Watch Out for This Sneaky Debt Buyer Tactic!


Midland FundingRecently I had a conversation with an attorney who represents Midland Funding, LLC here in Arizona.  He said that about 95% of Midland Funding cases are filed in the Arizona Justice Courts.  In Arizona, debt collection cases where the amount being sued on is less than $10,000 are filed in the Justice Court while cases where the amount sought is more than $10,000 are to be filed in the Superior Court.

In general Midland Funding and the other debt buyers like to keep their cases in the justice court system rather than the superior courts. Here are a few reasons why:

Filing Fees Paid by Debt Collector

Justice Court Filing Fees:     $96.00

Superior Court Filing Fees:  $304.00

Average Time to Trial

Justice Court:  5-8 months

Superior Court:  16-24 months

Arbitration Requirement

Justice Court:  None

Superior Court:  Yes, on any case worth less than $50,000

In general, superior court is much more expensive, takes a lot more time, and requires a lot more work.  Justice court, on the other hand, can often be a fairly straight forward process, less cost and less time.

But Watch Out for this Trick!

Recently I had a couple come meet with me that had a default judgment entered against them in justice court for $22,000!  You may be thinking “but John, you just said that justice court cases must be under $10,000?”  You would be right – justice courts only have jurisdiction over cases where the amount in dispute is under $10,000.

However, the way the law is written it says that the justice court’s jurisdiction is limited to cases where the amount in dispute is $10,000 or less – not counting attorney’s fees and interest provided by law.

What this Debt Buyer did was divide up the principal balance that was owed on the account at the time the account was charged off back in 2009 and separated that from the interest that had accrued from 2009 through to the day when the filed the lawsuit in 2013 – over 4 years later!

Their argument was that the principal amount (which was a little over $9,000) was within the jurisdictional limits of the court.  And then when it came time to get a default judgment they submitted a proposed judgment that added back in the interest that had accrued for the last four (4) years (about $9,500).

The problem with this argument is that while the law excludes interest that is allowed under the law – it does not exclude interest in the calculations if the interest is incurred as part of the contract or agreement.

So in this case, the debt buyer should have included both the principal and the interest in its calculations.  And if it had done so it would have been very clear to the court that the amount they were suing for was well beyond the jurisdictional limits of the Arizona justice courts.

So Why Should I Care?

The end result of the case I am talking about above was that the judgment was voided.  Once a judgment is voided the debt buyer can either re-file the case in the appropriate court or just abandon the collection. Many times this is a great way to get a default judgment overturned and provide you your opportunity to fight back and contest the evidence submitted by the debt buyer.

So if you have been sued by a debt buyer like Midland Funding or have recently found out that you have a default judgment out of an Arizona justice court – and the amount is for more than $10,000 we need to look into the details as to how that judgment got above $10,000.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© John Skiba, Arizona Consumer Law Group, PLC | Attorney Advertising

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