Lawsuits and Cost of Defense

By Gene Sollows

When you are facing tough financial times, it’s easy to feel like you’re out of the frying pan and into the fire.  Often, this comes in the form of a civil lawsuit filed by a creditor that is seeking payment.

From the moment you are sued, your debt is growing.  Cardholder agreements and other loan documents all contain language making you responsible for creditors’ legal fees and expenses.  Put another way, you are paying them to collect money from you.  In a typical credit card lawsuit, this can easily add several thousand dollars to a bill you weren’t able to pay in the first place.

In the past, collection lawsuits were typically restricted to larger accounts in which the outstanding debt was $3,000 or more, simply due to the time and cost involved in getting a collection attorney involved.  As the national economy flounders, however, creditors are increasingly willing to file lawsuits for smaller debts.  Unfortunately, the attorney’s fees do not scale downward with the amount owed, and you can easily end up on the receiving end of a judgment that is comprised mainly of fees, costs of court, and pre- and post-judgment interest.

Multiply this by five or 10 — the typical number of credit accounts held by most consumers — and the debt hole gets even bigger.

Cost of Defense

Defending one or more collection lawsuits involves large expenditures of time, money and frustration.  Meeting with your attorney, answering questions, producing documents — defending a lawsuit is a long, tedious and expensive experience.  You can easily spend thousands of dollars defending one collection case, and the defenses available to most debtors are fairly narrow.  Unless you have a bona fide dispute about the debt or the payment history, chances are that you will end up owing much more than when you started.

If you have one or more civil lawsuits, bankruptcy is an option you should consider.  Did you know that the cost of the bankruptcy itself is often equal to or less than the cost of defending one civil lawsuit?  The good news is that in most cases you can eliminate most or all of your debt in bankruptcy, not just the debt that is the basis of the lawsuit.

Give Bailey & Galyen a call today and schedule a free consultation with a licensed attorney to discuss your financial situation.

Tags: , ,

Leave a Reply