How Debt Collection Affects Plaintiffs

The unfortunate truth is that many plaintiffs take their case to court in order to

recover lost assets only to find themselves pushed further into financial trouble while they wait for their case to settle. The time between the incident of loss and settlement ranges, but usually goes over a year. This means that the plaintiff must keep up with all of their expenses on their own until the case is over--medical bills, standard living expenses, car and home payments, among others--even though they could be suffering from lost wages due to the incident.

If the plaintiff struggles to pay debt, they could see a battle with creditors in addition to their court case. Debt collection is stressful for anyone, but action taken by creditors puts only more emotional and financial stress on plaintiffs.

The ways that debt collection can effect plaintiffs:

Lost collateral. If the plaintiff has taken out a traditional personal loan from a bank, they are required to post collateral in case they cannot make payments. The problem with traditional loans is that they are designed for the needs of a plaintiff--the lender expects payment according to a specific time schedule, regardless of whether the plaintiffs case has been settled or not. Without a settlement, these payments can be difficult to make, especially since many plaintiffs are out of work and have other expenses piling up.

Foreclosure. This is actually a type of collateral--If the plaintiff has a mortgage and cannot keep up with payments, then the lender can foreclose on the house in order to collect. Foreclosure doesnt just happen if an individual cant pay their mortgage, but also if their property was used as collateral for a loan.

Legal action. If there is no collateral on a debt, in most cases, creditors cannot just take assets from an individuals bank account; the creditor must take them to court first. Much of this process depends on the plaintiffs state laws, but they should be aware that they may find themselves in another legal battle in addition to their original case. This takes focus away from their case and may put pressure on the plaintiff to accept a lower settlement.

Wage garnishment. One way a creditor may collect after a court judgement is wage garnishment. This also depends on state laws, but in certain cases, a creditor can take a fourth of the individual's wages. However, if the individual has more than one creditor, this can add up to even more lost wages.

One financial option open specifically to plaintiffs is presettlement funding, a type of loan that allows plaintiffs to borrow from their future settlement to pay expenses until the case concludes. This means less pressure to settle early--it is both a lawsuit funding option and a smart legal strategy. Plaintiffs can avoid many of the problems seen with traditional loans and credit cards: the case serves as collateral, and repayment is expected after settlement.

by: Steven Medvin

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