How I Settled a $23,000 Lawsuit for $3,000

(Last Updated On: December 31, 2018)

The weight of the paper in my hands felt like the weight of the world on my shoulders. My mind was swimming and I could hardly process what was going on. Sued? For almost $23,000? By a company I’d never heard of? Wait… what?!

We were sued last year and it was a terribly educational experience. I learned firsthand that when it comes to debt, you’re guilty until proven innocent.

If you don’t file an answer, you are considered guilty by default and the person suing you will get whatever they want. We had just 20 days to file an answer with the court. The original paperwork we received said that we were being sued for roughly $10,000 plus interest, fees, attorney’s fees and other applicable charges.

Immediately upon receipt of our paperwork, I contacted the Northwest Justice Project for free legal assistance. You can find their contact information by clicking here.

Although they couldn’t represent me, the NJP offered some helpful advice… and so did the other lawyers that I contacted. Remember that most attorneys offer a free initial consultation, so you can explain your case and get some advice before you pay!

I contacted several lawyers and used their free consultations to glean additional advice. However, nobody seemed to think there was much hope for my case. The plaintiff’s case seemed to be pretty ironclad.

With these doomsday predictions in mind, I filed my own answer to the court. I denied everything except my location and marriage. I raised a few common affirmative defenses. I took the paper to the court and filed it, hoping for the best. It turns out that I made a few serious mistakes that could’ve posed a problem later on… but remember that it is always better to file an answer incorrectly than not to file one at all!

Eventually, we received another stack of court papers seemed even more incriminating than the first. This stack was significantly thicker and included a loan agreement for the vehicle that had been repossessed nearly six years before, a summary judgment request for the original $10,000 or so of the loan, plus almost $13,000 in interest and additional fees.

I cannot stress this enough: Always, always, always answer the lawsuit. You don’t even know everything they’re asking for until after you’ve answered!

Eventually, I was able to retain the services of Edgar Hall from Washington Debt Law, LLC. For $300, Mr. Hall agreed to review all the documentation in my case.  It was the best $300 I ever spent because it saved me $20,000!

Upon review of the documentation, Mr. Hall discovered that the original lender had been charging us slightly more interest than the original contract allowed for. He also informed me that we could dispute the plaintiff’s request for six years of interest because they had violated the Truth in Lending Act by failing to send us statements showing the accruing interest. I was elated – the interest alone accounted for almost $13,000 of the summary judgment the plaintiff was requesting.

He also told me that settling out of court was my best option. Again, Mr. Hall offered great advice. He told me exactly how to approach a settlement and offered to help me if the settlement offer failed.

Since my husband and I survive on veteran’s compensation that cannot be garnished or taxed, I faxed the plaintiff an explanation letter and a copy of last year’s tax returns. In the letter, I explained that a $23,000 judgment would push us into bankruptcy and that I had consulted with an attorney who offered bankruptcy services for approximately $1,500. I offered the plaintiff that amount as a settlement, since that is more than they would receive in bankruptcy and it would help me avoid the inconvenience of bankruptcy.

A few days later, I received a fax proposing a counter-offer of $3,000. We accepted, paid and settled the matter out-of-court for $20,000 less than the judgment sought by the plaintiff.

Spending $300 for advice from an experienced, professional lawyer saved me $20,000. I can’t overstate how important it is to obtain good legal advice in a case like this!!!

how to settle lawsuit

Although our situation was somewhat unique and our strategies might not apply to your situation, here is some more general information:

“What do I do if I’ve been sued?”

If you’ve been sued, file an answer!!!! Even if you don’t know exactly what you’re doing, do your best. If you don’t file an answer, a default judgment may be awarded against you. The court assumes you have nothing to say in your defense, so the plaintiff wins – and usually gets everything they ask for.

Let me say that again, because it’s important:

If you don’t  file an answer in the given time,
you are giving the plaintiff whatever they ask for.

The scariest part is that you don’t even know what they’re asking for until you file your answer. My original paperwork indicated the plaintiff was seeking nearly $10,000, plus interest, attorney’s fees and more. It sounded awful! After we filed our answer, it seemed even worse – the summary judgment paperwork showed they were seeking nearly $10,000 plus an additional $13,000 in interest and several hundred dollars in additional fees. The interest alone was more than the original debt!! The plaintiff was seeking more than double the figure they’d initially claimed.

But if we hadn’t filed our answer, we wouldn’t have known about that until we discovered a $23,000 judgment against us. And by the time we discovered it, it would’ve been too late to fight it.

You can’t afford to not answer a lawsuit.

“How do I file an answer to the court?”

If you live in Washington State, you can find a basic answer form and some helpful information on This page specifically provides information about filing an answer.

Filing an answer sounds scarier than it is. Basically, you have to indicate what is true and what is false in the plaintiff’s claim. For example, in my answer, I indicated that it was true that David and I are married and live in Washington. However, I denied everything else.

The answer is not the place to make your case. You are simply preventing a default judgment. Any information you provide on your answer makes the plaintiff’s job easier – and that’s not what you want. Before an attorney friend stopped me, I had explained on the answer that I knew of a similar debt with Drive Financial but that I didn’t know who this plaintiff was. I was instructed to delete that and simply indicate the paragraphs that I didn’t agree with. That made the answer much easier and prevented me from assisting the plaintiff in strengthening their case.

Affirmative defenses and counterclaims are confusing. This is where I messed up in filing my answer – I didn’t raise the right defenses and that failure created a procedural error that could have prevented me from presenting the information that would have helped decide the case in my favor.

Despite all the flaws that were obvious in my case – the fact I didn’t know who this company was, they’d never contacted us before for payment, they were asking for six years worth of interest without following the Truth in Lending Act, there was an error in the interest rate on the original contract, the $10,000 car was inexplicably sold for just $461 after repossession and more – our inability to retain counsel before filing our answer almost proved disastrous.

This is why I encourage everyone to hire a lawyer, no matter how difficult that expense may be. I know my wonderful readers are low-income and that shelling out several hundred dollars for a lawyer is an extreme hardship or maybe even an impossibility. Even the advice dispensed during a free consultation could save you hundreds or even thousands of dollars.

If you’re in Washington State, I highly recommend that you contact Washington Debt Law LLC at (206) 535-2559 because they are the absolute best when it comes to consumer debt cases in our state. You can see Mr. Hall’s impressive reviews and endorsements on by clicking here.

“Do I need to file anything with my answer?”

In addition to completing the answer form (see above), you’ll also want to file a notice of appearance and, if applicable, a declaration of exempt income. These forms can be found here.

The notice of appearance ensures that you are notified about any action in the case. This ensures that the plaintiff notifies you about court dates, motions for judgment and more. If you do not file a notice of appearance, they are not legally required to inform you about any of these things. No matter what, you need to be notified!

The declaration of exempt income and assets notifies the court and the plaintiff of income and assets they cannot take. For us, this form was vital because the plaintiff cannot garnish my husband’s veterans benefits even if they win a judgment against us. This notified the plaintiff that our income was untouchable, which made our settlement so much easier.

Take these forms to the courthouse to get them stamped, then mail a copy to the plaintiff. This completes your answer.

“What happens after I file my answer?”

After we filed our answer, it was several weeks before we heard anything. One afternoon, a large stack of legal documents arrived in the mail. It included a lot of statements, legal claims and more. It also included a request for a summary judgment… and a court date.

Because we settled out of court, we did not have to attend the court date. However, that would have been the next step in the process.

“How can I settle out of court?”

By the time the case reaches this stage, the plaintiff typically has the upper hand. The motivation to cooperate and settle is greatly diminished. Convincing them to settle is not easy because the plaintiff’s hope is to win a judgment so that they can begin garnishing a paycheck.

The easiest way to convince the plaintiff to settle is to prove that winning the lawsuit will be unprofitable. Fortunately for us, we had an advantage because our income cannot be garnished. We notified the plaintiff of this when we filed our original answer. Later, following our attorney’s advice, we faxed a very simple letter to the plaintiff with a copy of our tax returns.

Even if you have garnishable income, you can still threaten bankruptcy. We explained that we couldn’t afford a $23,000 judgment and we would have to file bankruptcy. We advised them that we had found an attorney that would process our bankruptcy for $1,500. Since the plaintiff wouldn’t receive anything from a bankruptcy, we offered to send them $1,500 to avoid the whole mess. The plaintiff did not accept this offer but offered a counter-offer of $3,000. That was the amount we settled for – significantly cheaper than the $23,000 we were threatened with.

Since the plaintiff was the fifth company to acquire this debt and collections agencies typically buy debts for pennies on the dollar, it’s reasonable to assume that $3,000 was more than what the plaintiff had paid to acquire the debt. It is entirely possibly that the plaintiff still profited from this settlement, even though it was significantly less than the requested judgment.

“What happens if I don’t file an answer?”
(also “What happens if I lose in court?”)

If the plaintiff wins the court case, a judgment will be entered against you. A judgment means the court has determined that the plaintiff has the right to collect this money. It also allows the plaintiff to use various processes to collect that money if you don’t willingly pay. Options include paycheck garnishment, bank garnishment, and potentially selling some of your belongings.

Paycheck Garnishment

A garnishment is an order that the court sends to an employer, ordering a certain amount of your income to be withheld and sent to the creditor (the plaintiff who won the judgment). Your employer calculates how much of your income is exempt and sends an answer to the court explaining how much money will be paid to the debt and how much you will receive.

It’s important to know that there rules that dictate what money can and can’t be garnished. There are many types of income that are exempt and cannot be garnished at all – including veteran’s benefits, social security payments, student loans and federally qualified pension and retirement plans.

Even a regular paycheck can’t be completely garnished. In Washington State, you can’t be garnished for more than 25% of your net wages (except in certain cases, including child support). The protected part of a paycheck is the greater of these two options: (1) 75% of your net wages or (2) 35 times the current federal minimum wage. Since the current federal minimum wage is $7.25, a minimum of $245 per week is protected.

Example: Someone who earns minimum wage but works 40 hours per week in WA earns a gross income of $372.80 per week.  Whatever is left over after taxes, Social Security, and other mandatory deductions are removed is the net income. The protected amount is the greater of 75% of the net income or $245.

Although garnishment is a headache, your employer is not legally allowed to fire you for a garnishment unless you receive three or more different garnishments in a 12-month period.

Bank Garnishment

In cases when a paycheck can’t be garnished, a bank garnishment may be awarded. The awful thing about bank garnishments is that you are not entitled to notice that a bank garnishment has begun. Many people don’t know about their garnishment until they receive unexpected NSF fees.

You can, however, receive information about the garnishment. You can get a copy of the Writ of Garnishment and an Exemption claim form.

Certain funds cannot be garnished, even from the bank account. These include TANF funds, social security, veteran’s benefits and certain pensions and retirement benefits.

You must claim your own exemptions. The bank will not do it for you. The exemption claim form will include instructions of claiming exemptions. There is a $200 automatic exemption that you can always claim.

Liquidation of Assets

In some cases, the court can order a sheriff to seize and sell your property. The money earned from the sale will be given to your creditor. This process can be prevented by claiming exemptions.

A simple way to claim your exemptions is to make a list of personal property (including household furniture, appliances, clothing) and placing a * next to the exempt items. At the bottom, state that “I declare under penalty of perjury under the laws of the state of Washington that the foregoing is a list of my household furnishings and appliances (or tools or motor vehicles) and I believe the items I’ve marked with a ‘*’ are exempt from attachment.” (see Washington Law Help for more information)

This list can be presented to the sheriff who is seizing your property. The sheriff must them determine the value of the items listed before seizure can continue.

The creditor can also try to force a sale of your real property, including your land and home. In Washington State, the homestead law protects up to $125,000 of equity in the home. If you live in the home, the exemption is automatic. If you don’t live in the home, you must claim the exemption.

A worker who worked on the home, someone who provided materials to the home or a lender trying to foreclose are exempt from the restrictions of the homestead law.

For more information, please read this publication from Washington Law Help.

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