Can Credit Card Companies Sue You?

If you fall behind on credit card payments you can be sued. Many people assume credit card companies “write off” unpaid debts and the debt becomes a moot issue. Unfortunately, most credit card companies sell past due debts to debt collectors and the debt collectors pursue legal action against the debtor.

It’s a known fact – one of the most common reasons people are sued is because of unpaid debt. The good news is there are things you can do to avoid being sued, even if you are struggling financially, and there are things you can do after a lawsuit is filed to improve your situation. Assessing your situation with the assistance of a debt lawsuit professional can help you make the best choice based on your circumstances.

If you’ve been threatened with a lawsuit or already served paperwork regarding a lawsuit related to an unpaid debt, what do you need to know?

Lawsuits are Often the Last Resort

A credit card company isn’t going to file a lawsuit against you if you are late on a single payment. Chances are you can get away with a number of late payments before any legal action is taken, and in many instances, the original credit card company will pass your account off to a debt collector and not even deal with a lawsuit.

Of course, this doesn’t solve your problem because a debt collector is more likely to take aggressive action – their only purpose is to collect on debts, so they can put all of their resources into making you pay.

The thing that’s important to remember about lawsuits and credit card debt is that you’ll have plenty of options before the lawsuit is filed. You’ll receive a number of written warnings concerning your past due account and might have your credit limit decreased or your account deactivated.

What Happens Once a Lawsuit is Filed?

Once your account is 180 days or more past due, the original credit card company will charge off the debt, which often includes selling it to a collection agency. They make some of their investment back and the debt collector can now pursue you full-time. This does NOT mean the debt is cancelled.

The debt collection agency usually makes a few attempts to collect on the debt without the assistance of the legal system. This is important for a few reasons:

For starters, it means no official action has been taken yet and the court is not yet aware of the debt. Threats of legal action are illegal unless the creditor or collector intends to follow through. They cannot tell you that you are being sued unless they have begun the process of filing a lawsuit. If you are still receiving letters warning you that if you don’t act you could be sued than you are not being sued yet.

It’s also important to note that collectors contact you to try to collect on a debt because they want to trigger an action from you. They know that a threatening letter is often enough to force a debtor to make a payment of some kind. The debtor figures if they send $100 or a few hundred dollars, it’ll buy them some time and get the collector off their back.

What this actually does is re-start the statute of limitations on the debt. Making a payment to a debt collector out of fear is one of the worst things you can do. Unless you plan to pay off the entire debt or you know beyond a doubt that you can keep up with a payment arrangement, don’t send them money unless you have a complete understanding of the statute of limitations in your state.

In Texas, the statute of limitations on debt is generous in favor of the debtor. Debt collectors have just four years from the last activity on the account to file a lawsuit. If you haven’t made a payment on a credit card bill in several years, but you send the debt collector money, you’ve just triggers a reset of the statute of limitations and given the collector four more years to pursue you.

This isn’t to say you shouldn’t pay your debt obligations. Of course you should. But it’s important to have a thorough understanding of your rights and the protections that have been put in place for your benefit. Working with an experienced debt attorney can help you make the best decisions possible based on your circumstances.

If you’re being sued by a credit card company or debt collector, or you believe a lawsuit is imminent, we can help. Contact 1.800.220.4318 for more information.