Alabama Debt Collection Lawsuit — Part Eight — Hiring Lawyer To Settle The Case
Welcome to part eight of our series. To give you the context before we jump into the option of hiring a lawyer to help you settle the debt collection lawsuit, here is what we have covered in parts one through seven:
- What is the lawsuit against you?
- What does it mean to have the debt collection lawsuit “served” on you?
- A quick overview of the five options you have once you are sued
- Option One: Bankruptcy
- Option Two: Fight the lawsuit on your own
- Option Three: Settle the lawsuit on your own
- Option Four: Hire a lawyer to fight the debt collection lawsuit for you
Let’s jump right into Option Five — hiring a lawyer to settle the case.
IF I HIRE A LAWYER TO SETTLE THE DEBT COLLECTION LAWSUIT…
“How much will it cost in lawyer fees?”
You need to know the answer to this question very specifically. Just like hiring a lawyer to fight it, you want to know, is this hourly? Is it a percentage of what you’re saving me? Is it a flat fee, a fixed fee? What is your fee?
For our clients, we charge a fixed or flat fee so you know exactly what it’s going to be, and so you’re not wondering, “How much it’s going to cost?”
You know exactly what the cost will be, so you can decide if this makes sense for you to do.
“Do I need to file my own answer if I hired a lawyer?”
If you’ve hired a lawyer to settle the case, it would be odd to me if that lawyer did not also file the answer.
But maybe that happens.
So ask the lawyer you are thinking of hiring, “Will you file the answer for me?”
I would imagine that you want the answer to be “Yes!”
“How much will I have to pay the debt collector who sued me?”
Ask your lawyer. Say, “What are we going to have to pay to settle this?”
For folks who hire us, it is very simple. They pay us a flat fee, and we have authority to settle it if you pay absolutely nothing, not one penny, to the debt collector. The debt collector comes off your credit report, and what you “pay” is you agree not to sue the debt collector. Those are our terms of a settlement that we use.
So to answer this question, how much will I have to pay a debt collector?
Zero, if we’re representing you. If this is a live lawsuit, in other words, you do not already have a judgment against you, we’re not going to pay the debt collector any money if they want to settle with us.
Now sometimes people come to me and say, “John, I want to hire you in this case. I want you to pay the debt collector money.”
And I say, “I don’t do that. I’ll get you to another lawyer who will do that, but I am not paying them any money.”
And so just be very clear whoever you’re hiring, are you going to pay the debt collector money and how much are you going to pay, so you can figure out the total cost to you to get this case settled.
“Why would my lawyer make a settlement proposal and tell the collection lawyer that I want a consent judgment?”
This comes up pretty often and I cannot possibly imagine why it should ever come up.
Here’s the bizarre question.
Why would my lawyer make a settlement proposal and tell the collection lawyer I want a consent judgment?
I have no earthly idea. That’s the dumbest thing I’ve ever heard.
If you’re settling – and these have been in the context of a lump sum settlement, where the client ends up not hiring the lawyer – they come to me later and they say, “You know, my lawyer said in this $5,000 lawsuit, he wants to propose $3,500 with a $3,500 consent judgment,” and I’m just stunned.
“Why in the world?”
That makes no sense to me.
You should never, in my opinion, ever want a consent judgment.
Especially if you are doing a lump sum – the case should be over.
Regardless of the type of settlement, it is the collection lawyers that want the consent judgment.
We don’t want it.
I have no idea why a consumer lawyer would say, “Hey, I want a judgment against my client.” That’s just bizarre.
So if that ever comes up, I would just ask, “Why in the world would you suggest this? Explain it to me.”
“Will there be a written settlement agreement?”
Will there be a written settlement agreement? Absolutely.
You have got to have a written settlement agreement, just like if you were doing this on your own – we talked about this a few pages back.
If you hire a lawyer, you certainly want a written settlement agreement so it’s very clear what you are agreeing to, what are you paying or giving up, and what is the other side agreeing to.
So again, in our settlements, we make it very clear:
- Lawsuit will be dismissed with prejudice,
- Debt collector will come off of your credit report,
- You pay the collector who sued you nothing,
- You agree not to sue the debt collector.
So think of it sort of as global peace between you and the debt collector. That’s what we’re looking for.
So we want that to be very clear in the settlement agreement.
Make sure if you are hiring a lawyer that you get a settlement agreement that is crystal clear and it is in writing.
“Will I have any tax consequences?”
Will you have any tax consequences if you settle? Again, it’s basically the same whether you have a lawyer or don’t have a lawyer.
Is there any forgiveness of debt taking place? That’s really the important point to tax consequences. So if you hire a lawyer in a $5,000 lawsuit to settle the case for $3,000, yes, you better assume you’re going to get hit with $2,000 of income. That’s the difference between the $5,000 and the $3,000.
Now again, the approach we take is we will not pay these guys any money, not one penny. And a big part of that is I do not even want the possibility of the argument that, “Oh, we forgave this consumer the debt.”
So imagine a $20,000 lawsuit and we say, “You know, let’s pay them $2,000.”
Well, they’ve got an argument – whether right or wrong, they have an argument that they have forgiven $18,000.
In my way of thinking, if we pay them zero, it is impossible for the debt collector to argue they forgave you any debt.
So let’s kind of think this through. “Hey, they sued me for $20,000. I filed an answer denying that I owe Midland or Portfolio or LVNV, whoever it is, I deny I owe them any money and I pay them nothing, and they drop the lawsuit with prejudice – which is really a judicial determination that I do not owe that money. So how could they possibly forgive any?”
That’s been our position for many years.
We’ve never had any problems with it.
But again, if you’re thinking about hiring a lawyer to settle a case, you need to know from that lawyer, what can the tax consequences be?
“What happens to my credit reports after I settle?”
You need to know this before you hire the lawyer. What is the plan for credit reporting?
You settle the case – what does that mean credit reporting wise?
Don’t assume or guess.
Make sure you know before you hire the lawyer.
The way we do it is we want the credit reporting deleted by the debt collector, but other lawyers may say, “No, I don’t care about that.” And you need to know that going in, so you make sure that whatever it is you’re wanting to happen, actually happens.
Make sure you get what you are paying for.
And then I would ask the lawyer, “How will we make sure that whatever the deal is on the credit reporting, that that is actually followed?”
And the lawyer should have a good answer for you on that. We have a whole follow up system on that, but just ask whoever you are considering hiring about their plan to make sure the credit reporting is deleted.
OK, what’s next?
In the next part, we will talk about the actual Answer to the debt collection lawsuit. What does it say and how is it actually filed in court.
Thank you for reading this and I hope these questions — and answers — are helpful to you.
Feel free to call us if you have a question about a collection lawsuit in Alabama — you can call us at 205-879-2447 or fill out our contact form and we’ll email or call you right back.
Look forward to talking to you soon!
PS — You may also want to get our checklist to use when you have been sued by a debt collector in Alabama — it is free for you to download.