How to Settle Credit Card Debt When a Lawsuit Has Been Filed

George Simons

April 06, 2021

There's a way out when you go overboard with credit card debt.

Summary: Are you being sued for credit card debt? Wondering if you can settle and make the lawsuit go away? Learn what you should do when you're being sued but still want to settle your debts.

You may feel overwhelmed and scared when you are served with a lawsuit, especially if it's for unpaid debts. If you are facing challenges with your unpaid debts, it's important to know that you are not alone. You have options. Even if you have been sued, you still may be able to resolve the issue.

What Happens to Unpaid Debts When a Lawsuit Is Filed

When you can no longer make payments on your debts, the creditor will attempt to collect on the balance. It will probably email or text you, or send you a letter. Also, as soon as you start missing payments, the creditor will start to call the number on file. Once you are more than three months past due, it may hire a debt collector or law firm to collect the debt. It also can sell the debt to a national debt collector.

The odds are after you miss several months of payments, the creditor will sell the debt to its favorite debt collection company. Your account will say it was charged off and it will lower your credit score. The debt collector who bought the debt will try to collect what you owe. If you do not respond to the collection actions, a lawsuit could be filed against you. Unpaid debts will not go away. It will be noted on your credit report and damage your credit, and you could be sued.

Debt Collection Lawsuits and the Statute of Limitations

Debt collection lawsuits start when the law firm that represents you filed a case in court against you. You are served a summons and a complaint copy. This legal document will state how much you allegedly owe and why they think you owe the debt. The worst thing to do is to ignore the suit because there will be a default judgment against you. When they have a default judgment, they can request that the court give them wage garnishment or a bank account levy. If they garnish your wages, they can have the power to take money from your check each week until you pay off the debt. The bank levy allows them to take funds from your bank account.

There is only so much time that the creditor can file a lawsuit for your debts. This is a statute of limitations set by each state. The length of time they have will vary from three to 10 years from the date of the initial default.

If the collector tries to file suit against you after the statute of limitations runs out, then you can use it as a possible defense in the lawsuit. If you are successful, the case will be dismissed. If this occurs, the creditor may not sue you again for that debt. At that time, they have no way to collect from you other than ask you to pay it. But even if you are not able to be sued for the debt, it stays on your credit report for seven to 10 years. The time limit is based on when you first stopped making payments.

Legal Options Potentially Available to You

The good news is that you have several options, so never give up hope! You can resolve your debt after the suit is filed. You also can resolve your debt even after the creditor gets a judgment on you. If you deal with your debts directly, you usually have several options that let you get debt relief or restructure what you owe so that you can more easily pay it off. Most creditors will allow you to reach a debt solution at any time even after they have filed suit. The reason they do so is that they can save in legal costs by accepting a settlement on the debt.

One option available to you is to try and reach an amicable settlement on the credit card debt owed. You may agree to a payment plan to pay off what you owe over time. You will probably agree to pay less than the debt owed as long as you can pay off a good chunk of it fast. Some creditors will not do a payment plan because they think you will default again. In those cases, you may need to be able to make a lump-sum payment.

Please keep in mind that if you have a debt settlement plan, it will be noted on your credit report as the debt was settled for less than you owe. This makes it harder to get credit in the future. Also, if you are given debt relief, you could have to pay more income taxes; the IRS considers any forgiven debt to be income.

Another option is to pay what you owe in full. You also may try to get a payment plan over time, but it is uncertain if the creditor will agree to this option. They might because they can reduce legal fees and lower the chance that you file bankruptcy. They don't get anything if you do that.

If you decide to not pay the debt, they can get a judgment against you and levy your bank account, garnish wages, or even put a lien on your property in some cases - note, if you are in some states, they cannot put a lien on your homestead.

If you were told not to be concerned with a debt collection lawsuit because you are “judgment proof”, think again. When a creditor succeeds in a debt collection lawsuit against you, they will obtain a legal judgment. If you are considered “judgment proof,” it simply means you do not make a sufficient amount of income for the creditor to garnish your wages. Nevertheless, the judgment will still be entered into the record and will appear on your credit report. Plus, if you eventually earn a higher income, the creditor can subsequently file a garnishment request.

Keep all of the above information in mind if you owe credit card debt and a collections lawsuit was filed against you. It is important to understand that you have multiple options and all is not lost. Creditors have an interest in working with you and you can often come to a reasonable agreement. The critical thing to remember is to not ignore the lawsuit.

What is SoloSuit?

SoloSuit makes it easy to respond to a debt collection lawsuit.

How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

Respond with SoloSuit

"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James

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>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

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