“Opportunity Costs” in Debt Law

Knowing how to make the debt collector pay for chasing after you is one of the most important weapons you have. If you have a little basic information, provided by the Debt Defense System and some persistence, you can make the debt collectors go away and leave you alone. Opportunity cost is a key concept in economics and in debt litigation.

The Cost of Doing One Thing Rather than Another

I often talk about “opportunity costs” in debt litigation, and if you are defending yourself against a debt collector you need to understand the concept. Very simply, an opportunity cost is what you give up whenever you choose to do one action rather than another. In other words, the world is full of opportunity costs: if you marry one person, you opt not to pursue another one. If you read a book, you miss the movie you might have watched instead during that time. And in a debt collection case, if your lawyer spends 20 hours preparing for and going to trial against one defendant, that could be fifty or more cases the lawyer can’t be getting default judgments on in that time.

Debt Collectors Try to Maximize their Income

Of course opportunity costs are not necessarily bad. It’s just what what happens when you choose one course of action over another.

And note that these costs can altered by later, or by other, choices. For example, if your lawyer must spend 20 hours preparing to sue one defendant, you could always hire another one to pursue default judgments. But every choice has consequences, and hiring lawyers has a tendency to hurt the bottom line at the end of the day.

As I have often pointed out, debt buyers or debt collectors make their money by creating a smooth, largely automated process of getting judgments and pursing collection. They’ll file 100 suits and manage to get 75 defendants served. Out of the 75 cases remaining, 65-70 will either settle or default. The remainder of the cases provide the challenge to the debt lawyers: can they process them quickly enough to make money? Or must they let them go? And even where the defendants hire lawyers, the debt collectors enjoy a heavy advantage in the early going as they can handle several of these cases at once while the defendants lawyers typically handle only one at a time.

“Individualizing” Your Case Multiplies their Opportunity Costs

Opportunity cost begins to be a significant issue after the early stages of litigation. After the pleadings (that’s the petition and answer), the form motions to dismiss, form discovery, and form objections, the lawyers must begin to make important decisions regarding the use of their time. In other words, the debt collection lawyers are generally able to stay on autopilot until you file a motion to compel. And maybe even after that for a little while until you start making them confront your case on its own.

Motions to Compel – Worth the Work

That’s why a motion to compel is so often a turning point. After you start making the lawyer spend precious time on your case and your case alone, opportunity cost quickly becomes a major issue for them. They may expect to win a judgment—for a thousand, or ten thousand or more dollars—but the bigger the judgment, the less likely they are to be able to make you pay. And in exchange for getting that judgment, they either give up on many other cases they could file and win easily, or they hire another lawyer. Hiring another lawyer only looks smart at first, because there are enough debts out there for any debt collector to keep almost any number of lawyers busy. They’re still paying one lawyer real money to go after one person who might, or might not, be able to pay in the end. That’s the real cost. The opportunity cost is all the people that get away while they’re chasing you.

Just a Business to Them

Debt collectors are after you to make money. In general, they don’t care anything about you one way or another. They don’t care if you don’t owe the money, and they don’t care if you do owe it and manage to get away (as long as they make more money going after someone else). They’re not after you for any kind of principle, and if you can raise the real and opportunity costs for them high enough, they’re probably not going to keep going after you at all.