Over a million debt collection lawsuits were filed last year. If you are facing tough times, you may have already been sued. Or you can fear it. I write a lot about what to do if you are sued, but this article will discuss some tips for avoiding a lawsuit or minimizing the impact of any lawsuit you may face.

Prioritize your expenses

If you are facing financial difficulties, you need to know where you are spending your money. First and most obviously, you do this to make sure you’re not spending money that isn’t for something you want or need. I was recently at an Internet marketing workshop where they revealed the surprising results of a survey that an Internet company had conducted. The company sells monthly subscriptions to certain types of website maintenance. The price is over $800 per month, and the survey question that made my workshop attendees laugh was, “Do you have a website?” Who would pay $800 a month for website management and don’t have a website? It turned out that more than half of the respondents answered “no”.

Maybe some of those “no’s” were sarcastic, but make sure you don’t have memberships floating around for stuff you’re not using. Gym memberships, for example…

Prioritize your payments

Another, colder reason to prioritize your spending is that if you have to go to something, you need to know what’s most important to keep or what payments are most important to keep making. Obviously you’ll want to prioritize based on importance. Some other considerations may not be so obvious. Among the debts, you should also prioritize by:

• type of interest
• debt age
• if the original creditor or a debt collector now owns the debt

Type of interest

It makes sense, if you can afford something extra, to pay off the balances with the higher interest rates. You do this because it will reduce the total amount of interest you pay and reduce your total debt more quickly. There is no point in paying off the balance on a credit card that has a lower interest rate than another card. It can be rewarding to take them all out at once, but you get a lot more bang for your buck by aiming for the highest rates first.

debt age

All things being equal, it makes sense to pay off newer debts first. To put it negatively, you do this because it is often more difficult for a collector or creditor to sue an older debt, and if the debt has been delayed long enough, the creditor may decide to write it off for a number of reasons. Therefore, when in doubt, pay the debt that is freshest in the creditor’s mind. Also remember that payments extend the statute of limitations, which generally run from the time you default, but start over if you make another payment.

If the original creditor or a debt collector now owns the debt

All things being equal, it makes sense to pay an original creditor (the person or company that is actually delaying your money) rather than a debt collector (the company that bought the debt). Once again, this is a negative consideration. At worst, a debt collector is less likely to be able to prove the things they need to prove to defeat you in litigation if you fight them. Also, you may have some relationship with the original creditor that would be saved by payment, while you may not have a relationship with a debt collector.

At least not one you want to encourage in any way!

the biggest mistake

If you want to keep debt collectors out of your pocket and possibly out of your life, there is one mistake you must not make. For information on that, you will need to visit my website.