Section 811 of the 1977 Fair Debt Collection Practices Act protects consumers from suits by “debt collectors” in inconvenient forums. Actions by “debt collectors” to enforce a lien on real property may be filed only in the county in which the real property is located. Other “debt collector” collection actions may be brought only where the debtor resides or where the contract is signed. Learn more at http://www.mabankruptcylawyers.com.

Even cheaper and quicker than a default judgment is a cognovit judgment. In cognovit judgments (a/k/a judgments by confession), the parties agree at the time that the debtor-creditor relationship is created that if the debtor defaults on her obligations, the creditor can obtain a judgment against the debtor without any notice to the debtor, without any hearing. An attorney chosen by the creditor appears in court to confess judgment against the debtor for any unpaid portion of the debt along with various fees and charges without the necessity of even service of process on the debtor. A debtor generally does not know when the cognovit judgment is entered. After learning that a judgment has been entered, a debtor is limited to two avenues of relief. The first available remedy is a petition to strike the judgment. This petition is only available in cases where irregularities constituting fatal defects are apparent on the face of the record. The other available remedy is the petition to open judgment; its main disadvantage is that the burden of proof is placed on the debtor.

Most states have enacted legislation eliminating confession of judgment or severely restricting its use. Learn more about bankruptcy at http://infospeak.org/?p=95.

The Supreme Court considered due process attacks on confession of judgments; in D. H- Overmyer Co., Inc. v. Frick Co. (1972), the court held that a confession of judgment provision is not per se violative of due process. Overmyer presented the most appealing possible fact situation for upholding the constitutionality of cognovit judgments: both the debtor and the creditor were substantial business entities, and the facts revealed that the cognovit provision was included in the contract as a result of good faith bargaining between the parties. The Court in Overmyer, indicated by way of dictum that a confession by judgment may well violate due process “where the contract is one of adhesion, where there is great disparity in bargaining power, and where the debtor receives nothing for the cognovit provision.” Check out bankruptcy at http://thongchaimedical.org/?p=125.

In a case decided the same day as Overmyer, Swarb v. Lennox (1972), the Court held the Pennsylvania cognovit provisions not unconstitutional on their face. In Swarb, a three judge district court had held inter alia that (1) the action challenging the constitutionality of the Pennsylvania provisions could not be maintained as a class action on behalf of all Pennsylvania residents who signed cognovit notes; (2) the action, however, could be maintained as a class action on behalf of natural persons residing in Pennsylvania who earned less than $10,000 annually and signed such instruments; (3) the Pennsylvania practice of confessing judgment was unconstitutional as applied to the designated class.

Swarb V. Lennox (1970). Only the plaintiffs appealed, claiming that the court should have declared the Pennsylvania rules and statutes unconstitutional on their face. In rejecting this contention and affirming the district court’s opinion, the Court said: “Overmyer necessarily reveals some discomforture on our part with respect to the present case. However that may be, the impact and effect of Overmyer upon the Pennsylvania system are not to be so delineated in the one-sided appeal in this case and we make no attempt to do so.” In light of the facts of both Ouermyer and Swarb, the constitutionality of cognovit notes in a consumer credit transaction is still in question.

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