Sued for Credit Card Debt: Learn the Steps to Protect Yourself

If you’ve been sued for credit card debt, you might be wondering what your options are. Don’t worry—there are ways to defend yourself, resolve your debt, and get your finances back on track.

You may still be able to negotiate a debt settlement with whoever is suing you. You could possibly even beat the lawsuit, depending on the situation. 

The information provided in this article is intended for general informational purposes only and shouldn't be taken as legal advice. For personalized legal advice, consult with a qualified attorney licensed to practice law in your state.

Who Can Sue You for Credit Card Debt?

You might be surprised to find that a company you have never heard of is suing you for credit card debt. This is because credit card companies often pass their collection problems along to other organizations.

It’s important to understand who can sue you for credit card debt. This may help you negotiate with the creditor. Also, you may have additional legal protections depending on who is suing you.

Just because you’re late with a credit card payment doesn’t mean you’ll be sued. If it’s a fairly small amount, the credit card issuer may decide it’s not worth the time and expense of bringing the case to court. A study by the Consumer Financial Protection Bureau (CFPB) found that among major credit card issuers, the amount owed in cases where they took legal action ranged from $4,587 to $10,980. 

Another factor in your odds of getting sued for credit card debt is the likelihood that you would be able to pay if a court judgment goes against you. Credit card issuers don’t want to bother suing people who don’t have the income or assets necessary to pay any judgment that results. 

Credit card companies

Your payment terms are described by the written agreement you signed when you opened your credit card account. Payment is typically due within 30 days. Once a payment is overdue, it’s considered delinquent. 

Even after a payment becomes delinquent, a credit card company is likely to pursue routine collection efforts before taking legal action. These may include mailing you reminders and contacting you by phone. 

If those routine efforts fail, your credit card company might sue you for the amount owed. This may include the amount you borrowed plus any interest and penalties specified by your credit card agreement. 

Instead of pursuing you directly, credit card companies often pass along the task of debt collection to other firms. These include debt collectors and debt buyers.

Debt collection firms

A debt collection firm is a company that is hired by a creditor to collect money on their behalf. So, if you owe a credit card company money, they may hire a debt collection firm to go after that money for them.

It’s important to know whether the company trying to collect a debt from you is the original creditor or another firm. If it’s someone other than the original creditor, their debt collection activities are covered by a law called the Fair Debt Collection Practices Act (FDCPA). This includes debt collection firms and law firms hired to collect debts. 

The FDCPA limits when and how debt collectors can contact you. It is designed to make sure debt collectors keep communications about your debt private. It also guards you against having debt collectors harass you with frequent or inconvenient contact. 

Another way the FDCPA protects you is by requiring debt collectors to provide you with written details about the debt they’re trying to collect. It then requires the debt collector to give you 30 days to respond before they contact you again. 

And if you want to stop debt collection calls, the FDCPA has rules about that, too. You can mail a cease-and-desist letter to the debt collector to instruct them to stop calling.

Debt buyers

Some companies specialize in buying past-due debts from creditors. They have a legal right to try to collect on that debt. They profit if they can collect more than the amount they paid for the debt. 

There are two reasons why it helps to know if a debt buyer is contacting you about a debt instead of the original creditor:

• Companies who buy past-due debt for the purpose of attempting to collect on it are covered by the FDCPA. Their collection activities are subject to the same restrictions described above in the section on debt collectors.

• When a company buys past-due debt, they typically do so at a huge discount. They often pay only pennies on the dollar for debt acquired. Keep that in mind if you reach the point of negotiating a settlement with a debt buyer. They can accept a lot less than the full amount you owe and still make a profit. That may give you more room to strike a bargain to reduce how much you have to pay.

You May Like These

Debt Validation Letter - How to Validate a Debt

7 Tips to Help You Pay Off Credit Card Debt

Zombie Debt: Don’t Let It Rise To Bite You

How to Respond to a Credit Card Debt Lawsuit

Receiving a court summons

If you are sued, you will receive a legal document called a court summons. This notifies you that you are being sued and are required to respond. 

A lawsuit for collection of debt is a civil matter, not a criminal one. That means you won’t go to jail for credit card debt if you lose the case, but you’ll be subject to possible financial losses. For example, the debt collector may be able to garnish your bank account. It’s very important to respond if you receive a summons. 

If you fail to respond to a summons, a default judgment is likely to be issued against you. That means you automatically lose the case because you haven’t responded. 

The CFPB found that most debt collection cases brought by credit card companies result in default judgments. If you simply accept a default judgment instead of responding to a summons, you give up your right to fight the case brought against you. You could also lose the leverage you have to negotiate a settlement with the credit card company. 

How to Get a Credit Card Lawsuit Dismissed

A credit card lawsuit can be overwhelming, but you can take steps to try to get it dismissed. Here's how you could protect yourself when sued for credit card debt:

Challenge the validity of the debt

One of the first things you can do is challenge the validity of the debt. If the creditor or debt collector can't prove you owe the debt, the lawsuit might be dismissed. Here’s what you should ask for:

• Proof of the debt. Request the original contract you signed. Also, ask for a clear breakdown of the amount they say you owe.

• Proper documentation. The creditor must prove they own the debt, especially if a third-party buyer bought it.

If they can't provide this, you may have grounds to ask the court to dismiss the lawsuit.

Prove identity theft or fraud

If you didn't incur the debt in question because you were the victim of identity theft or fraud, you can use this as a powerful defense. Here’s how to handle it:

• Gather evidence. Collect any documents that prove the debt is from identity theft. This includes police reports and communication with creditors.

• Report the fraud. Report the fraud to the credit bureaus and any banks involved.

If the judge agrees the debt was fraudulently incurred, this could lead to a dismissal. A dismissal means you aren't responsible for the debt.

Check the statute of limitations

Every state sets limits—called a statute of limitations—on how long creditors and debt collectors have to sue for unpaid debt. If they file the lawsuit after this period has expired, you could ask the court to dismiss the case. Here’s what you need to know:

• Check your state's statute of limitations. These statutes vary by location and type of debt. The statute of limitations on credit card debt usually ranges from three to 10 years.

• File a motion to dismiss. If the debt is time-barred, it means the statute of limitations has expired. You could ask the judge to dismiss the case.

This is a strong defense. Courts usually dismiss cases where the statute of limitations has passed.

File a motion to dismiss

If you believe there’s a legal flaw in the lawsuit, you could file a motion to dismiss. Here are some common reasons to do so:

• Improper service. If you weren't properly served with the lawsuit, you might argue for a dismissal.

• Lack of jurisdiction. Creditors have to sue you where you live or where you signed the contract for the debt. Otherwise, the case may be dismissed. 

• Lack of standing. If the creditor can’t prove they have the legal right to sue you, the court may dismiss the case.

To file a motion to dismiss, you must submit a formal request to the court. The motion should explain your reasons and provide any evidence.

You can look on the court’s website for instructions on how to answer a creditor lawsuit or file a motion to dismiss.

Do You Need a Lawyer if You’re Sued for Credit Card Debt?

If there are clear mistakes in the claim against you or the statute of limitations has run out, you might be able to get the lawsuit dismissed easily. If not, you should seriously consider getting legal help. 

An attorney experienced with debt collection cases can advise you on the best strategy for how to respond to the lawsuit. This may include advice on how to fight the lawsuit as well on how to minimize what you have to pay.

There are a couple other important things an attorney with experience in these cases might be able to help you with:

• Knowing which of your resources are judgment-proof. Depending on the laws in your state, some of your assets and/or sources of income may be protected from legal judgments against you. The laws on this vary from state to state, so getting an attorney who is familiar with the laws in your state is vital.

• Deciding whether bankruptcy is the best step. It’s one thing to fight a single lawsuit. It’s another thing if you have multiple creditors coming after you. Bankruptcy has serious long-term consequences, but it can also serve a useful purpose. If you owe money to more than one creditor and can’t afford to repay what you owe, bankruptcy might be the most sensible solution.

If you have trouble finding an attorney to take your case, see if there is a legal aid society in your area. These organizations specialize in finding help for people who are inexperienced with the legal system. 

Can You Settle Credit Card Debt When a Lawsuit Has Been Filed?

Debt settlement can be an efficient way of getting rid of a lawsuit against you. 

Negotiating to pay part of what you owe might work best for both parties. It could allow you to settle the debt for an amount you can afford. Settling gives your creditor the chance to collect some payment without having to go through the time, expense, and risk of a lawsuit.

You might be surprised at how motivated your creditors are to settle a debt rather than take the case to court. A CFPB study found that even when a court rules against a debtor, creditors collect an average of less than 20% of the amount owed within the first year after the judgment. Even five years after a judgment, creditors collect only about a third of what they’re owed on average.

Creditors know that even if they win in court, they are likely to collect only a fraction of what they are owed. It may be much more cost-effective to accept partial payment upfront. So, make an offer, or work with a debt settlement specialist who can negotiate on your behalf.

How to Avoid Being Sued for Credit Card Debt

You can defend yourself from a credit card lawsuit, but if you can avoid it entirely, that’s even better. The most reliable way to ensure you’re not sued is to get your credit card debt paid off or settled.

You could negotiate a payment plan or a debt settlement offer yourself. But it may be challenging, especially if you have a large amount of debt or several debt collectors hounding you. This is where a credit card debt relief service could make a world of difference.

A debt relief company could help you organize your credit card debt and run the numbers on how much you can afford to pay per month, based on your income and expenses. Then, the company’s debt consultants could negotiate with your debt collectors and make a deal that works for you.

Let’s be honest: Most people don’t have a ton of experience talking with debt collectors, much less negotiating with them. Debt collectors, on the other hand, are experts in getting as much money as they can out of debtors, because they do it all the time.

In this situation, it helps to have professionals on your side. Freedom Debt Relief has resolved over $20 billion in debt since 2002 (read our testimonials for reviews from real clients). If you’re feeling overwhelmed because of credit card debt, talk to one of our Certified Debt Consultants to get on the path to being debt-free.