Ever since I have been practicing in the bankruptcy/debt arena, I have seen junk debt buyers like Midland Funding, Portfolio Recovery Associates, Merchants Credit Association and Renton Collections file debt collection lawsuits on accounts where the amount is relatively small – some for amounts less than $1,000. I seriously have had clients come into my office who have been sued by Merchants Credit Association for $500 in medical bills or less.
The reason why this is so nonsensical is because the time, effort, and court fees it takes to get a lawsuit filed and served in Washington State will cost nearly as much as they are suing for. For instance, in the King County District and Superior court, where most of the cases are filed, the following are costs associated with filing a debt collection lawsuit:
- Washington District/Superior Court Filing Fee: $83.00/$240.00
- Process Server Fee: $120.00
That minimum $203 dollar amount doesn’t include the cost of hiring a lawyer to file the lawsuit which of course the debt collection law firm will try to get the consumer to pay for if they get a judgment or the case is settled. Often times these cases can be settled for less than the full balance they are seeking pre-litigation and after a case is filed. Once a judgment is entered however, settlement becomes much harder to obtain.
Does it Make Sense to Hire a Lawyer on a Small Debt Lawsuit?
The usual answer is no, it probably doesn’t. I try and keep my fees reasonable and affordable and even then I typically charge more than the amount being sued on. So what are you supposed to do ? Here are three tactics you can use to deal with your small dollar lawsuit.
#1 – Ask for Validation of the Debt – Make Your Debt Collector Prove their Case in Court
Cases filed by debt collectors may be full of holes. They often don’t have the right evidence, witnesses, or law to prove their case. These companies and law firms rely on over 90% of the people they sue just ignoring the summons and complaint and having a default judgment entered against them.
Therefore, if you continue to ask for validation of the debt, and that validation cannot be provided, often times the debt collector will either fold and dismiss the case or agree to work out a settlement for less than the full balance. If they are unable to prove their case at trial the court will enter a judgment in your favor. It is not uncommon for a debt collector to wait until the final minutes before your scheduled trial at the courthouse to offer to dismiss the case due to lack of evidence. The point is that it may be worth your time to show up at court.
I understand that the court system can be complicated and overwhelming to navigate. The debt buyer will be represented by an attorney who will know the court system inside and out and will try and use their knowledge of court procedure to throw you off and cause you to lose your case. That is why it is so vital to have an understanding of not only the court procedures but the underlying law as well. Judges will only decide your case based on the law, if you don’t cite a law to back up your request to dismiss the case, you may not be successful.
#2 – Settle the Debt for an Amount Less than The Full Balance
The next approach is to settle your case before it goes to discovery or to a trial. While your debt collection law firm wants to settle the case (because that means you paying them money) there are tactics you can use to get the best settlement possible. In negotiating with debt collectors to obtain a settlement it is best to determine what you can pay in a lump sum settlement as well as a settlement that can be paid over a couple months.
Next, you should evaluate your case to see if there is anything you can use as leverage. Here are a few of the items you can use as leverage to get the best settlement:
- Are You Judgment Proof?: Judgment proof means that even if the creditor wins a judgment they will not be able to collect due to your financial circumstances. Perhaps you receiving social security retirement or social security disability as your sole source of income. These types of income cannot be garnished.
- Do You Have Past Due Child Support or Maintenance: If a person owes child support or spousal maintenance this debt gets paid first. When people fall behind on their child support often their wages are garnished until the support is brought current. This means that if a debt collector wins a judgment against you they will have to wait in until the support payments are paid first.
- Tax Liens: This falls into the same category as support payments. The government always comes first. If you owe back taxes then this can act as a lien against all of your real estate, personal property, and your wages.
- Bankruptcy: You would think that telling debt collectors that you are going to file for Ch. 7 bankruptcy would give you some leverage. Unfortunately, not with high volume debt collectors who have become immune to creditors stating that they are going to file bankruptcy. But hey, you might as well throw it out there as you have nothing to lose.
#3 – File for Chapter 7 Bankruptcy
If you are being sued by a debt collector for a small amount (under $1,500) then bankruptcy should not be your first choice, unless you have other debts to make a bankruptcy worthwhile. Bankruptcy is a very affective tool. You don’t want to use it, but if you need to it will get results immediately and help you get the fresh start that you need. Immediately after filing for bankruptcy debt collection efforts must stop, and that includes stopping a debt collection lawsuit in most cases.
As you can see, you have several options at your disposal. If your lawsuit is only for a small amount, you shouldn’t stress about it too much as educating yourself on your options is the best thing you can do so you are not taken advantage of.
If you have been sued by a debt collector and you live in Washington State, give Symmes Law Group a call at 206-682-7975 to learn about your options. If you would like to learn If you would like to learn how to deal with your debt collector on your own check out my DIY debt collection response course complete with sample materials and forms to learn how to use the law to your advantage.
