Facing a lawsuit as a Plaintiff or Defendant with limited financial resources? What are the critical aspects of legal actions involving parties with insufficient funds?
Whether you’re the one suing or being sued, this article sheds light on everything you need to know. Learn what to expect if you sue someone who can’t afford to pay, as well as what happens if you’re on the receiving end of a lawsuit without the means to settle. From wage garnishments and asset seizures to insurance’s role and court judgments, we provide essential insights and practical advice for navigating these challenging legal waters, ensuring you’re prepared for any outcome.
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What to Expect if You Sue Someone Who Can’t Afford to Pay?
When you file a lawsuit against someone who lacks the financial means to pay, there are a number of potential outcomes and legal avenues available. The court’s decision on liability and damages is independent of the defendant’s ability to pay.
If you win the case, the court may issue a judgment in your favor for the amount owed. However, collecting the awarded sum can be challenging. Common methods include wage garnishment, where a portion of the defendant’s future earnings is directed to you, and liens on property, which can be sold to cover the debt. In cases where the defendant has insurance, such as homeowner’s or auto insurance, the insurance company may cover the costs up to the policy’s limit.
Although these methods can facilitate payment, they often require time and persistence. In some instances, if the defendant’s financial situation improves, the judgment can be enforced at a later date, ensuring that you have a legal claim to future assets or income they may acquire.
What Happens When Someone Sues You and You Have No Money?
On the flip side, if you’re the one being sued and lack the financial means to settle a claim, the situation demands a different approach but poses similar challenges.
Despite your financial constraints, a court ruling against you would still result in a legal obligation to pay the determined amount. This could lead to wage garnishment, where a part of your future income is deducted to satisfy the debt, or even asset seizure, including bank account freezes.
Certain incomes, like disability benefits, are generally protected from these actions. If paying the judgment is beyond your means, exploring options like bankruptcy might provide some relief, although this carries significant long-term implications. Seeking legal counsel can help you navigate your rights and responsibilities, potentially leading to negotiated settlements or manageable payment plans that align with your financial situation.
How to Get Money When the Defendant Has No Money
There are several collection techniques to obtain money from a judgment when the person you’ve sued doesn’t have the cash to pay you.
Method #1: Insurance
In most cases, the negligent individual’s insurance company will pay the settlement or judgment you have obtained against them on their behalf. For example, if you are injured while visiting their home, the negligent individual’s homeowner’s insurance policy might cover the cost of the settlement or judgment against them.
Similarly, a car accident that results in injuries is covered by either the plaintiff’s or the defendant’s insurance company, depending on the state’s laws.
Problems arise when liability insurance coverage isn’t available. Insurance coverage may not be available if the defendant doesn’t have a homeowner’s policy or the accident occurs at another location. However, if the incident happened in a workplace setting, you may be able to recover damages through the employer’s insurance policy.
Method #2: Wage Garnishing
States allow wage garnishment when a judgment is obtained against an individual. The defendant’s wages will be reduced by a certain amount, usually a dollar figure or percentage of their paycheck. The wage garnishment continues until the judgment is fully settled. Interest will continue to accrue on the judgment while it is being repaid.
However, wage garnishment may not be possible if the person doesn’t have a steady job. In addition, people who receive money through Social Security benefits cannot have their checks garnished. Other options to collect unpaid judgments will need to be considered in such cases.
Method #3: Forced Sale or Seizing of Personal Assets
A defendant’s personal assets may be seized to obtain the money needed to satisfy a settlement or judgment. Homes, cars, investment accounts, and any other property that has value can be taken.
Thus, even if the defendant in your case doesn’t have money to pay the judgment outright, it can be obtained by selling the assets they own.
The court will typically order the local sheriff to seize the assets of the individual who owes money through a judgment. However, it is the sheriff’s job to locate the assets and follow procedures to give them to you. Finding assets isn’t always easy to do. If there are co-owners of assets or ownership is unclear, it may be a complicated process to seize an individual’s assets.
Method #4: Freezing Bank Accounts
Most people have a bank account that they use for regular expenditures. If a judgment is obtained against an individual, their bank account may be frozen and the money in it rerouted to you to satisfy a judgment. If a bank account is frozen, the negligent person will not have access to funds until the judgment, settlement, or lawsuit is satisfied.
Method #5: Future Income
The future income of an individual can be used to satisfy a judgment. If the person takes on a regular job in the future, their earnings may be subject to wage garnishment. Thus, if you find out that the defendant you successfully sued has begun working again, you can ask the court to garnish their wages.
Method #6: Business Income
If your defendant owns a business, you may be able to collect damages through the income generated by their company. A lawyer can help you determine the best way to collect damages from business income. Depending on the company’s legal entity structure, business income may be protected.
The Ability to Pay Has No Bearing on the Verdict
In a lawsuit, the court is responsible for reviewing the facts and evidence of a case to determine who is at fault. The defendant’s inability to pay has no bearing on the verdict. If the court finds the defendant liable for your injuries, they can place a court order or judgment against them, ordering the defendant to pay for damages.
If you’ve been injured, you shouldn’t be deterred by the defendant’s lack of money. There are many other ways to collect money owed to you. With a bit of work, you’ll be able to make them pay for the damages you incurred due to their negligence.
No Money Can Actually Make It Easier to Win Your Case
An individual with no money will often avoid appearing in court to mount a defense. They may consider the court proceedings time-consuming and not worth the effort, especially if they know they were in the wrong. Litigation costs may also play a factor. If the defendant fails to appear, the court will order a default judgment against them.
A default judgment awards the entire amount of the lawsuit to the plaintiff. In such a case, the court assumes that the individual is responsible for the damages and that the circumstances of the case are correct as presented by the plaintiff. The defendant becomes legally obligated to pay the balance of their judgment.
Once the plaintiff obtains a default judgment, they can pursue collection of the judgment through liability insurance, wage garnishment, seizing a person’s assets, or other means.
Interest Accrued on Unpaid Judgments
Many states allow interest to accrue on unpaid judgments. For every month that the balance of the judgment remains unpaid, interest charges accrue. Plaintiffs who continue to pursue their case may find that they can collect significantly more than they were initially due, especially if the judgment remains open over a period of time.
Plaintiffs who obtain judgments from people who don’t have money shouldn’t be dissuaded by the negligent party’s current financial situation. The plaintiff can continue to monitor the circumstances and pursue collection through the court.
In some cases, it’s helpful to hire a debt collector who can follow the person’s activities and seek repayment when they become more financially stable.
When Insurance Is Involved, Why Do You Need a Lawsuit?
A lawsuit isn’t always necessary in cases where the negligent party has insurance. The insurance company will examine the claim’s facts and pay the due amount according to the policy coverage.
However, remember that the insurance company is responsible to its shareholders. Protecting company profits is very important, and if the insurance company pays the maximum amount for a settlement, it affects its bottom line.
While you may think your case is small or the amount owed is inconsequential to insurance company profits, over time, settlements add up. Thousands of people may simultaneously pursue similar claims against the insurance provider. The company may suffer from declining profits if it obtains significant settlements.
To ensure you get the most out of your personal injury case, you should work with an attorney at a law firm. A law firm can help you build a solid case strategy against the insurance provider so you don’t settle for less than you deserve.
Insurance companies will frequently contact injured individuals to settle the claim for a smaller amount. If the individual accepts, they may not have the money required to pay for past and future medical expenses.
An attorney can ensure that all legal proceedings are followed. Personal injury law firms usually offer free legal help that is repaid only if they obtain a settlement or court verdict in your favor. Their assistance can go a long way to ensuring you receive an adequate amount of money to help you financially recover from injuries.
Can I Sue Someone in Small Claims Court?
If you’re intent on collecting the money owed to you, you may file a lawsuit in small claims court. Check your state’s statute of limitations laws to determine how long you have to file your case. In some states, you will have limited time to pursue your case. Steps to take in filing a small claims court case include:
Step 1: Gather Evidence
You’ll want copies of all documentation and evidence related to your case. Photos, contracts, police reports, records of relevant conversations, and transaction details of medical expenses are all helpful in proving liability in a personal injury case.
Calculate the amount owed to you using the bills you have incurred as a result of your injury, as well as an estimation of future costs.
Step 2: Serve a Demand Letter
Send a demand letter to the individual responsible for your injuries. The demand letter asks for the money owed to you by the defendant and indicates a court date for your case. If the dependant does not repay you before the court date, the court will decide whether the money is owed to you or not.
Step 3: File Your Evidence and Claims in Court
If the demand letter does not result in payment from the defendant, you will need to present your evidence in court. Sometimes, defendants decide not to appear in court. The court will award a default judgment to the plaintiff in these cases. Keep in mind that legal representation is not possible in small claims court.
Step 4: Pursue the Judgement
If a judgment is awarded to you, you have the right to pursue collections against the defendant. You can hire a debt collector for collection assistance. They can help you pursue wage garnishment or other means to collect the debt owed to you. The money should come from the debtor’s pocket. The judgment will be held at the local recorder’s office.
The Verdict: So Should I Sue Someone With No Money?
Making the decision to sue someone isn’t easy, especially if you are aware that they don’t have the current ability to repay you. It’s best to speak with an attorney advertising legal assistance for personal injury cases to determine whether you should file a lawsuit.
The attorney can examine the facts and evidence of your case to decide whether a lawsuit is warranted and to determine the potential to recoup your costs.
Attorneys are familiar with the various means available to obtain money from a lawsuit, even if the person doesn’t appear to have assets to satisfy a judgment or settlement.
Your lawyer can seek to uncover insurance coverage, personal property, bank accounts, and other assets to obtain the money necessary to compensate you for your damages. They can also determine whether your claim has merit and develop your case strategy.
Stonewood Funding: A Lawsuit Lending Company
Stonewood Funding provides pre-settlement funding to individuals involved in current personal injury litigation. In many cases, obtaining the money from an expected settlement can take time, especially if significant negotiations are underway or your case is held up in court.
If you need cash immediately to pay for your medical bills and household expenses, we may be able to offer you a settlement loan. No payments are due on your loan until you receive the money from a court verdict or settlement. We accept responsibility for lending you money, and if you lose your case, there is no need to repay us.