Confirm client credit status
Establishing the existence of credit is key. Ask the client about all credit accounts. Who are the authorized users? Are spouses co-borrowers? Is there debt or credit is in each spouse’s individual name? A common mistake is to ask the client to bring a copy of his or her own credit report sourced from the big three credit bureaus (Equifax, Experian and TransUnion). Typically, these free consumer credit reports are of little use to your case for many reasons. The most important is that consumer credit reports are inadmissible in court. If they are used as a foundational document, your credit damage demand will be dismissed.
A better option is a commercial or subscriber credit report that reveals credit status back seven years prior to the date of issuance/publication and will often indicate creditor or public record remarks. Each commercial report is tri-merged, meaning they include reports from each of the three national credit agencies. In the current restrictions on credit report access, only the person named on the report has the ability to request or authorize them. Requesting them from most direct lenders results in refusal. Requesting them from a loan broker or mortgage banker more often leads to co-operation. Revealing that the credit report content may be used in litigation will cause refusal by either source. But it is important to be honest when requesting the report, so the client may volunteer that this request is to get a pre-approved line of credit, to help them shop in the right price range.
Confirm the amount of approved credit in use per client
Most marital couples have multiple accounts—some are individual or business accounts, but most are joint accounts. Joint accounts, if not dissolved properly, are the most accessible after separation and most prone to abuse. At case intake, ask the client to provide 1) any new derogatory account remarks (i.e., late payments, collection accounts), 2) added public records such as judgments and liens, 3) account closures and 4) application denials.
Another important piece of information to obtain is the aggregate amount of credit limit at the time of the economic injury. There must be enough credit available or in use to confirm an individual’s level of creditworthiness recognition (and lack thereof after the injury). This information can usually be found on the various credit statements supplied by the client.
An overview of the specific economic harms inflicted on the client can be readily revealed in simple true-or-false questions which address the nature of harm(s) already been inflicted and are very specific as to the damage suffered (whether compensable or not).
- credit card(s) status – is client an approved borrower or authorized user
- Dipping into resources –tapping into savings, retirement funds, bank of Mom & Dad/friends
- Seeking financial counseling – debt counseling or BK thoughts
- New collection accounts – are they coming soon or already in place
- Mortgage Status – current payments, modification program, FC notice
- Insurance – in force, forced – denied
By taking the time to review the supplied documents and to listen to the client’s responses to the above questions, it will be possible to determine the extent of credit harm or damage (if any).
What makes the economic damage claim admissible in court?
It is necessary to have a mutual indemnification agreement that specifically identifies credit reputation damage as compensable. In most cases a general a mutual indemnification agreement will be ineffective as a basis for securing compensation.
Establishing an evidentiary foundation for a credit damage claim is crucial to overcome opposing counsel’s arguments that the damages are speculative and to prepare an information-based platform that is acceptable to the judge or jury. When claimed damage can be confirmed and defined by credit reporting bureau documentation with documentation backup, there is no basis for a speculation objection from opposing counsel.
To that end, it is important to have the gathered credit documents efficiently organized so that a judge or jury can immediately understand their significance. A summary of pertinent documents both pre-injury and post-injury will establish the seriousness of the plaintiff’s current credit situation in relation to a pre-injury credit history. Counsel should prepare the summary before the initial demand to confirm that all categories of credit damage have been explored and no aspect neglected.
These documents include pre-injury and post-injury credit reports; monthly statements from creditors; creditor notices sometimes provided in monthly statements; loan documents; collection notices; delinquency notices; cancellation of services notifications; public records; subpoenaed documents as necessary from credit grantors or credit bureaus; property appraisals; good faith loan estimates; and notices of credit denial that stipulate the cause or basis for denial or change of terms (increased costs).
Documents can be obtained through discovery if not in the possession of the client.
The financial aspects of a divorce can be messy and emotional. No matter how successful an attorney is in replenishing a party’s bank account through settlement or trial, the efforts will not resolve the long-term loss and expense caused by damage to credit reputation. It is up to the client’s attorney to see that the client is properly compensated for current and future credit damages.
For free consultation about whatever floats your boat, call 714-441-0900.