Collector Induce you to Settle to Stop Legal Action... but Judgment Entered Anyway?

This situation is common. You agree to settle a collection lawsuit in exchange for a promise to stop the case. You pay as agreed, but then find yourself on the wrong end of a default judgment.

The good news is that you may obtain a judge's discretionary sympathy to vacate that judgment based on New York CPLR § 5015(a)(3). This often-overlooked section of New is based on "fraud, misrepresentation, or other misconduct of an adverse party."

Examples of fraud, misrepresentation, or misconduct of an adverse party:

1. The collector tells you to "forget about" the complaint served on you[1];
2. The collector tells you the complaint will be dismissed but pursues a default judgment while making payments[2];
3. Sending a consumer a stipulated judgment while misrepresenting its implications[3];
4. Giving advise (especially bad advice) to an unrepresented consumer;
5. Taking undue advantage of a consumer in the course of settlement[4];
6. Sending a stipulation of settlement with the summons and complaint; and
7. Filing affidavits with false statements or notary defects (i.e. debt buyer has personal knowledge when untrue; affidavits notarized in bulk at different locations).

Not only do these seven instances serve as a basis to vacate a judgment under CPLR § 5015(a)(3), but you could likely use them in your own case against the collector/lawyer for violating the Fair Debt Collection Practices Act.

But it's important to overturn the judgment first before taking retaliatory action. Contact us right away if you've settled but have suffered a default judgment consistent with the above.