George Simons | July 21, 2022
Summary: Can't afford to pay off your credit card balances? Wondering if you're going to be sued? Find out how often credit card companies sue for non-payment.
Your credit card company will try to reach you if you fall behind with your payments. This is because creditors are allowed to pursue all means legally acceptable to collect their money from debtors. A lawsuit is also an option, but it is not usually the first legal measure creditors opt for.
You may fail to pay your credit for one reason or another. Often, some people begin to worry about being contacted or sued by a creditor for non-payment. But, quite frankly, creditors do not sue as often as many people think.
This is because lawsuits can be costly, time-consuming, and frustrating. This article explains what happens if you fail to pay your credit cards on time and everything else you need to know about late credit card payments.
Most credit card companies have policies on the immediate actions to take against a debtor who is behind in payments by a couple of days. However, just like any other business, these credit card companies always try to maintain a good relationship with their customers, the debtors.
Therefore, a lawsuit wouldn't be the first desirable means of resolving a non-payment. In most cases, the credit agreement would involve a penalty or an increased interest rate as a consequence of late payment.
The credit companies also weigh the costs and benefits of a lawsuit before settling for one. Keep in mind that the credit agencies make money from the interests they earn from the debts. Therefore, even before creditors consider a lawsuit, they first must weigh the cost they would incur against the possible positive outcomes of the lawsuit. These considerations include the amount of debt, probability of recovering it, and legal expenses that they would incur in the debt recovery process.
Before making such decisions, the credit card company may opt for the following methods of debt recovery:
Sometimes, attempts by credit companies to reach out to a debtor may not bear any positive result. Most credit card companies hand over the debt to collection agencies who are more persistent and experienced in debt collection when this happens.
Debt collection agencies make their profits from the commissions they earn after a successful debt collection. They may not be as lenient as the credit card companies, but their collection practices are regulated by the Fair Debt Collection Practises Act (FDCPA).
Such agencies will regularly contact you through phone calls, collection letters and may even want to discuss a repayment plan with you. But, again, if these methods fail, a lawsuit would be the next option.
Credit card collection lawsuits have several possible outcomes.
For example, if the debtor uses the statute of limitation of the credit card debt in their defense, the case may be ruled in their favor. If the debtor fails to appear for a hearing, the court will automatically pass a default judgment in favor of the credit collector. On the other hand, the creditor gains nothing by suing a debtor who is judgment proof.
This section discusses these outcomes in more detail.
You may use the statute of limitations as your defense in court. The statute of limitation is the time limit that the companies have to sue you for the debt, which differs in different states and the type of debt. After the SOL expires, the debt becomes time-barred, meaning the collection agency can no longer file a lawsuit against you for the debt.
However, in some states, the clock on the debt can restart once the debtor accepts, in writing, that they owe the debt. In that case, the collector can still sue for the debt. Some state laws also make it illegal for a debt collector to continue contacting you for a time-barred debt, while others allow it.
If a debtor does not have enough assets, money, or garnishable income, they are considered judgment proof. This means that the creditors will not be able to collect anything from the debtor. Despite that, the debt collector can still file a lawsuit against the debtor.
A default judgment is passed when the debtor fails to appear in court for the hearing. Unfortunately, some people often assume that they have no chance against a debt collector when a lawsuit is filed against them, and therefore choose to ignore the court summons.
The truth is, you will never know what defenses you had in your favor or whether the debt you are being pursued for is yours if you ignore the summons. For that reason, SoloSuit can help you file your Answer for a credit card lawsuit, increasing your chances of winning such a case.
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.
"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
Here's a list of guides for other states.
Being sued by a different debt collector? We're making guides on how to beat each one.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.