Legal Action - The Truth Exposed

The people I talk to are always concerned about a lawsuit, I should state first that I am not a lawyer and this article is not legal advice and should not be used as a substitute for the advice provided by a licensed expert. This article is for informational purposes only and based solely on my 14 years of debt management experience.

Anytime you borrow money as a loan or in the form of a credit card you are entering into an agreement. Creditors use high priced lawyers to draft carefully worded agreements so they do not lose their money. You need to understand that ANYTIME you are in breach of a contractual arrangement you are exposing yourself to a lawsuit.

The fact of the matter is there are hundreds of thousands to literally millions of contacts broken for not paying debt daily in North America. The creditors simply do not have the resources or the capacity to sue every person that does not pay.

But they can certainly threaten a lawsuit to everyone that does not pay. Typically a very tiny percent of people ever get sued for not paying their debts, most just get harassed by bill collectors and get nasty collection letters that typically are not worth the paper they are written on.

Launching a lawsuit to collect a debt is generally a business decision and not a personal one. A creditor must incur more debt in the form of legal fees and court costs to even begin the process, not to mention the time needed to gather the evidence and put it all together. In making this decision a creditor will weigh out if it is worth their while to throw more good money after bad trying to collect debt with a lawsuit or just letting collection agencies irritate you hoping to be paid at some point later.

They are not concerned with if they will win or not. If you borrowed the money and did not pay, they will win.

What creditors are concerned with is whether or not they can collect on the judgment once they win. A judgment allows the creditor to take the money from you without asking. It can be in the form of a lien on your home, bank account or garnishment on your wages. But if they have no idea where to collect on a judgment it's a pretty bad business decision to sue someone with nothing.

The 4 main things to consider when launching a lawsuit is:

Can they find you?
This may seem obvious and silly but if they don't know where you are, it's a mistake to waste time and money getting a judgment they can never collect on.

How much is owed?
Generally speaking anything less then $1,000 is a colossal waste of time; they will usually pass on suing these balances. Debts under $10,000 fall under the small claims courts laws in Ontario (check your region) and are fairly easy to sue, they don't consume vast resources. In fact I have seen creditors limit their claim to $10,000 when slightly more is owed so they can take advantage of the small claims court rules. If you owe $10,000 or more it will take much more in the way of resources to obtain a judgment so only those people with sufficient and clear assets to pay a judgment are usually ever considered. But if you do have to answer a lawsuit for $10,000 or more you are liable for a lot more court costs and legal fees incurred.

What assets do you own?
If you are a homeowner with any equity you are a primary target for a lawsuit if you aren't paying your debts, you can't pick up a home and move it. It's great security for a judgment. You can't do any financing or sell it with a lien on the title so it is almost 100% guaranteed to be paid. Cars, boats, household goods, furniture or any other goods that can be moved and hidden are almost never targeted to satisfy a judgment. Another problem with these items is they generally depreciate and are worth next to nothing after factoring the cost to collect and sell them.

Do they know where you work?
Employment income can be garnished. There is no fixed amount of your pay, it's up to the courts to decide but usually less then 20% of your pay is common. The problem here is the creditor must first know where you work, and further to that if you quit your job they are left with nothing unless they can find out where you end up next. Finding out where someone works can be next to impossible sometimes however it can be done. They will also consider the type of job you have, more secure, higher paying, longer running jobs are more attractive to garnish then short term lower paying jobs.

If you are having difficulty in paying your bills and are afraid of a lawsuit, it's probably a good idea to limit your communication until you have sufficient resources available to pay the debts. Bill collectors are very good at probing and getting information from you that can be used later on for a lawsuit. Talking about your job, your home or other assets can only increase your chance of getting sued.

If you owe debt, deal with it. After food, shelter and your basic life needs, paying debt should be your next priority. Sitting on debt longer only costs more, closes doors and limits your options in life. Do it on your own, but if you find the balances keep going north and haven't come down then seek help now. Bankruptcy and Debt Settlement are great options if you owe more then $10,000. Anything less then that is a good candidate for credit counseling. But the bottom line is don't contemplate doing something about it, eliminate it.

Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca