Why Playing The Odds With A Collection Lawsuit Isn’t A Good Idea

Why Playing The Odds With A Collection Lawsuit Isn’t A Good Idea

By |July 25th, 2012|

If you’ve ever fallen behind on a bill, you’ve thought of ignoring the bill in the hopes that it would disappear. If you’re smart, you’ve banished that thought pretty quickly.

Lots of people who call me with bill problems ask about the odds of the collector starting a lawsuit against them.

They’re not being dishonest, merely trying to assess their chances of getting out from under their debt without taking any action.

Here’s what I tell them.

Assume The Lawsuit Is Coming

The debt buying industry is a multi-billion dollar enterprise, generating tens of thousands of jobs and earning hefty pay checks for the executives in charge. Though some people pay voluntarily, the debt buyers need to turn a profit – and for that, they need to file a collection lawsuit against the person who owes the money.

How Often Do Collectors Sue?

I don’t have a crystal ball, but I can tell you that between 2006 and 2008, a lawsuit was filed in approximately 300,000 consumer debt cases each year in New York City alone. About 89% of these cases were filed by debt buyers.

By comparison, about 75,000 collection lawsuits in Chicago in 2007 were filed by debt buyers.

Encore Capital Group, a fairly large-sized debt buyer, filed nearly 4S0,OOO lawsuits around the country in 2008 alone.

Some creditors will file a collection lawsuit for large debts, others for small ones. Will yours be pulled for legal action? There’s absolutely no reliable way to know.

A Few Better Options

You could bury your head in the sand and hope the collector won’t start a lawsuit against you for a debt, but why take the risk? There are other options at your disposal, especially if you act sooner rather than later.

Some of those options include:

  • settling your debt
  • working out a payment plan with the collector
  • waiting for a lawsuit so you can defend against it in court
  • paying the debt in full
  • filing for bankruptcy

As you go through the collection system, your options may become less attractive. For example, filing for bankruptcy before a lawsuit starts may be less complex than after the lawsuit is filed. Collectors may be willing to enter into better settlements before a lawsuit as well.

Whatever you do, the odds are stacked against you when it comes to a collection lawsuit. Don’t play a losing game – it’s a sucker’s bet.

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.