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When can a credit card company sue you?
By Gina Freeman
Published on April 30, 2023
Read time: 6 min
Credit card companies take many steps before suing for non-payment. You should never be surprised by a credit card lawsuit.
Lawsuits become more likely after a debt is six months delinquent.
You might be able to resolve the debt before a lawsuit is filed.
Falling behind on your debts is scary, yes. And if your credit card debt is seriously delinquent, it’s smart to think about what you can and should do to protect yourself from aggressive collection efforts, including lawsuits.
Here’s the thing. It costs money to come after you in court, so that’s not the first step your credit card issuer will take, even if you’re struggling to pay. Even if your financial situation is bad, you have a few options for moving forward, and they don’t all end with you in court.
Can a credit card company sue you?
Let’s get the bad news out of the way. Yes, credit card companies can sue you for non-payment. According to the Consumer Financial Protection Bureau (CFPB), credit card companies sue their customers about 12% of the time. On average, credit card companies sue to recover balances over $2,700.
Now the better news. Lawsuits are a tool of last resort for most credit card issuers. If you’re feeling fearful, you can breathe now. Credit card issuers are more often willing to help their customers who are having payment problems.
So stop stressing and start solving—you’ve got this.
What happens when you don’t pay your credit card bill?
Your credit card company will probably take these actions before considering a lawsuit:
Charge you a late fee after a missed payment
Report your payment as “late” to credit bureaus (31 days after the due date)
Reduce your credit limit or even close your account
Increase your interest rate (if at least 60 days past due) for at least six months
Try to contact you
Your credit card company will try to get a hold of you many times via calls, emails, letters, texts, or social media before they file a lawsuit against you. These are opportunities to ask for help and discuss solutions. If you continue ignoring your credit card company, collection efforts will intensify. And they may ultimately result in a charge-off and a lawsuit.
What is a charge-off?
Credit card companies usually try to collect past-due amounts for 120 to 180 days before “charging off” your balance. Charging off debt doesn't make the debt go away. It just means writing off the balance for their own tax and accounting purposes.
Before charging off your account, your card issuer may try to help you out (and cut its losses) with account re-aging, forbearance, debt management, or debt resolution.
Account re-aging allows you to bring your account current with three consecutive minimum monthly payments or an equal lump sum payment.
Forbearance can take several forms—usually lowering your payments or letting you skip some payments.
Debt management happens through a credit counselor. You make a single monthly payment into a plan, and your counselor distributes it to your creditors. The creditors often agree to lower your interest rates and monthly payments and waive late fees.
Debt resolution means the creditor accepts less than you owe as payment in full. You can negotiate your own debts or hire a professional debt resolution company to help you.
Some credit card companies will sue before charging off a balance. This isn't common, but it’s possible, especially if you owe a large amount and have assets or a steady income.
Once the card is charged off, the credit card company might sue you. Or it could sell the debt or transfer it to a collection agency (and let them sue you). You’re more likely to be sued if you haven't come to an arrangement, especially if your balance is large and you’re not judgment-proof. Judgment proof means you don’t have enough assets and income for the creditor to seize.
Can a debt collector sue you?
Debt collectors can sue you for credit card debt. And they probably will if you ignore them and they believe they can collect a judgment.
Understanding the difference between credit card companies, your original creditors, and debt collectors or debt buyers is important. Collectors get hired or buy the debt you owe. Your rights depend on who is coming after you.
If a debt collector contacts you, ask them (in writing) to validate the debt, especially if there is any doubt that the debt is yours. Make the collector prove that you owe the money and that they have the right to ask you for payment. Verify the debt's age and look up the statute of limitations for collecting a debt in the state where you live. (Do an internet search for “statute of limitations on debt in [your state].”) If the statute of limitations has passed, you’ll want to point it out to the court when you answer the lawsuit.
Once you have all the information you need, you have choices:
Pay the debt
Deny the debt
Negotiate the debt
Ignore the debt (not recommended)
You can often head off a debt collector lawsuit by simply communicating with them and working out a solution you can afford. Going to court is expensive for collectors, and results aren't guaranteed (unless you fail to show up, which means they automatically win). You can try to negotiate a payment plan that allows you to repay the debt in full with affordable payments, or resolve the debt for less than you owe.
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What happens if you get sued by a credit card company?
Don't ignore a credit card lawsuit. Ever. It’s the one thing you can do to make the situation worse. If you don't answer a credit card lawsuit, the credit card company, collection agency, or debt buyer can get a default judgment (that means they automatically win their case). Then they can garnish your wages or go after your bank account and other assets.
Read your summons, and make sure the suit is legitimate. Ask the debt collector to validate the debt. Your summons will tell you the deadline to file an answer and how to do it. You must file an answer and appear in court to avoid a default judgment.
Should you get a lawyer if sued for credit card debt? According to Pew Research, you're more likely to settle or even win your case if you’re represented. Consider hiring an attorney if you don’t feel comfortable navigating the process alone, and you can afford the help. You can also ask your local legal aid society for help.
What if you owe the money? And expect to lose in court? It’s better to avoid a lawsuit. Contact your creditor and ask for what you need—more time to pay, an affordable payment, reduced interest, a one-time settlement. This is when it can be really helpful to have a professional debt negotiator on your side to help work out the details.
Your bargaining position is stronger if your credit and income aren’t great. But if you earn a good living or have money in the bank, settle as best you can—before a judge adds court costs to your balance and hands your bank account over to the winner.
What should you do if you can’t pay your credit card?
If you can’t pay your credit card, first of all, know that you’re going to be okay.
Open up communication with your creditors. Explain why you can’t pay, how much you can afford, and how long you expect to need help paying your bill.
Don't send in less than your minimum payment unless the creditor has agreed to a lower amount. Credit card companies and collectors can sue you even if you make partial payments. Be sure the agreement is in writing.
Getting out of debt usually isn’t easy or quick. But it can be done. You just need a plan and the willingness to follow it. Sometimes it’s easier to stay willing if you have someone in your corner every step of the way. Start by talking with an expert debt consultant—someone who understands the situation and can offer real-world solutions..
Frequently asked questions
Can a credit card company garnish your wages?
A credit card company can't garnish your wages until it sues you, wins a judgment, requests, and is granted a Writ of Execution and delivers that to your employer. A Writ of Execution is the official document that forces your employer to send a portion of your pay to the creditor.
When those things happen, your credit card company becomes a "judgment creditor" and can take up to 25% of your income until your debt is paid off. You can head off wage garnishment by signing a payment agreement and filing it with the court.
What if you can't afford to pay the debt even after being sued?
After you lose a lawsuit, the winner (the "judgment creditor") may be able to garnish your wages, take money from your bank account, or force you to sell assets. You might believe you're judgment-proof if you don't have income or assets up for grabs. And you could be right.
However, you may have earnings or assets in the future, and most judgments are renewable. Your creditor just needs to wait.
What if you can't afford to pay your judgment and basic expenses? You might be able to appeal a wage garnishment in court. Bankruptcy is another option. You can also try negotiating with judgment creditors. They might accept less than you owe if they think you're about to file for bankruptcy.
How many payments can you miss before a credit card company sues you?
No law requires credit card companies to wait before filing a lawsuit. However, most credit card companies wait four to six months before charging off your debt. And they almost always wait until the debt is charged off before filing a lawsuit.
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