Can a Credit Card Company Sue You?

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Falling behind on credit card payments can lead to serious consequences, including the possibility of being sued by the credit card company. If you’ve ever asked yourself, “Can a credit card company sue me?” the answer is yes. Credit card companies have the legal right to sue individuals for unpaid debts. Understanding how and why they sue, as well as what you can do to protect yourself, is essential to navigating this challenging situation.

Can a Credit Card Company Sue You?

Yes, a credit card company can sue you if you fail to pay your outstanding balance. Lawsuits are typically filed after other collection methods, such as phone calls, letters, and third-party collections, have failed. A lawsuit allows the credit card company to seek a judgment against you, which can give them additional tools to collect the debt.

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Why Do Credit Card Companies Sue?

Credit card companies resort to lawsuits for several reasons:

Any Amount: Credit card companies have been known to sue for as little as $1,000 or even less. Don’t assume because your debt is small that they won’t sue. We have defended thousands of small balance debt collection lawsuits.
Preserving Legal Rights: Filing a lawsuit allows the creditor to stop the clock on the statute of limitations for collecting the debt and attempt to get a judgment which can last for up to 20 years depending on state law.
Enforcing Payment: A court civil judgment can provide the creditor with legal avenues to collect, such as garnishing bank accounts or placing liens on property.

What Happens When a Credit Card Company Sues?

If a credit card company decides to sue, here’s how the process typically unfolds:

You Receive a Summons and Complaint

The summons informs you that a lawsuit has been filed and includes a deadline for your response.
The complaint outlines the creditor’s claims, including the amount owed and the legal basis for the lawsuit.

You Must Respond to the Lawsuit

You typically have 20 days plus the following Monday to file a written answer with the court but this depends on each court level and state law. Ignoring the lawsuit can result in a default judgment in favor of the credit card company.

Discovery Phase

If you respond, the case moves into discovery, where both sides exchange information and evidence. Some courts do not allow for discovery. The credit card company must show more than 50% that you:
- You owe the debt.
- The amount claimed is accurate enough for the Judge.
- They have the legal right to collect.

Settlement Negotiations

Many lawsuits are settled out of court through negotiations. The creditor may agree to accept a reduced amount or payment plan to avoid the costs of trial.

Trial and Potential Court Judgment

If the case goes to trial and the credit card company wins, the court issues a judgment against you. This judgment may include:
- The principal amount owed.
- Interest and penalties.
- Attorney’s fees and court costs.
- Post Judgment interest will accrue for years which can double or triple the amount of the judgment over time.

What Can Credit Card Companies Do After Winning a Judgment?

Once a judgment is obtained, creditors can take additional steps to collect the debt:

Bank Account Garnishment

Creditors can often seize funds from your bank account to satisfy the judgment. Some funds, like Social Security benefits, are exempt from garnishment.

Property Liens or Seizure

A creditor may place a lien on your non-exempt real estate. Many states protect your primary residence or your homestead property from liens, but other properties could be at risk.

Turnover Orders

Creditors may request the court to order you to turn over non-exempt assets, such as valuable personal property.

Wage Garnishment (in most states)

Most states allow for some form of wage garnishment regarding Credit Card Judgments. The states that currently do not allow are Texas, North Carolina, Pennsyvania and South Carolina.

What to Do If a Credit Card Company Sues You

Don’t Ignore the Lawsuit Papers: Ignoring the debt collection lawsuit will result in a default judgment against you followed by potential garnishment of your bank account or wages depending on state collection laws. This is more serious than a simple collection letter. It’s a Court process that could give the creditor the power to take some of your assets or put a lien on property that you own. A debt lawsuit is much more important than simply having a negative mark show on your credit report. A low credit score is not nearly as critical as a default judgment for not responding to a debt collection lawsuit. You must have a debt collection defense strategy.

Retain an Attorney on a Fixed Fee

When A credit card company takes legal action against you, navigating the court process for a debt claim can be complicated. Getting legal advice is crucial. Additionally, you will likely need to appear in court one or more times. If you hire an attorney, they can often appear on your behalf. Opt for an attorney who charges a flat fee to avoid the potentially high costs of hourly billing. Being a defendant in a debt collection lawsuit is not an enjoyable experience, and knowing the fixed cost of legal representation can help alleviate some stress.

Respond to the Complaint:

When you are sued by a plaintiff debt buyer or credit card company for an alleged debt, you must respond to the lawsuit by filing an answer with the court within the specified deadline. The exact deadline depends on the court in which the case was filed. In your answer, you should generally deny the allegations made by the creditor otherwise, you risk admitting to the debt.

Plead Your Defenses: Responding to a credit card lawsuit is crucial, as it is with any debt-related lawsuit. In your response, you should assert any valid defenses, such as disputing the accuracy of the debt, claiming the debt is beyond the statute of limitations, or stating that you are not the responsible party. As the defendant, it is essential to properly assert your defenses. The creditor might lack adequate documentation from the original creditor, and if this is the case, you need to clearly explain this to the judge

Don’t Miss Court Hearings

When a debt buyer takes legal action against you for credit card debt, the court will typically set deadlines and schedule hearings for your case. It is crucial to attend all scheduled hearings and meet all deadlines. Hiring an attorney who specializes in debt lawsuit defense can be highly beneficial. Obtaining legal advice on consumer protection can significantly aid in defending against a debt collector in a debt collection case.

Read Court Orders Carefully

Adhere to any court orders or rulings. Failing to do so can lead to further legal consequences. This differs from the debt collection laws that creditors must follow before filing a debt collection lawsuit. You need to read every order carefully and also search for any specific local rules of the Court.

Trial Preparation

A debt collection lawsuit often culminates in a trial. If negotiations fail and the case proceeds to trial, collaborate with your attorney to build a strong defense and gather evidence to support your position. This underscores the importance of obtaining sound legal advice when faced with a debt collection lawsuit filed by a debt collection agency or credit card company. Often, they may not provide sufficient documentation from the original creditor. As a debt buyer, they are required to present certain documentation at trial.

Settlement Options to Avoid Trial

Even if the creditor’s documentation is weak, settlement should still be considered. Some judges may focus on whether you had a debt rather than whether the debt buyer has met their legal burden of proof. This risk can be challenging to overcome, making settlement a prudent option regardless of the evidence presented.

Final Thoughts

Yes, credit card companies can sue you for unpaid debts, and the consequences can be significant. However, by understanding the process, asserting your legal rights, and seeking professional guidance, you can navigate the situation effectively. If you’re facing a lawsuit or struggling with credit card debt, act quickly to explore your options, protect your assets, and minimize financial harm.

Mike Weston, Esq.

Mike Weston is a seasoned debt lawsuit defense attorney and founder of Weston Legal. Since 2005, Mike has devoted his career to compassionately helping consumers struggling with issues involving their personal and business debts. Mike is grateful to have been able to help tens of thousands of clients become empowered with knowledge on the path to financial stability.