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Archive for the tag “creditor”

A Collection of Personal Injury Writings by James W. Cushing, Esquire

Over the course of my career, I have written extensively on a wide variety of personal injury legal principles.  These writings have been published in The Legal IntelligencerUpon Further Review, and The Pennsylvania Family Lawyer as well as posted onto my blog.  I have collected these articles and blog posts and have listed them below.  Thanks for reading!


My Articles:


A Collection of Contract and Debt Collection Writings by James W. Cushing, Esquire

Over the course of my career, I have written extensively on a wide variety of contract law issues and debt collection legal principles.  These writings have been published in The Legal IntelligencerUpon Further Review, and The Pennsylvania Family Lawyer as well as posted onto my blog.  I have collected these articles and blog posts and have listed them below.  Thanks for reading!

My Articles:


The Secret Defense to Debt Collection Matters

Unfortunately, many people find themselves in a situation where they get behind on paying their bills and, due to lack of funds, wind up not paying some of them.  Not paying one’s bills will more often than not result in that debt being sold to a collections agency and that agency suing the debtor for payment (and adding on all kinds of things, like interest, attorney’s fees, penalties and the like to boot).

Selling one’s debt to a collection agency is an important step in the process that directly affects the subsequent lawsuit against the debtor.  Typically, large lenders – especially lenders like credit cards companies – have a fair amount of debtors who stop paying (for whatever reason) on the debt owed to the lender which results in their debts being sent to collections.  When these lenders send debts to collections, they do so by selling the debts to a collection agency.  When they sell the debts to a collection agency, they will often sell the debts in bulk, often for pennies on the dollar.  The transaction benefits the creditor as it gets something for the debts owed without having to pursue costly and time consuming litigation.  The transaction benefits the collection agency because it can pursue collection (including law suit) against a debtor for the full amount despite having bought the debt for far less than its principal value, let alone its value inflated by interest and such.

More often than not, when debts are sold to collection agencies, the initial creditor (e.g.: a credit card company) simply provides an affidavit to the collection agency regarding the amount of the debts and the names of those who owe the debts.  Typically, no other document is supplied by the initial creditor to the collection agency, including any contracts with the debtor or anything bearing the signature on the debtor.  Once the collection agency assumes the debt, it has the right to bring suit against the debtor for the unpaid debt.

The lack of documentation of the contract with the debtor is absolutely key to any defense to the collection of the debt.  If the creditor brings suit against the debtor in the Court of Common Pleas and does not attach the contract between the debtor and the creditor which underlies the alleged debt, the debtor can file objections to the complaint (the document which initiates the law suit) asking for it to be dismissed due to the lack of a contract.  I can say, from personal experience, that such a tactic works as, very often, the collection agency pursing the debtor simply does not have the underlying contractual documentation to prove its case against the debtor.

If the case is brought in small claims court, the creditor does not have the obligation to include a copy of the contract to the complaint, so successfully defending against a collections law suit takes some shrewd strategy.  The lack of documentary evidence is still a huge problem for the creditor, but the small claims aspect of this matter makes the approach different and much trickier.  As the complaint does not require the contract to be appended to it, and the primary place for these matters to be resolved is at a hearing before a judge, the creditor has the procedural advantage.  At the hearing, the collection agency, armed with an affidavit from the initial creditor (as described above), secures almost all of the other evidence it needs to win against the debtor through the debtor’s testimony.

Here is how the hearing would play out: the creditor describes the claim to the judge, which is that the debtor had a contract with a credit card company (for example), he did not pay the debt owed, and is now in collections and all of this is supported by the affidavit.  Now, the affidavit, taken alone, is insufficient to win the case as there is no evidence that the debtor actually contracted with the creditor.  So, at the appropriate time during the trial, the creditor will ask the debtor some questions (i.e.: cross-examination).  These questions will be something like: “did you have a credit card from XYZ company on these dates”?  “Did you make charges on it?” “Did you make all the payments on it?”  “Do you owe $XYZ on the credit card?” And other questions like it.  At the end of the examination, the debtor himself provides all of the evidence against himself that the creditor needs to win the case against him.   As a result, the creditor will win the case against the debtor thanks to the debtor supplying all of the evidence, via his testimony, need by the creditor.

So, how does a debtor avoid the fate of the debtor in the above scenario?  That is where a good lawyer comes into play.

Debt Acknowledgment: Going Beyond Limitations

Anyone considering bringing a lawsuit needs to be aware of the relevant statute of limitations applicable to one’s case.  A statute of limitations establishes a hard deadline by which a particular suit must be brought, which, if missed, bars the potential plaintiff from bring it.


Generally speaking, in the context of a debt collection contract claim, the applicable statute of limitations sets a four (4) year deadline to bring suit after a breach of contract.  This limitations period is set by 42 Pa.C.S.A. Section 5525(a)(1).  A breach of contract occurs upon non-performance of a contractual duty, which, in this case, would be the non-payment of a debt.


Although the four-year statute of limitations identified above serves as a hard deadline in most debt collection cases, there is an important exception to this statute which serves to extend the time to bring suit and/or serve to toll the statute of limitations: the so-called “acknowledgement doctrine.”


Pennsylvania law has well established the acknowledgement doctrine.  The doctrine states that “[a] clear, distinct and unequivocal acknowledgement of a debt as an existing obligation, such as is consistent with a promise to pay, is sufficient to toll the statute.”  In Re David Cutler Industries, Ltd., 502 B.R. 58 (2013)


The acknowledgement doctrine in practice serves to restart the running of the applicable statute of limitations cited above, which would begin upon a reasonable elapse of time from the date of acknowledgement.


For example, if the statute of limitations for the failure to pay a debt is set to expire on August 1, 2015, a debtor’s acknowledging the debt on July 25, 2015 would serve to toll the statute of limitations and reset the hard deadline set by the statute to four years after a reasonable elapse of time from July 25, 2015.  A debt customarily must be paid within thirty days of when it comes due; therefore, the new statute of limitations in the example above would be four years from August 25, 2015.


When litigating a breach of contract claim, particularly a debt collection matter, and a statute of limitations deadline is approaching, or has passed, practitioners would be wise to explore the possibility of trying to have the debtor acknowledged the debt at some point.  Doing so could serve to save the viability of a case and go a long way to ensuring the debt owed is paid.


For more information on the issues addressed above, be sure to also review these cases: Colonial Assur. Co. v. Mercantile and General Reinsurance Co. Ltd., 297 F.Supp.2d 764 (2003); Huntingdon Fin. Corp. v. Newtown Artesian Water Co., 442 Pa.Super. 406 (1995); Camenisch v. Allen, 158 Pa.Super. 174 (1945); In Re Maniatakis’ Estate, 258 Pa. 11 (1917).

Originally published in The Legal Intelligencer Blog on July 21, 2015 and can be seen here.

Acknowledging a Debt to Toll the Statute of Limitations

As every lawyer knows, the statute of limitations is the death knell for any case if the deadline it sets to bring a lawsuit is missed.

Collecting on money owed pursuant to a contract is generally governed by a four (4) year statute of limitations which begins to run upon the breach of that contract. One way to extend that four (4) year statute is to find a way to toll it. The case of In Re Michael Angelo Corry Inn, Inc., 297 B.R. 435 (W.D., PA 2003), provides one innovative way to try and toll it.  Specifically, the Court in the above case analyzed whether acknowledging a debt and promising to repay serves as a way to toll the statute of limitations.

The underlying case involved the filing of a proof of claim by a creditor against a debtor who has filed for bankruptcy. The fact that the context of the case was bankruptcy has no effect or relevance on how the statute of limitations for a contract claim functions and/or applies. The issue was the fact that the creditor did not pursue the alleged debt with any alacrity and many years passed with no action taken on the loan and/or its repayment. The time that elapsed from the potential breach was longer than four (4) years in this case and, therefore, on its face, any action to pursue the contract claim would then be barred by the relevant statute of limitations. In order to avoid the contract claim from being a non-starter due to being barred by the statute of limitations, the creditor attempted to argue that the aforesaid statute is tolled by an acknowledgment of the debt made my the debtor.

The Court agreed that the statute of limitations on contract claims can be tolled if the debtor acknowledges a debt. The caveat, however, is that acknowledgment is more than merely expressing a willingness to pay it.

The acknowledgement doctrine requires a debtor’s acknowledging the existence of, and obligation for, a debt to be clear, distinct, and unequivocal, along with a promise to pay that is similarly doubtless. The Court made it clear that there must be no uncertainty in the debtor’s identification of the specific debt owed, acknowledgment of his own obligation to pay that debt, and a clear promise to pay. A debtor who simply declares an intention or desire to honor his obligation is not considered to have made a promise to pay sufficient to toll the statute of limitations under the acknowledgment doctrine.

So, when litigating a breach of contract claim for an unpaid debt, if one thinks the case can no longer be pursued due to the expiration of the statute of limitations, remember to fully explore the acknowledgement doctrine. It may allow a creditor to successfully pursue a debtor far beyond the four (4) years permitted by the statute of limitations.

Originally published on September 8, 2014 in The Legal Intelligencer Blog and can be found here.

Strict Compliance with the Municipal Liens Act is Required to Collect

The Commonwealth Court of Pennsylvania (“Court”), in the matter of City of Philadelphia v. Manu, 2013 WL 4768308, has made it clear that it expects strict compliance with the black letter of the Municipal Liens Act (“Act”). Defendant Agnes Manu (“Manu”), who litigated pro se, appealed an Order of the Court of Common Pleas of Philadelphia (“CCP”) denying her motion to strike or vacate and that provided the context for the Court to make its ruling and issue its opinion accordingly.

The procedural history of this matter is somewhat complex. Manu owns real estate (“Property”) in Philadelphia that is allegedly the subject of a municipal lien held by the City of Philadelphia (“City”). In January 2011 the City filed a petition with the CCP requesting permission to sell the Property free and clear of all encumbrances for delinquent water and sewer rents. The liens claimed by the City included one entered on August 27, 1987 for an unpaid water/sewer bill totaling $0.00 (no, that is not a typographical error) which was amended in its January 2011 petition to include an alleged claim of $657.54, plus interest and penalties, for City taxes allegedly owed in 1986.

In its January 2011 petition, the City identified seven (7) different parties, along with the United States, which/who allegedly have an interest in the Property based on the tax information certificate, and requested the CCP to issue a rule upon these aforesaid parties. For reasons which are unclear from the record available, the CCP issued a rule only upon Manu and directed that service should be made in the matter for writs of scire facias pursuant to the Act. The CCP granted Manu’s request for additional time to respond to the aforesaid rule, but instead of responding to the rule, Manu elected to file a motion to stay the proceedings on the basis that she had filed an appeal nunc pro tunc with the Board of Revision of Taxes due to, Manu alleged, never having received service of any tax assessment notice since 1998. Perhaps, due to the fact that Manu failed to respond to the rule, and filed a motion to stay instead, the CCP entered orders denying the motion to stay and granting the City permission to sell the Property as it requested and described above. The CCP indicated that it was satisfied that the rule was properly served and, indeed, served upon all relevant parties.

A few days after the above two (2) orders by the CCP were entered, Manu filed a motion for clarification as she could not discern whether the lien was for water/sewer bills or real estate taxes, nor was it clear how much she owed; the CCP denied this motion. Subsequent to the motion for clarification, Manu then filed a motion to strike or vacate the CCP order permitting the sale of the Property due to lack of jurisdiction based on the failure to effect proper service pursuant to the Act; this motion, too, was denied by the CCP and Manu appealed that denial. The appeal of this denial is the subject of the Commonwealth Court case described herein. While the above was transpiring, another party, namely Informational Management Group, Inc., filed a petition to intervene and open on the basis that it, too, was never properly served with the underlying lien and was not joined into the case by the City as an indispensable party; the CCP denied this petition as well.

When analyzing this matter, the Court began by emphasizing that the Act lays out a specific, detailed, and exclusive procedure which must be followed with precision. Furthermore, the Court made it clear that the City had the burden of proving strict compliance with the Act. In its review of how the CCP handled this case, the Court observed that the CCP did not even require substantial compliance with the Act, let alone strict compliance. Namely, the petition filed by the City did not provide a list of all the municipal claims at issue or a sense of their magnitude; indeed a lien which totals $0.00 is absurdly the opposite of demonstrating its magnitude, even if the City later revealed it is actually pursuing at least $14,702.99. In addition, without any explanation in the record, and at variance with the requirements of the Act, the CCP issued a rule only upon Manu instead of all interested parties and, further, none of the parties were served in the manner required by the Act. The Court noted that the Act is somewhat confusing inasmuch as one (1) section requires personal service and posting whilst another requires posting and first class mail; what was not confusing to the Court was that the record of the proceedings in CCP revealed that service was not perfected on any party using any of the above-listed options. Moreover, even if service was perfected, the Act requires the CCP to hold a hearing to determine whether service was properly perfected on all parties, whether there was contemporaneous publication of the rule, and whether the facts alleged in the petition are true. Needless to say, the CCP record contained absolutely no evidence that such a hearing was ever held. The CCP must make an independent inquiry into whether the City strictly complied with the Act and the CCP record reveals no such inquiry ever occurring.

Finally, the City attempted to argue that Manu’s appeal was untimely filed. The Court dispensed with this argument by pointing out that the CCP continued to retain jurisdiction over the Property when the sale of the same had neither occurred nor concluded. Regardless, the Court ruled that a petition to open a judgment can be filed at any time when there is a lack of subject matter jurisdiction and Manu’s claim that not all parties were served and, indeed, not all indispensable parties were joined into the case, clearly deprives the CPP of subject matter jurisdiction over the case.

In the final analysis, the Court in the instant matter made it abundantly clear that a municipality pursuing liens must strictly comply with all of the terms of the Act in order to collect on its alleged liens and Courts of Common Pleas must ensure compliance.

Originally published in Upon Further Review on October 22, 2013 and can be viewed here.

Attorneys Beware The Fake Creditor Scam

Here is an article, by Gregory S. Shields, Esquire, who is my friend and colleague,  providing some sound wisdom and insight into how an attorney pursuing a practice in debt collection can be defrauded.  The article is entitled “Attorneys Beware The Fake Creditor Scam” and can be found here and on my website here.

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