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What do I do if someone threatens to sue me?

If the threat comes in written form (a letter or other document), take it seriously. Don't throw it in the waste paper bin, or put it on one side to deal with later. It will generally contain a deadline by which you are required to respond (or pay up), failing which the other party will start court proceedings. You need to respond in writing within that deadline, even if you are denying the claim, because this is your best hope of minimising the damage.

If the other party considers that it has a legal basis for the claim, it may issue proceedings if you fail to respond, and may decide to do so despite your response. This is the point at which the legal costs start to increase. So it is worth considering the allegations carefully, and deciding whether you want to try for a settlement before things get to that stage.

If you think that the claim is unjust or unreasonable, but are uncertain about your ability to defend it, take professional advice. A solicitor will be able to advise you on the merits of the case, and suggest a strategy or strategies for resolving it.