There's a tendency to start out somewhat biased in debt collection cases. Especially where individuals are being sued by businesses, we assume they do owe the money. We might even wonder why most defendants bother to show up if they know in advance that they have no realistic defense.
But many debtors do not fit the stereotyped deadbeat role. Instead of shuffling in with heads down, saying something like, "I didn't pay that bill because I'm short of money right now," they often present well-thought-out, convincing defenses, with the result that the judge would reduce the amount the plaintiff asked for, or occasionally even rule that no debt exists.
A prominent study of small claims court cases found that when a defendant shows up to contest a case, the plaintiff's chance of winning 100% of the amount asked for declines substantially. ("Small Claims and Traffic Courts," by John Goerdt (National Center for State Courts).) In fact, defendants win outright in about one-quarter of debt cases and often pay half or less of what the plaintiff asked for.
Here are some examples of cases in which the defendant succeeded in whole or part:
Example 1: A local hospital sued an unemployed man for failure to pay an emergency room bill for $678. It seemed like an open and shut case–the person from the hospital had all the proper records, and the defendant hadn't paid. Then the defendant told his side of it. He was taken to the emergency room suffering from a superficial but painful gunshot wound. Because it was a busy night and he was not about to die, he was kept waiting four hours for treatment. When treatment was given, it was minimal, and he suffered later complications that might have been avoided if he had been treated more promptly and thoroughly. He said he didn't mind paying a fair amount, but that he didn't feel he got $678 worth of care in the 20 minutes the doctor spent with him. The judge agreed and gave judgment to the hospital for $250, plus court and service of process costs. After the defendant explained that his only income was his unemployment benefits, the judge ordered that he be allowed to pay the judgment at the rate of $25 per month.
Example 2: A large local tire retailer sued a woman for not paying the balance on a tire bill. She had purchased eight light truck tires manufactured by a major tire company and still owed $612. The tire company representative presented the judge with the original copy of a written contract along with the woman's payment record, and then waited for judgment. The woman, who ran a small neighborhood gardening and landscaping business, produced several advertising flyers from the tire company that strongly implied that the tires would last at least 40,000 miles. She then testified and presented a witness to the fact that the tires had lasted less than 25,000 miles before wearing out. The defendant also had copies of four letters she had written over the past year to the headquarters of the tire company in the Midwest complaining about the tires. Both in the letters, and in court, she repeatedly stated that the salesperson at the tire company told her several times that the tires were guaranteed for 40,000 miles. Putting this all together, the judge declared the total price of the tires should be prorated on the basis of 25,000 miles and, after figuring what the defendant had already paid, gave the tire company a judgment for only $350, instead of the $612 requested. The woman wrote out a check on the spot and departed feeling vindicated.
Example 3: A rug company sued a customer for $1,486 and produced all the necessary documentation to show that the carpet had been installed and that no payment had been received. The defendant testified that the rug had been poorly installed, with a seam running down the center of the room. He brought pictures that left little doubt that the rug installer was either incompetent or completely thoughtless. The defendant also presented drawings that illustrated that there were several better ways to cut the carpet to fit the room. The rug company received nothing.
Of course, the real point of these examples is not to be found in their individual fact situations–yours will surely differ. Rather, they illustrate that if you can convince the judge that goods or services were substandard, chances are you'll win at least a partial victory.
Defenses in cases where a bill was not paid include:
Breach of contract. The other party failed to live up to (perform) the terms of the contract within the correct period of time, with the result that you are no longer obligated to keep your payment obligation. For example, you contracted to have your kitchen counter remodeled using white ceramic tile, and ended up with beige plastic tile. Or, you ordered a cake from a website and it arrived looking nothing like the picture.
Trivial defects won't void a contract. To succeed with a breach of contract defense, you must show that the other party's breach was significant enough that it prevented you from receiving all or at least a substantial amount of the benefits that you wanted from the contract. For example, if you order light yellow flowers for a wedding and refuse to pay the bill because cream-colored flowers are delivered, you can be pretty sure the judge will decide in favor of the flower vendor, especially if you used the flowers. By contrast, if you order yellow flowers and receive dark red ones that obviously clash with your color scheme, your chances of winning would be much better.
Fraud. The other party intentionally lied to you about a key fact in a transaction. For example, you purchased a used car with 75,000 miles on the odometer. Later, you meet the vehicle's first owner who says it really had gone 125,000 miles and that the odometer said so when he sold it to the used car dealer who sold it to you.
Breach of warranty. An express or implied warranty (assurance) made by the seller of goods is breached. For example, a roofer claims in writing that your new roof will last 20 years. In fact, it leaks in the first big storm.
Violation of statute. Many federal and state laws require the seller of a particular type of goods or services to comply with specific rules. For example, federal regulations provide that a door-to-door seller of goods and services that cost more than $25 must give you notice of your right to cancel the purchase within three business days, along with a cancellation form. If he fails to do so, your right to cancel continues indefinitely. For example, if you buy an expensive vacuum cleaner from a door-to-door salesperson and ask (in writing) to cancel the deal the next day, you have a good defense if the vacuum cleaner company sues you for nonpayment.
EXAMPLE: TopHat Models, a New York modeling agency, sued Mary P., claiming she had not paid the agency's $1,000 fee for creating a portfolio of "professional quality photographs." The photos were designed to help Mary obtain employment as a model. In her defense, Mary claimed that TopHat had violated New York State's employment agency licensing law (N.Y. Gen. Bus. Law § 170 and following) by falsely claiming it would help her find modeling jobs and in fact making no effort to do so. After concluding that TopHat was primarily a scheme designed to get consumers to overpay for photographs and that it had not attempted to find Mary modeling work, the court agreed and ruled that Mary owed nothing.
To successfully defend a suit claiming you owe money, you'll normally need to document a very good reason why the goods or services you received were inadequate or some other reason why you are not legally required to pay. This means you'll need to do more than tell the judge a sad story. If shoddy goods are involved, show them to the judge or bring a picture or written report from an expert. If you received truly bad service, bring a witness or other supporting evidence to court. For example, suppose the new paint on your recently refinished boat immediately began to chip and peel and, as a result, you notified the boat yard that you would not pay for the job. In case you are later sued, you will want to take pictures clearly showing the problem and get a written opinion from another boat refinisher stating the work was substandard as well as an estimate to fix or redo the job. If a company misrepresented a product or service to you, it is very helpful if you can find others who were also victims who will either go to court with you to tell the judge a similar story to yours, or give you a letter you can take to court, describing the false statements they were given.
You may have a tactical advantage at the hearing if the person who appears in court on behalf of the creditor is not the same person with whom you dealt. For example, if you state that a salesperson told you X, Y, and Z, the salesperson probably won't be present to state otherwise. This may tilt a closely balanced case to you. It is perfectly appropriate for you to point out to the judge that your opponent has only books and ledgers, not firsthand knowledge of the situation. The judge may sometimes postpone the case until another day to allow the creditor to present the testimony of the employee you dealt with, but often this is impossible because the person in question has moved on.
You can ask for a little more time to pay. In some states, the judge has considerable discretion to order that a judgment be paid in installments. If you are financially pressed, installment payments can obviously be extremely helpful, because as long as you meet the payment schedule, the creditor can't initiate a wage levy (garnishment) or other collection activity. So don't be shy about asking the judge to establish time payments–the judge won't know that you want them if you don't ask. Even if you don't make your request in court, it may not be too late. Some courts allow you to file a request to pay a judgment in installments after the hearing.