Pursuing what you’re owed from a debtor who won’t pay you back is a frustrating experience. In these circumstances, you may consider suing a debtor when other methods of recovering a debt have failed.
Is suing a debtor a smart and effective way to pursue an unpaid debt? There’s no universal answer to this question. Because every case is different, you may strongly consider reviewing your situation with a legal professional. They can evaluate the circumstances and explain your options in greater detail.
That said, it’s generally wise to account for various factors when deciding whether to file a lawsuit to collect a debt. They include the following:
The Reason the Debt Remains Unpaid
The fact that a debtor hasn’t paid you what they owe yet doesn’t mean they never will. Unforeseen circumstances may have prevented them from paying you on time, but they may intend to pay back their debt once they’re able.
Try to find out why a debtor hasn’t repaid you before filing a lawsuit. Exercise your judgment when determining if their reason is valid. If you believe you can work out a reasonable payment plan a debtor is likely to stick to, you might give them an opportunity to address the issue before you proceed with legal action.
Pursuing a debt through legal means is often a last resort when all other methods have failed. Before filing a lawsuit, you may want to consider other methods of debt collection, including hiring a debt collection agency or negotiating a repayment plan with the debtor. These methods may be less expensive and time-consuming than filing a lawsuit. Additionally, they may be more effective at recovering the debt if the debtor is willing and able to pay but needs more time or assistance.
You have to strike a balance here. The fact that the debtor has told a sob story doesn’t mean they’re not taking advantage of you. If you believe a debtor is biding their time but has no intention of paying you back, consider limiting how many “second chances” they get.
Whether the Debt is Valid
A debtor may have several reasons for not paying you back. Sometimes, debtors don’t repay their creditors or don’t pay their bills because they don’t believe they owe the debts in question.
Obviously, a debtor disputing your claims about how much they owe isn’t a guarantee they are accurately representing the situation. Maybe a debtor falsely believes they don’t owe a valid debt. Maybe they’re engaging in deception in an attempt to avoid paying you.
Regardless, do your homework and confirm the debt is valid. You may waste time and money proceeding with legal action if it turns out a debtor doesn’t actually owe what you’re seeking.
Whether You’ve Exhausted Other Methods
Filing a lawsuit isn’t the only way to pursue a debt. Taking this step is usually a last resort when hiring debt collection agencies doesn’t work.
Whether the Debtor Can Pay
Having some understanding of a debtor’s assets and general financial situation when they haven’t repaid what they owe can help you weigh the pros and cons of suing them. If you find a debtor lacks the cash and/or assets necessary to cover what they owe, filing a lawsuit may not be worth your time. Even if you win the case, you may never receive the unpaid debt.
Understanding the Importance of Professional Guidance
None of this is meant to discourage anyone from suing a debtor when doing so is necessary to recover a valid debt that’s remained unpaid for some time. The best way to learn more about your options is to discuss your case with an expert. If you’re not sure whether it’s time to file a lawsuit against a debtor, a legal professional who handles such cases can help you sort through your options.
Roach & Lin, P.C., is an NYC law firm offering legal services to creditors, lenders, and other such parties.