Defenses you can use in a debt lawsuit

Defense: Running the statute of limitations 

The plaintiff must file a lawsuit within a set amount of time. After that period expires, they can no longer sue. This time limit is called the statute of limitations. The statute of limitations that apply to most debt cases: 

• Breach of written contract- 4 years  

• Account Stated- 4 years  

• Open book account for money due- 4 years  

If the period of time has been longer than the statute of limitations allows, you may be able to use the defense called running of the statute of limitations.   

Defense: Laches 

Even if the plaintiff files the lawsuit within the statute of limitations, they are not allowed to delay so long that it negatively affects your ability to defend yourself.  

You can use this defense if the Plaintiff waited a long time to file this lawsuit and you thought that the Plaintiff was no longer trying to collect this debt. The delay caused you harm because it increased the amount that the Plaintiff is suing you for. Or, you no longer have documents relating to this case.

For example, the plaintiff waited almost 4 years to file for a breach of written contract suit. But your defenses depend on bank records and your bank only keeps 3 years of records. 

If this is the case, you may be able to use the defense called laches. 

Breach of contract by Plaintiff 

If the plaintiff did not do everything it was required to do according to the contract, then you may not be legally required to pay what you owe. You may be able to use breach of contract by Plaintiff as a defense. 

Equitable Estoppel 

If the plaintiff communicated one thing to you and then did another, and that misrepresentation did harm to you, you may be able to use equitable estoppel as a defense.  

For example, if the plaintiff communicated to you that if you lost your job your payments would be suspended for up to six months, but instead sued you as soon as you didn’t pay after losing your job, you could use this defense. 

Fraud, misrepresentation, or deceit by the plaintiff 

If you feel you only entered into the contract because of misrepresentations, fraud, or deceit by the plaintiff, you could argue this defense. 

Unclean hands 

This argues that the plaintiff has committed wrongdoing and is attempting to benefit from this wrongdoing. 

Usury 

California law limits the amount of interest charged when loaning money or giving credit to 10% per year. Some lenders are exempt from this rule, including banks and other commercial lenders. If the lender isn't exempt, charging more than this is called usury. If the plaintiff has charged you more than the 10% interest permitted under the law, they are not entitled to recover interest.

Duress/Undue Influence 

This agues that you entered the agreement because the plaintiff took advantage of your mental state or used force.

Recoupment 

This argues that the defendant could have sued the plaintiff, for example, under the Rosenthal Fair Debt Collection Act, and is therefore entitled to an offset of the amount that would have been recovered. 

No breach by Defendant 

You fulfilled your part of the contract so the Plaintiff is not entitled to recover anything.

Lack of privity 

This defense argues that you and the plaintiff did not have a contractual relationship, or if the plaintiff is not the original creditor, that the contract was not properly assigned to the plaintiff. 

No damage to the Plaintiff 

This defense argues that the plaintiff has not been harmed by the breach of the contract, and therefore should not be allowed to recover anything. 

Offset 

The amount asked for in the Complaint is too high because the Plaintiff did not credit you for the money you paid or the Plaintiff owes you money

They can't recover attorney's fees

If the Plaintiff asked for attorney's fees in the Complaint, but your contract doesn't say they can get attorney's fees and there's no law that says they can, you can use a defense that the attorney's fees are not recoverable.

Identity theft

You were the victim of identity theft and do not owe the debt. You filed a police report about the identity theft and gave the Plaintiff a copy of the report.

Discharge by bankruptcy 

This defense argues that the debt was part of a bankruptcy case, and was canceled (discharged) in bankruptcy. 

Res Judicata/Collateral Estoppel 

You would use this defense if the issue has previously been decided by a court, and the court found you did not breach the contract. A creditor cannot re-file the suit and argue that the same actions were a breach of contract. 

Statute of frauds 

Some types of contracts must be in writing. If the contract the Plaintiff is suing you about is not in writing, but you think that law says it should have been,  this defense may apply to you.

Parol Evidence Rule 

By law, a written contract takes priority over what is said in relation to the agreement. If the plaintiff’s claim is based on a verbal statement that contradicts or falls outside the written terms of the agreement, you may raise this defense.

Satisfaction 

If you have completely paid the plaintiff or paid an amount the plaintiff agreed to accept as full payment, you may argue that you have satisfied the debt. 

Prevention of performance 

If you tried to pay but the plaintiff would not let you, you may use the prevention of performance defense. For example, you offered payment in full, but the plaintiff would not accept it. 

Cancelation of contract 

If you use cancelation of contract as a defense, you argue that you and the plaintiff both agreed to cancel the contract.

Rescission 

This defense is sometimes used in a sales contract. You may be able to use this if you promptly returned the goods or rejected the services under the contract, therefore voiding the contract.

Frustration of purpose 

This argues that an unexpected event or occurrence happened which prevented the defendant from receiving the goods or services, or that enforcement of the contract would not allow the parties to receive the benefit of the contract.

Lack of Consideration 

This argues that no contract was formed because you never received the goods or services promised by the plaintiff. 

Failure of consideration 

This argues that the goods or services received from the plaintiff were so poor that any further payment would be unconscionable. 

Failure of Condition Precedent 

This argues that something was required to happen before your obligation to perform under the contract and that this condition never took place. 

Quantum Meruit 

This argument is that the plaintiff never completed performance under the contract, and is only entitled to payment for the portion of the contract that was performed. 

Lack of standing to sue 

The plaintiff or original creditor was not licensed to do business in the State of California. 

Waiver 

The Plaintiff told you, by actions or words, it was giving up its rights under the contract. You relied on what they did or said. Therefore, the Plaintiff is not entitled to recover anything.

No deficiency judgment permitted 

This argues that the lawsuit follows the sale of property securing a contract, such as a home or a car, that the amount sought is the deficiency (shortage) under the contract, and the plaintiff has not completed the legal requirements to seek this deficiency.

Other examples:

• The loan was a first mortgage for the purchase of real property (land/buildings) which was foreclosed on non-judicially (not by the court) 

• The loan was a motor vehicle loan, and the plaintiff or original creditor did not: 

  • Send notice of the intent to sell the vehicle 
  • Send notice that the defendant had a right to redeem the motor vehicle prior to sale 
  • Include in the notice the right to reinstate the contract if such a right existed 
  • Include in the notice in at least 10 point bold type that “NOTICE. YOU MAY BE SUBJECT TO SUIT AND LIABILITY IF THE AMOUNT OBTAINED UPON DISPOSITION OF THE VEHICLE IS INSUFFICIENT TO PAY THE CONTRACT BALANCE AND ANY OTHER AMOUNTS DUE.”  (Civil Code section 2981)
• That the vehicle was not promptly sold (within 90 days of repossession) 
• That the vehicle was not sold in a commercially reasonable manner.