What's My Case Worth to a Debt Collector?

What are the debt collectors thinking about when they sue you? How do they determine how much your case is worth to them if they want to settle? This article discusses some of the things the debt collector considers in evaluating your case. You can dramatically change this number and make them want to settle if you defend yourself using my litigation materials.

I often receive comments like, "they're suing me for $10,000.00. They'll definitely find it worthwhile to keep after me." Or, "they're only suing me for $500, I'm sure they will let it go."

These comments might be true, I suppose, but I often think they reflect more on the state of mind of the speaker than the person suing them. In other words, the more afraid you are of being sued, the more likely it looks that they will pursue you to the ends of the earth.Of course that isn't generally the way debt collection lawyers think (although it is never a good idea to share your dread of being sued with their lawyers).

Company lawyers usually take a pragmatic view of your case. They are in debt collection, and are suing you, as a business. They want to know they will make money by suing (or continuing to sue) you. And they only know what they know, and not what you know, about your state of mind.So what are the lawyers who are suing you thinking about? Their fees, mostly.

That isn't a joke: legal fees are the largest expense of most debt collection cases brought by debt collectors, often dwarfing the cost of acquiring the debt. Consider a debt of $10,000. It may have been bought by the debt collector for 3 cents per dollar. (I've heard numbers ranging from 25 cents per dollar to 3 cents per hundred dollars, depending on the age of the debt and other factors.)If the debt collector paid 3 cents per dollar on a $10,000 debt, it paid 300 dollars for your debt. To put it more bluntly, the company paid $300 for the right to force you, either through threats, harassment or litigation, to pay them $10,000. If the collection attorney costs "only" $100/hour (and that is a very low rate for a lawyer in a city), anything over three hours of attorney time will be more than the debt cost.

That is important because they could always buy someone else's debt and chase them instead of you if it is going to take more than three hours to make you pay.Once suit has been filed, though, how do lawyers evaluate the case? As nearly as possible, lawyers try to determine the amount they may win, the cost of pursuing it, and the chance of collecting.

This is simply a set of business judgments that the lawyer and their clients make, based on a great deal of experience. Then the equation looks a little like this: dollar value of judgment x (times) chance of collecting - (minus) cost. The wild card in these cases is risk, but that is a topic for another article. If the chance of collection is 50% (probably an excessively high number for these cases), then a $10,000 case looks like this: $10,000 x.50 - fees, and that in turn becomes $5,000.00 minus fees.

Their case against you is valued well below $5,000.00 from the beginning, and anything you did that could push the amount of attorney time of collection up towards 20-30 hours would rapidly make the case unprofitable.Of course, in assessing a case, the debt collector does not know initially what you will do or how you will affect the risk or attorney-time required. They don't even know whether or not you can beat them.

Can you see how expressing your willingness to fight at the beginning of a case might alter the value of the case for the debt collector? Can you see how demonstrating an ability to fight the case would change the way the debt collector looked at the numbers? Learn how to use these questions they have to your advantage with my Litigation Manual and other materials.