Article by Adrian Lapas, Eastern North Carolina Bankruptcy Attorney
As I stated in my prior post, there are ways besides bankruptcy that you can deal with your debts is to let your creditors sue you. Hunh? Why on earth would anyone want to get sued? A legitimate question and my answer is not one given lightly nor does it apply in all situations.
In order to make this option of dealing with your debts feasible, you will most likely need a lawyer well-versed in defending debt collection suits. Preferably, this lawyer is also well-versed in claims under the Fair Debt Collections Practices Act and applicable state debt collection law. Generally, I am talking about lawsuits against you for old credit card accounts but this type of strategy can sometimes apply to other collection accounts.
So, when would allowing a creditor to sue you make sense? It would be helpful to delve into how collections are handled nowadays.
The bad debt buyer will purchase this portfolio of debt for pennies on the dollar. By that, if a debtor owed an alleged credit card account balance of $5,000.00, the bad debt buyer may purchase the account for 3 cents on the dollar or $150.00.
The documentation that the debt buyer receives from the original creditor on the account is usually bare-boned—that is, name, address, and other rudimentary information. The debt buyer will then sue you and try to collect the full amount of the alleged debt. This is big business and some bad debt buyers purchase portfolios of credit card accounts for hundreds of millions of dollars (still at 3¢ on the dollar).
In this type of situation, the bad debt buyer is counting on you, the debtor, not responding, or taking any action on the lawsuit. In fact, if you do respond, particularly with a lawyer, often the debt buyer will file a dismissal because they know they cannot prove the debt in court.
A lawyer well-versed in these debt buyer lawsuits often can win in court or, at least, negotiate a settlement where the debt buyer will dismiss their case with prejudice (which means it can’t be filed again) and that the tradelines are deleted from your credit report. Sometimes, the debt buyer will even pay your lawyer’s fees.
If you have a significant amount of debt and you get sued by a bad debt buyer, it may make more sense just to seek bankruptcy protection and get rid of all your debts. An experienced bankruptcy lawyer, particularly one who is versed in consumer protection statutes, can help you make a decision as to whether the “litigation” strategy or bankruptcy strategy is the best one to deal with your financial situation.
Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg, and the Tampa Bay area.