Credits and Debts

Creditworthiness is influenced by legal, not just financial, factors under US law. While a bank may look at income and assets, the legal system evaluates credit through the lens of contractual compliance and the presence of any judicial encumbrances, such as liens or judgments. An entity with significant cash flow may still possess poor legal credit if they are subject to active litigation or have a history of non-compliance with court ordered mandates.

A debt is only as valid as the evidence used to support its existence and its amount. Under the law, a debt must be liquidated and it must be enforceable under the governing statutes of the jurisdiction. If a creditor cannot produce the original signed agreement or if the interest rates charged violate state usury laws, the debt may be legally voided. We treat every claim of debt as a rebuttable presumption requiring forensic proof of the right to recovery.

When a debt moves from current to delinquent, the creditor utilizes credit reporting as a functional tool of coercion. By reporting a default to major bureaus, the creditor damages the debtor's legal standing, making it difficult to secure new capital or maintain existing business relationships. This damage is often the first stage of an enforcement operation intended to weaken the debtor's position before a lawsuit is filed.

A lawsuit is the mechanism that converts a contractual debt into a judicial judgment backed by state authority. Once a judgment is entered, the Debt side of the equation gains the power of the state. The creditor can then initiate a bank levy or a wage garnishment, effectively bypassing the debtor's consent to seize assets. This transition from a voluntary liability to an involuntary seizure is the most dangerous phase for any individual or business.

Secured debt is tied to a specific asset through a security interest, allowing for immediate repossession upon default. Unsecured debt, such as credit card balances or medical bills, is not tied to any specific property. To collect on an unsecured debt, a creditor must typically win a lawsuit and secure a judgment before they can touch your assets. We ensure that a default on an unsecured debt does not inadvertently lead to a seizure of secured property through procedural oversight.

Consumer debt is governed by fairness statutes like the FDCPA while commercial debt assumes parties are sophisticated actors. The legal standards for fairness are often lower in the commercial arena, as the law prioritizes contractual certainty. We provide a unified legal framework that addresses both consumer and commercial liabilities, ensuring that your business sovereignty and personal estate are both shielded from creditor aggression based on the applicable jurisdictional rules.

A creditor cannot simply report that you owe money: they must be able to prove it with forensic documentation if challenged. 

Under the FCRA, if a reporting agency cannot verify the data within a specific timeframe after a dispute is filed, they are legally required to remove the entry. We utilize this verification mandate to eliminate unverified and zombie debts from our clients' reports, removing the leverage that creditors use to force settlements.

Reporting a debt to a bureau is a separate legal action from an active collection operation. A creditor may report a default to damage your standing while simultaneously engaging in a debt collection operation to recover the funds. However, the law prohibits reporting a debt that is past the statute of limitations or that has been discharged in bankruptcy. SJKP LLP monitors these intersections to ensure our clients are not subjected to unauthorized reporting during the litigation process.