Before you even consider filing a lawsuit, you must determine whether it makes financial sense for you to proceed. In this episode, we discuss some important factors to consider when evaluating the economic wisdom of proceeding with a lawsuit.
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You are ready to file a lawsuit.
You have identified who (or what) to sue.
If you are representing yourself without an attorney (pro se or pro per) you have researched your state’s law and determined what causes of action to include in your complaint.
You are ready to pull the trigger—prepare a complaint, file it in court, serve your opponent with it, and start your pursuit of justice.
There is just one step left . . . and it is an extremely important one! You have to determine whether it makes financial sense for you to proceed with a lawsuit. You must balance your expected recovery (what you hope to get out of the lawsuit) against your litigation costs AND your opponent’s ability to pay off a potential judgment.
You could have the best lawsuit ever—but if it is going to burn a hole in your wallet—it is probably not worth your time and money!
Common litigation costs you may encounterDepending on your state, county, city, etc., court fees and litigation costs may differ. Here are some common expenses you may need to pay:
Check to see if you qualify for a fee waiver that would allow you to proceed without paying any (or some) court fees. Every jurisdiction is different, but this usually involves filing an application or motion to waive fees, which a judge then reviews and makes a ruling. You will likely need to produce evidence showing that you cannot afford to pay court fees (e.g., affidavit, declaration, bills, bank statements, etc.).
As you can see, lawsuits can be very expensive, even if you save money on attorney’s fees by representing yourself pro se / pro per. Do not let this list overwhelm you—I prefer to be overinclusive so you know upfront what costs you might incur. Sometimes surprises suck!
What if you can recover litigation costs?At this point, you might be thinking to yourself: “I don’t care about litigation costs because in my state, the losing party has to pay the winner’s litigation costs, so I’ll just win and get those expenses back!”
If your state allows you to recover litigation costs, that is great! But remember: you still have to win to recover! That means you will likely have to go to trial, prove your case, and obtain a judgment in your favor.
If you lose, you are out of pocket for all your litigation costs AND you have to pay your opponent’s costs! Or, if you settle (as do 90-95% of cases), most settlements involve each party “eating” (absorbing) its own costs.
Even if you win and get your litigation costs back in the end, you still have to come up with the money to finance your lawsuit until the end. If you run out of money midway through your lawsuit, you may end up having to dismiss it.
Watch your wallet!
Determine whether your opponent can afford to pay youHere is a rhetorical question: How happy would you be if you won a judgment—only to find out that your opponent is broke, unemployed, in serious debt, and cannot pay you a penny? Even worse, if the defendant files for bankruptcy, your right to collect the judgment will probably be terminated.
To avoid this disaster scenario, you should find out early on whether your opponent has the financial wherewithal to pay you if you win. Do some basic online research (e.g., Google, Bing, etc.) and social media (Facebook, Instagram, etc.). Is he employed? Does he drive a nice car? Does he appear to have disposable income (vacations, restaurants, property, possessions)?
You can also try searching public records in your state/county/city to determine whether he owns property, such as homes, cars, boats, etc. The more you know about your opponent’s assets—or lack thereof—the better position you will be in to determine whether you are likely to get paid.
Researching a business’s financial situation is a bit trickier than a person, but there are still things you can do. Drive past the business. If it is a retail establishment, restaurant, or store, are there people going in and out? Does it appear to be relatively successful? Does it own any equipment, vehicles, or merchandise? Does it have a legitimate website and social media presence? Read any reviews or articles you find relating to that business.
You can also search public records to determine whether the business or individual has outstanding judgments or liens (e.g., taxes, child support, alimony, criminal penalties, etc.).
There are also online services you could use to check whether your opponent has any prior or pending bankruptcies, lawsuits, judgments, liens by creditors, court orders for garnishment of wages, child support, or alimony. These services may even be able to tell you whether your opponent has property, personal possessions, and a job.
If you discover unpaid judgments and liens, that is a red flag. It means that other parties have had a hard time collecting from your opponent. You may very well run into the same problem…
One last word on this topic: Just because a person or business is broke does not necessarily mean pursuing a judgment is pointless. The future is uncertain. A person can eventually inherit money, start a successful business, or sell off property. Depending on the state, judgments may be valid for 10-20 years, and can often be renewed. The big question is: How long are you willing to wait to recover your money… if ever?
ConclusionBefore filing a lawsuit, be sure it makes financial sense. If you rack up expenses beyond what you recover, you are in a worse position than you would be without the lawsuit. Likewise, if you sue a person or business that is broke or contemplating bankruptcy, you will probably have a hard time enforcing your judgment.
Like many things in life, justice ain’t cheap.
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* This it not legal advice. All episodes of The Legal Seagull Podcast are subject to The Legal Seagull's disclaimer, located at www.thelegalseagull.com/disclaimer
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