One of the greatest fears people have when they are considering credit card debt settlement is being sued by a creditor or debt collection company. The question is often asked, “What are the chances of them suing me while I’m trying to work out a credit card debt settlement?” To understand the answer you must first understand the process of debt collection litigation.
In this session were going to take a look at the hoops a creditor or debt collection company must jump go through in order to sue a debtor. This knowledge will help you understand your chances of being served with a lawsuit or hit with a wage garnishment.
Ever heard this conversation before? “Sir/ma’am, if we don’t receive a payment by this Friday, unfortunately you leave us no other alternative but to sue you.” Threatening debtors with lawsuits, wage garnishments and arrests have been a staple in the debt collector’s arsenal for years. If you are attempting to work out a credit card debt settlement, you need to know the facts about being sued for unsecured debt. Note, I said unsecured debt; secured debt is a whole other subject.
Credit card debt settlement is really the way to go as opposed to bankruptcy but it does offer some potential challenges you won’t experience with bankruptcy. The one big one is; once a person files bankruptcy, all creditors must cease their collection activities! With credit card debt settlement, creditors are not required by law to cease in their attempts to collect. That being said, here are the normal steps a creditor or debt collection agency has to go through in preparation to sue a debtor.
Step #1 – Assets Investigation: It serves no purpose suing someone who can ill afford to pay. As the old saying goes, “You can’t squeeze blood from a turnip!” This first step involves hiring an Assets Investigator to determine the likelihood of collecting the judgment in the event that they do sue and win. A typical investigation may include the following: skip tracing, verification of employment income, corporate affiliations, liens, judgments and bankruptcies, professional licenses, real property, automobiles, bank accounts, brokerage accounts, water vessels and aircraft. It will also include personal information confirmation such as: date of birth, social security number, social security number fraud check, address history, divorce records, name of spouse and children and child support payments.
The average going rate for an assets investigation is around $400.00 plus expenses when applicable. This step is vital because it does not make good business sense for a company to sue if they don’t know if their judgment will be collectible. No sane company is going to skip this step.
Step #2 – Hire an Attorney: As you know, hiring an attorney is not cheap no matter what the issue is. A creditor or debt collector can expect to pay anywhere from $150.00 per hour for an attorney right out of law school and $225.00 and upward for an experienced attorney. We’ve only been through two steps and already you can see why credit card debt settlement is a better option than a lawsuit.
Step #3 – File The Case In Court: Once the attorney takes the case, they will be required to pay the upfront legal costs such as the filing fees, court costs, etc. These fees can range anywhere from $700.00 to $1300.00 depending on the jurisdiction of the lawsuit. The question they have to weight is, “Do we take the chance in court or work out a credit card debt settlement initiated by the debtor?”
Step #4 – Cross Their Fingers: Why must they cross their fingers and hope that all of the stars are aligned in their favor? If they decide to proceed with legal action and they are awarded a wage garnishment, the debtor could quit that job and they are creditor is right back to square one. If in the middle of the suit the debtor decides to file bankruptcy, the creditor or debt collection company will end up getting nothing. If the debtor sells all of their assets, gives them away or empties out their bank accounts, once again the company that initiated the lawsuit gets nothing. Now you can see why credit card debt settlement is by far the better option for all parties involved.
But the worst of all scenarios is if the debtor does one of two things: (a). Shows up in court with a consumer advocate attorney whose ready to fight as if this is the end of the world. Or, (b). The debtor opts to represent himself Pro Se and is fully prepared to drag this issue the long route with various valid legal motions related to the FDCPA, FCRA and state laws.
In any of these scenarios, the creditor or debt collection company will be faced with a mounting legal bill they may exceed what they may or may not have recovered. Clearly, if the assets and income are not there – or there seems to be a gray area on their ability to collect, it would be to their advantage to work out a credit card debt settlement.