If a creditor sues you, whether you should hire a lawyer to defend against the lawsuit depends in large part on whether the creditor can prove its case against you, how much it will cost you to defend the lawsuit, and whether the creditor can collect from you. (Learn more about creditor lawsuits.)
Even if you don’t end up hiring a lawyer, an experienced consumer attorney can help you evaluate the creditor’s case and your personal circumstances to determine the best course for you.
When a creditor sues you to collect debt you haven’t paid, you have three choices to deal with the lawsuit:
Which option is best for you will depend on a number of factors.
If you owe the amount that the creditor is seeking in its lawsuit, hiring a lawyer might be a waste of time and money. If you don’t have a defense or counterclaim and the creditor can easily prove its case, then you’ll lose. You’ll then owe the judgment amount, have to pay your own attorney, and may have pay the creditor’s attorney fees also (in some types of cases, the losing party has to pay the other side’s attorney’s fees).
If you have a valid defense to the lawsuit, or a good counterclaim, it might make sense to hire a lawyer to represent you in the lawsuit. Hiring a lawyer can ensure that you have the best information available with which to defend the suit and can save you money in the long run.
A defense is a reason why you are not liable for the debt or a reason why the creditor should not be allowed to collect the debt.
Here are some common defenses to creditor suits:
A counterclaim is a claim that you have against the creditor. In most states, the counterclaim must relate to the transaction at issue in the creditor’s lawsuit. For example, say the creditor sues you for nonpayment of a credit card debt. You could file a counterclaim alleging that it harassed you in trying to collect the debt. It’s not a defense to the underlying debt, but a separate claim. If you win on your counterclaim, you might get a money judgment against the creditor. Your filing of the counterclaim might also induce the creditor to withdraw its lawsuit against you.
Even if you have a good defense to the lawsuit, you’ll want to consider the amount of the debt before hiring an attorney. Attorney’s fees can add up quickly. If you hire a lawyer to defend a lawsuit over a small debt, you may end up owing more in attorney’s fees than you would if you chose not to defend the suit. (Learn more about how much attorneys charge in debt cases.)
But keep in mind that a lawsuit for a relatively small amount can grow if the creditor gets a judgment against you. The creditor will ask the court to include not only the debt balance, but the amount of the creditor’s attorney fees, court costs, and interest. Once a judgment is entered, interest will accrue on the judgment amount until it is paid. You could find yourself liable for an amount that is hundreds or thousands of dollars more than the original debt. Because of this, it might be worth hiring an attorney to help you settle the debt for a fair amount.
Being judgment proof really means that you are collection proof. That is, if the creditor gets a judgment against you, can it collect it through wage garnishment, taking your bank account funds, or the like? If not, you are judgment proof. (Learn more about what being judgment proof means.)
If you are judgment proof, it might not make sense to spend money hiring an attorney to defend against the creditor’s lawsuit.
If you have a significant amount of debt, especially credit card or other unsecured debt, it might be worth your while to consult with a bankruptcy attorney. Defending numerous credit card suits can be expensive and time consuming, and the effect on your credit score of these judgments may be worse than that of a bankruptcy. You may find that discharging all your old debt with a Chapter 7 or a Chapter 13 bankruptcy could cost less than defending even one credit card suit. And bankruptcy can often help you get on a stronger financial footing sooner.