George Simons | October 19, 2022
Summary: Is your credit card company calling you about a past due balance? Find out if your credit card company can sue you over a debt.
As of 2021, nearly half of American adults have credit card debt. If you're part of this statistic and struggling to pay your credit card debt, you might be wondering if the credit company can sue you for failed payments.
The answer is yes. A credit card company can file a civil lawsuit to recover the debt if you stop making payments.
If you miss your monthly credit card payments, the credit card company will probably mail you a notice of the missing payments. Then, after some time, usually 30 days, you may start receiving phone calls from the credit card company's representatives requesting you to pay what you owe. If you miss the next payment, the credit company may escalate its efforts to recover the debt.
For instance, they may hire a debt collection agency to help recover the debt. Your credit report will be negatively affected when this happens, and your credit score will drop significantly. In addition, if time passes by and you show no effort to repay the debt, the credit company might resort to extreme measures such as filing a lawsuit against you.
Some people believe that credit companies won't bother spending their time or money to sue them, but this isn't true even though it might be expensive to file a lawsuit, credit card companies bank on the assumption that most people won't show up in court if summoned for credit card debt.
For this reason, the creditor can decide to sue you if they believe they can recover the legal fees if the court rules in their favor.
If the credit card company files a collection lawsuit against you, you'll need to file a response to the court within a stipulated period. This period may be between 20 to 30 days, depending on your state. If you fail to file an answer to the court, the plaintiff can request the judge to enter a default judgment against you. They can also request you cover the interest on debt, attorney, and court fees.
Back to the unanswered summons, the court may serve you with a request for a default judgment and give you a second chance to answer the complaint. However, if you ignore the court summons, the judge will go ahead and rule in favor of the plaintiff. This ruling gives the credit card company legal authority to take additional action against you to try and collect its debt in full.
After the credit card company wins the lawsuit filed against you, they can request the court's permission to garnish your wages. They may also petition the court for a judgment lien. A lien will be placed on your assets, e.g., your home or car. So when you sell any of your assets, the creditor will take a share of the proceeds.
In most cases, you can't be jailed for not paying a debt unless you fail to appear in court and the judge issues a warrant of arrest against you for contempt of court.
For this reason, it's always advisable to take a collection lawsuit seriously and respond to it in time.
Most credit card companies often sell their debts or delegate the duty of following up on credit card debts to independent debt collectors. For this reason, a debt collector might contact you to pay the debt on behalf of the credit company. If you fail to make any payments, the debt collection agency can file a lawsuit against you in court.
It's always advisable to respond to a lawsuit as soon as you're served; SoloSuit can help you file an answer document if you don't know where to start.
But before doing this, there are a few things you should do. These include:
Sometimes debt collectors make mistakes and sue people for debt they don't even owe. These mistakes are rare, but they do happen. In some cases, the debt may be inflated and not what you originally owe the credit card company.
To avoid being a victim of such mistakes, request documentation from the debt collectors verifying that the debt has been assigned to them.
You'll need to make the request in writing and then send it by mail to the debt collection agency. The debt collector will then respond by sending a copy of the credit card agreement between you and the credit company.
They will also attach proof that the debt has been assigned to them. After verifying that the debt is indeed yours, evaluate the other options as discussed below.
This is the best option if you want to avoid going to trial and paying legal fees. You can contact the credit company and discuss a payment plan with them. Often, creditors may accept a lump sum payment in exchange for forgiving the remaining debt amount or an installment plan.
If you don't know how to pursue a settlement agreement on your own, you can hire a lawyer to represent you in the negotiations. However, there's no guarantee that the credit company will accept a deal with you. If you agree on a payment plan, ensure you put the agreement in writing to prevent any other issues from arising in the future.
Settling the debt in full is the best option to consider if you can afford to pay the full amount. It resolves the debt account immediately and helps avoid a lawsuit. However, the collection account will remain on your credit report for at least seven years, and there won't be much difference in your credit rating even if you settle the debt in full.
This is the last resort to consider if you can't pay the debt and face the risk of wage garnishment. You'll need to consult a bankruptcy attorney to help you with the process of filing for bankruptcy before the court enters a judgment against you.
There's nothing more stressful than struggling to pay your credit card debt and facing a collection lawsuit at the same time. Worse still, the court can rule against you and give the creditor power to take measures such as wage garnishment or judgment lien.
For this reason, it's always advisable to respond to a collection lawsuit within the stipulated time. SoloSuit is a great place to start if you're looking for a fast, attorney-approved response to your debt collection lawsuit.
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.