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

George Simons | March 27, 2024

George Simons
Co-Founder of SoloSuit
George Simons, JD/MBA

George Simons is the co-founder and CEO of SoloSuit. He has helped Americans protect over $1 billion from predatory debt lawsuits. George graduated from BYU Law school in 2020 with a JD-MBA. In his spare time, George likes to cook, because he likes to eat.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

woman and dog reading studying laws

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.

Settle credit card debt.

You can negotiate debt settlement at any stage of the collections process, even after you've been sued by a credit card company. SoloSettle makes it easy.

Settle with SoloSettle

What happens to unpaid debts when a lawsuit is filed

When you can no longer make payments on your credit card, the creditor will attempt to collect on the balance. It will probably send you an email, text, or letter. You'll also receive phone calls from the creditor as soon as you start missing payments. Once you are more than three months past due, the creditor may hire a debt collector or law firm to collect the debt. It also can sell the debt to a national debt collector.

After you miss several months of payments, the odds are that the creditor will sell the debt to a debt collections agency. Your account will say it was charged off, and it will damage your credit score. The debt collector who bought the debt will try to collect what you owe. If you do not respond to their collection efforts, a lawsuit could be filed against you. Unpaid debts will not go away, no matter your reason for not paying.

SoloSuit can help you respond to the lawsuit and settle the debt with the collector.

Debt collection lawsuits and the statute of limitations

Initial actions in a lawsuit

Debt collection lawsuits begin when the creditor/debt collector files the Summons and Complaint documents in court and serves you with a copy. The Summons is a legal document notifying you that you're being sued, and the Complaint outlines the specific allegations against you (i.e. the exact amount you owe). You have 14-30 days to respond to the Summons and Complaint, depending on which state you're being sued in.

The worst thing to do is to ignore the Summons and Complaint. Here's why.

Failure to respond to the lawsuit can result in a default judgment against you. If the court orders a default judgment, then the creditor/collector has the legal right to garnish your wages, put liens on your property, among other things.

SoloSuit can help you file an Answer in all 50 states.

State of limitations

There is only so much time that the creditor can file a lawsuit to collect debts. This is known as the statute of limitations, which differs in each state as well. The statute of limitations prevents collectors from suing people for super old debt.

If the collector tries to file suit against you after the statute of limitations has passed, then you can use it as an affirmative defense in the lawsuit. There are several other affirmative defenses you can list in your Answer that will strengthen your case.

SoloSuit can help you make the right affirmative defenses to help you win your case.

Options for settling a credit card debt

The good news is that you have several options if you've been sued for a credit card debt, so never give up hope! Here are some routes you can take to improve your chances of settling the debt:

  • File the Answer
  • Send a Debt Lawsuit Settlement Letter
  • Offer a lump sum payment
  • Pay the debt in full (not ideal)

File the Answer

Like we mentioned before, the first and most important part of reaching a settlement in a debt lawsuit is filing your Answer.

Even if you've reached a settlement with the collector, you should still file an Answer with the court. Collectors can be sneaky and request a default judgment after reaching a payment agreement with you. If the court does not have your Answer on file, and you have no way to prove that a settlement was reached, the collector can always ask for a default. This is why it is so important to always, always file the Answer first.

You can draft your Answer with SoloSuit's help in minutes, for free!

Send a Debt Lawsuit Settlement Letter

You can resolve your debt after the suit is filed by usingSoloSettle.

After filing your Answer into the case, you should begin the process of negotiating a settlement. Most creditors/collectors want to reach a settlement, and they will often settle for less than the amount you actually owe.

You should wait about 20-30 days after you've filed your Answer to send the settlement letter, before the collector makes any other moves in court. This gives the collector enough time to know you've responded, and it shows you won't give up so easily.

You have the most leverage right after filing your Answer, because it proves that you plan to fight back and that you know what you're doing (at least to an extent). Most collectors would rather settle with a portion of the debt than continue in court, which takes up a lot of time and resources.

SoloSuit can help you draft a Debt Lawsuit Settlement Letter in minutes!

Offer a lump sum payment

It is better to offer a lump sum payment as a settlement than a payment plan. Here are a few reasons why.

A lump sum payment is offering to settle the debt with a one-time payment, whereas on a payment plan, you may end up paying more than a lump sum over a longer period of time. Generally, most collectors would rather take a lump sum payment anyways. This is because most collectors have purchased your debt for pennies on the dollar, so accepting a lump sum agreement will still help them profit, and they won't have to worry about you defaulting on your payment plan.

Check out this video of SoloSuit's CEO explaining how to negotiate a debt settlement:

Here are SoloSuit's basic tips and tricks for negotiating a debt settlement:

Tips and Tricks for settling a debt lawsuit

Effects of settling a debt

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.

No one is 'judgment proof'

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.

Settle with SoloSettle

Make an Offer

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

>>Read the NPR story on SoloSuit: A Student Solution To Give Utah Debtors A Fighting Chance

Negotiate settlement if you're being sued by credit card company

If you're being sued by a credit card company, it isn't too late to settle the debt.

We wanted to learn more about how to negotiate debt settlement, so we asked a debt lawyer to share some tips and tricks on how to settle with creditors and debt collectors. Here are some tips on debt settlement from an attorney:

  • Show Hardship and Other Debts: Demonstrate financial struggles and other obligations, like other debts or inability to garnish Social Security, to encourage settlement.
  • Avoid Lowball Offers: Propose realistic settlement amounts; too low offers are likely to be rejected.
  • Know Who To Call: When negotiating debt settlement, you will typically contact the debt law firm, not the creditor or debt collector suing. The attorney acts as a middleman between the two parties.
  • Be Prepared for Counteroffers: Expect negotiation and be ready to adjust your offer accordingly.
  • Provide Accurate Financial Information: Be truthful about your financial situation, as creditors often have detailed information about you.

To learn more about how to negotiate debt settlement, check out our interview with attorney, John Skiba, below:

How to Answer a Summons for debt collection in all 50 states

Here's a list of guides on how to respond to a debt collection lawsuit in each state:

The Ultimate 50 State Guide

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If the thought of going to court stresses you out, you’re not alone. Many Americans who are sued for credit card debt utilize a Motion to Compel Arbitration to push their case out of court and into arbitration.

Below are some resources on how to use an arbitration clause to your advantage and win a debt lawsuit.

Stop calls from debt collectors

Do you keep getting calls from an unknown number, only to realize that it’s a debt collector on the other line? If you’ve been called by any of the following numbers, chances are you have collectors coming after you, and we’ll tell you how to stop them.

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Statute of limitations on debt state guides

Like all debt collection laws, the statute of limitations on debt varies by state. So, we wrote a guide on each state’s statutes. Check it out below.

Statute of Limitations on Debt Collection by State (Best Guide)

Check the status of your court case

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How to stop wage garnishment in your state

Forgot to respond to your debt lawsuit? The judge may have ordered a default judgment against you, and with a default judgment, debt collectors can garnish your wages. Here are our guides on how to stop wage garnishment in all 50 states.

How to settle a debt in your state

Debt settlement is one of the most effective ways to resolve a debt and save money. We’ve created a guide on how to settle your debt in all 50 states. Find out how to settle in your state with a simple click and explore other debt settlement resources below.

How to settle with every debt collector

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Civil law legal definitions

You can represent yourself in court. Save yourself the time and cost of finding an attorney, and use the following resources to understand legal definitions better and how they may apply to your case.

Get answers to these FAQs on debt collection

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