Discover Bank is a common creditor that we encounter when defending consumers and small businesses in debt collection and judgment enforcement situations. Discover rarely sells its debt to a third party debt-buyer and instead prefers to pursue consumers directly. This generally makes it more difficult to defend against them as they are considered an original creditor and do not have to show a proper chain of title or assignment of the debt from debt buyer to debt buyer as companies like Midland Funding and LVNV Funding must do. Discover Bank will generally send defaulted debts into collection first. If collection fails then they will transfer the matter over to a debt collection law firm such as Selip and Stylianou, Zwicker and Associates, and Pressler Felt and Warshaw to pursue a lawsuit.
A consumer debt can and does quickly turn into a default judgment in these situations most commonly because of service of process issues. In a city such as New York, people move from address to address frequently. For this reason, a consumer may be served at an old address and never receive actual notice of the lawsuit. Additionally, there are process servers that fail to serve a consumer properly. This is a known issue in New York and has been referred to as Sewer Service. If the lawsuit is received then an answer with defenses keeps the burden on Discover Bank to prove that they are the rightful owner of the debt. They must provide the original contract as well as monthly statements to prove their case. They must also prove that the amount being sought is accurate. All of these issues can be attacked when mounting a proper defense. At a minimum, these defenses can be used against Discover as leverage in settlement discussions with firms like Selip & Stylianou, Zwicker, and others. In our experience, Discover has been willing to negotiate settlements between 40% - 60% off of the balance and provide 12-24 months of interest-free payments. This is usually a good option as it saves the consumer money, eliminates the risk of loss in litigation, and significantly lowers the cost of legal fees involved. In cases under $25,000 a settlement makes the most sense as the cost of litigating a legal matter against Discover toward trial does not make much practical sense.
A default judgment on the other hand can result in a frozen bank account, a wage garnishment, and even a lien placed on real property. Bank levies can freeze up to double the amount of money in an account while a wage garnishment can take 10% of a consumer's wages every pay period. A real property lien is good for up to 10 years and can prevent the purchase or sale of real property. To vacate a judgment a consumer must file an order to show cause under CPLR 5015 within one year of actual notice about the judgment, a reasonable excuse must be shown and at least one meritorious defense must be asserted. A default judgment may also be vacated purely based on improper service. If service was not made then there is no jurisdiction and the judgment is considered to be void. Additionally, under CPLR 317 a judgment may also be vacated without the need for a reasonable excuse as long as the consumer was not personally served, a meritorious defense is asserted, and the motion is filed within 5 years of judgment entry and within one year of actual notice about the default judgment. Vacating the judgment does not mean that the case will be dismissed but rather re-opened giving the consumer the ability to defend themselves on the merits as discussed above.