Forum Shopping By Zombie Debt Buyers - Why Are They Dodging Small Claims Courts & Filing Actions In More Expensive Forums?

Notre Dame Law School Associate Clinical Professor of Law Judith L. Fox writes (footnotes omitted):

• Carol Jones called the Notre Dame Legal Aid Clinic for assistance. She had received a summons and complaint regarding a credit card she was unable to pay. My student intern and I met with Carol and reviewed her paperwork. Carol agreed that the complaint referenced her credit card and the balance was correct. During the conversation she mentioned “that other complaint” that she had not brought along because it “was not her debt.”



• In the case of both complaints, for the debt she owed and could not pay and for the debt she did not recognize, Carol saw no reason to appear in court. Carol was judgment proof and too poor for bankruptcy court.



• Both complaints were collection actions attempting to collect debt far below the $6,000 jurisdictional limit for small claims actions in Indiana, and yet one collector filed in small claims court, a division of the Superior Court, and the other filed in the Circuit Court.



• Nothing about the nature of the claims accounted for the decisions to file in different courts; the only difference between the claims was the nature of the plaintiff. The plaintiff filing in small claims court was collecting its own debt, the other was a national collection agency.



• Why would the collection agency spend more money to file an action in a Circuit Court, a court of general jurisdiction, when it could file so much more cheaply in small claims court?

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• Looking back over the statistics, I noticed many other cases filed in Superior and Circuit Courts that were below the jurisdictional limits of small claims court. 64% of the cases in the study group were for claims below $6000. This is significant because much of the conversation around collection activity and abuses has focused on the problems in small claims courts.



• National collection firms are forum shopping in Indiana. They are increasingly avoiding small claims courts.

For more, including why collection agencies are not filing claims in small claims court and how that decision may impact the debate over reform of the collection industry, see Do We Have A Debt Collection Crisis? Some Cautionary Tales Of Debt Collection In Indiana, 24 LOY. CONSUMER L. REV. 355 (2102).

Thamks to Deontos for the heads up on the article.