Being sued by a debt collector like Midland Funding can be the tipping point that leads many families to file for bankruptcy. But is it the best option in your situation? Bankruptcy will stop the debt collection lawsuit with Midland but it comes at a price. In this post I would like to take you through the same analysis that I take all new clients through when it comes to deciding whether or not you should fight your lawsuit with Midland Funding or if you should pull the trigger and file for bankruptcy.
How Much is Midland Funding Suing You For?
The first thing you need to look at is how much the debt buyer is suing you for. This information can be found in the complaint that was served on you with the summons. The larger the amount they are suing you for the more you have to risk in fighting the lawsuit. Anytime you defend a debt collection lawsuit, no matter how good your case, there is a chance you could lose. If you are being sued for $30,000 and lost it is a pretty big deal (at least for most of us).
Many of the clients I meet with aren’t comfortable with the risk of fighting a debt collection lawsuit when the amount sought is large and opt for bankruptcy to eliminate it completely.
On the other hand, if the amount the debt collector is seeking is low it doesn’t make sense to file for bankruptcy simply because it would literally cost you more to file for bankruptcy than to pay the debt in full. For instance, I charge about $2,000 for a chapter 7 bankruptcy case. If you are being sued for $1,500 it obviously doesn’t make sense to pay me $2,000 so you can avoid paying Midland Funding $1,500.
Do You Have Other Debts?
This is an important one. Often I will tell clients that their defenses are good and that there is a good chance they will win their debt collection case. But then I ask them the question - are there any other possible lawsuits lurking out there? It doesn’t do you a whole lot of good if you win one lawsuit only to have it replaced by two other lawsuits.
Even if you are being sued for a relatively small amount on your current debt collection lawsuit, if you have multiple other debts that may sue you, it may be a good idea to just get rid of everything at once and file for bankruptcy.
What Does it Cost to Fight Midland Funding?
As with everything cost is a factor. As I mentioned above I charge about $2,000 to file a chapter 7 bankruptcy. In the Phoenix, Arizona area that is about middle of the road when it comes to legal fees for bankruptcy. Depending on whether your Midland Funding lawsuit was filed in Justice Court or Superior Court you could end up spending anywhere from $1,800 up to $3,500+ to fight your debt collection lawsuit.
It is not cheap to litigate. But if the Midland Funding account is the only one that is causing you grief, it may be worth the expense to fight the lawsuit – particularly if they are suing you for big bucks.
If You Hadn’t Been Sued Would you Even Be Considering Bankruptcy?
The final question I pose to all potential clients is this – if you hadn’t been sued by this debt buyer would you even be considering bankruptcy? If the answer is no then most times I tell them to fight the lawsuit. If you wouldn’t even be considering bankruptcy without this current legal problem then you can fight the lawsuit and even if you lose you can then file for bankruptcy and completely eliminate the debt.
The choice between fighting the debt collection lawsuit or filing for bankruptcy is not an easy one. But using the guidelines above can help you analyze what your best options are and prepare a plan to move forward.