Should I Get a Lawyer If a Creditor Sues Me?

Consider these factors when deciding if you should hire an attorney to defend against a creditor lawsuit.

By , Attorney (Tulane University School of Law)

If a creditor sues you, whether you should hire a lawyer to defend against the lawsuit depends largely 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.

Even if you don't end up hiring a lawyer, an experienced debt settlement attorney can help you evaluate the creditor's case and your personal circumstances to determine the best course for you.

Your Choices for Dealing With a Lawsuit

When a creditor sues you to collect a debt you haven't paid, you have three choices to deal with the lawsuit:

  • allow the creditor to obtain a judgment against you (called a "default judgment")
  • defend the lawsuit yourself, or
  • hire an attorney to represent you in the lawsuit.

Which option is best for you will depend on several factors.

Do You Owe the Money?

If you owe the amount the creditor seeks in its lawsuit, hiring a lawyer might be a waste of time and money. You'll lose if you don't have a defense or counterclaim and the creditor can easily prove its case.

You'll then owe the judgment amount, have to pay your own attorney, and might have pay the creditor's attorneys' fees too. (In some cases, the losing party must pay the other side's attorneys' fees).

Do You Have a Defense or Counterclaim to the Lawsuit?

If you have a valid defense to the lawsuit or a good counterclaim, hiring a lawyer to represent you in the case might make sense. Hiring a lawyer can ensure that you have the best information available to defend the suit and can save you money in the long run.

What Is a Defense?

A "defense" is a reason why you aren't liable for the debt or why the creditor shouldn't be allowed to collect the debt. Here are some common defenses to creditor suits:

  • the statute of limitations (the period in which the creditor must bring the lawsuit) has run
  • the creditor filed the case in the wrong court, or
  • the creditor can't produce the original paperwork to prove you owe the debt.

What Is a Counterclaim?

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 might be able to 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.

You might get a money judgment against the creditor if you win on your counterclaim. Your filing of the counterclaim might also induce the creditor to withdraw its lawsuit against you.

What Is the Cost of Hiring an Attorney vs. the Amount of the Debt?

Even if you have an excellent defense to the lawsuit, you'll want to consider the amount of the debt before hiring an attorney. Attorneys' fees can add up quickly. If you hire a lawyer to defend a lawsuit over a small debt, you might end up owing more in attorneys' fees than you would if you chose not to defend the suit.

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 the debt balance and the amount of the creditor's attorneys' fees, court costs, and interest.

Once a judgment is entered, interest will accrue on the judgment amount until it's 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.

Are You Judgment Proof?

Being "judgment proof" really means that you are collection proof. That is, if the creditor gets a judgment against you, it can't collect the judgment through wage garnishment, taking your bank account funds, or the like.

If you are judgment proof, spending money hiring an attorney to defend against the creditor's lawsuit might not make sense.

Would Bankruptcy Be a Better Option?

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 scores from these judgments might be worse than that of a bankruptcy. You might 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.

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