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

George Simons | May 12, 2023

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 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:

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.

>>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

How to Answer a Summons for Debt Collection Guides for Other States

Here's a list of guides for other states.

All 50 states.

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri

Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah; File a Motion to Satisfy Judgment Vermont Virginia Washington West Virginia Wisconsin Wyoming

Guides on How to Beat Every Debt Collector

Being sued by a different debt collector? We're making guides on how to beat each one.

• Absolute Resolutions Investments LLC
• Accredited Collection Services
• Alliance One
• Amcol Clmbia
• American Recovery Service
• Asset Acceptance LLC
• Asset Recovery Solutions
• Associated Credit Services
• Autovest LLC
• Cach LLC
• Cavalry SPV I LLC
• Cerastes LLC
• Colinfobur
• Covington Credit
• Crown Asset Management
• CTC Debt Collector
• Delanor Kemper & Associates
• Eagle Loan of Ohio
• Educap
• Estate Information Services
• FIA Card Services
• Forster & Garbus
• Freshview Solutions
• Harvest Credit Management
• Howard Lee Schiff
• Hudson & Keyse LLC
• Integras Capital Recovery LLC
• Javitch Block
• Jefferson Capital Systems LLC
• LVNV Funding
• Mariner Finance
• Medicredit
• Michael J Adams PC
• Michael J Scott
• Midland Funding LLC
• Mullooly, Jeffrey, Rooney & Flynn
• Mountain Land Collections
• MRS Associates
• National Collegiate Trust
• NCEP LLC
• NRC Collection Agency
• OneMain Financial
• Palisades Collection LLC
• Paragon Revenue Group
• Pinnacle Collections Agency
• PMAB LLC
• Portfolio Recovery Associates
• PYOD LLC
• Reunion Student Loan Finance Corporation
• Revenue Group
• RSIEH
• Security Credit Services
• Sherman Financial Group
• Suttell and Hammer
• T-Mobile
• Transworld Systems
• Tulsa Teachers Credit Union
• UCB Collection
• Velo Law Office
• Velocity Investments
• Waypoint Resource Group

Win Against Credit Card Companies

Is your credit card company suing you? Learn how you can beat each one.

• Bank of America
• Capital One
• Chase
• Credit One Bank
• PayPal Synchrony Card
• SYNCB/PPEXTR
• Synchrony Bank
• Target National Bank
• Wells Fargo

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