to convince the courts to re-open those old cases and overturn those judgments. Another option often overlooked is convincing the plaintiff to stipulate (agree) to overturn a judgment based on default (the defendant does not show up).

How Judgment Enforcement is Related to the FDCPA

During the course of our work, challenging judgments, we sometimes uncover bad behavior by debt collectors (including collection lawyers and debt buyers) in connection with the collection of judgments. This scenario raises an important question: "Does the judgment preclude or interfere with a separate case against the debt collector under the Fair Debt Collection Practices Act (FDCPA)?”

The answer depends on whether the bad conduct is related to claims that should have been raised in the underlying case. For example, a dispute as to the suit amount—or even bad service—should be raised in the underlying case. A good attorney could argue that a subsequent FDCPA complaint amounts to a "compulsory counterclaim," which would require it to be asserted in the underlying case. 

By the way, the FDCPA is a federal law that empowers consumers to sue debt collectors who mistreat consumers. For example, debt collectors may not harass anybody or make false, misleading, or deceptive representations. This statute is broad and directs that consumers’ attorneys’ fees be paid by the losing debt collectors. This “fee-shifting” provision incentivizes consumers and attorneys to bring cases.

Bad conduct during the collection of the judgment, such as harassing or targeting third parties, is fair game for new FDCPA cases despite the intact judgment.

Notwithstanding the viability of an FDCPA case connected to an existing judgment, there are some tactical reasons to vacate the judgment first.

4 Reasons to Vacate your Default Judgment before Suing

Here are four concrete reasons to first vacate the judgment before bringing the FDCPA case:

  1. Avoid frustrating your primary goal of getting relief against the underlying judgment. Oftentimes, countersuing too early causes the collector to double down on the validity of the judgment. Recoveries under the FDCPA often pale in comparison to the sum of a current judgment balance.
  2. With a judgment intact, a judgment creditor may require you to release it from liability (agree not to sue under FDCPA) to resolve the underlying judgment. Stated another way, the effort of bringing a separate FDCPA case may turn out fruitless.
  3. You may catch the offending collector committing additional violations in opposition to your motion to vacate the judgment. For example, the collector may continue its “venue violation” (litigating in an improper county) by enforcing the judgment in that county.
  4. The legal doctrines of res judicata and collateral estoppel stop courts from rehashing cases or issues already litigated between parties. After all, the purpose of entering a judgment is to bring finality to a dispute and to perhaps set a precedent for later, similar disputes. Any issue that could have been raised in defense of the debt lawsuit (amount, custody, interest, notice, etc.) is deemed waived absent setting aside of the judgment.
    1. Along the same lines, the Rooker-Feldman doctrine blocks federal courts from hearing cases by “state-court losers” (judgment debtors—don’t take it personally). Stated another way, you may not sue a debt collector in federal court under the FDCPA merely to block or challenge a state-court judgment.
    2. But, as stated above, the above three preclusive doctrines (res judicata, collateral estoppel, and Rooker-Feldman) should not apply if, in the FDCPA, violations were not subsumed or encompassed within the judgment. Defenses to the underlying debt itself would be incorporated into the judgment, precluding later litigation. But bad conduct happening after that, for example, misrepresenting who owns the judgment, should not be precluded.
    3. Worth noting, however, is that unlicensed debt collectors are vulnerable to separate FDCPA damages despite a judgment under the theory that the judgment is void based on that lack of regulation. But if the judgment cannot be undone based on that misconduct, separate damages may be awarded for the behavior itself.[1]

Multiple Choice Questions:

What is the main purpose of a judgment in court?
a) To revisit issues already encompassed within judgments
b) To reduce disputes to judgments
c) To overturn old judgments
d) To interfere with separate cases under the FDCPA

Who bears the burden of proof when attempting to overturn old judgments?
a) Plaintiffs
b) Judgment creditors
c) Judgment debtors
d) Debt collectors

Under what circumstances can an FDCPA complaint be considered a "compulsory counterclaim"?
a) When it involves harassment by debt collectors
b) When it relates to claims that should have been raised in the underlying case
c) When it is based on new evidence
d) When it pertains to issues already litigated in court

Answer Key:

  1. b) To reduce disputes to judgments
  2. c) Judgment debtors
  3. b) When it relates to claims that should have been raised in the underlying case

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[1] See Newton v. LVNV Funding, L.L.C., 2015 WL 789516 (Mass. Super. Ct. Oct. 27, 2015). But see LVNV Funding L.L.C. v. Finch, 207 A.3d 202 (Md. 2019) (judgments already final cannot be undone just because plaintiff was unlicensed, but the consumers could obtain damages in a separate affirmative action).