Dealing with credit card debt can be stressful. If you fall behind on payments, you may be wondering if a credit card company can take legal action against you to recover the debt.
This post will provide an overview of when and how a credit card company can sue you over unpaid debt.
When Can a Credit Card Company Sue You?
Most credit card companies will attempt to collect late payments through letters, phone calls, and negotiated payment plans first. However, if you ignore their attempts or fail to make agreed-upon payments over an extended period, they do have the legal right to sue you for the unpaid balance.
Here are some of the most common situations when a credit card company may decide to take legal action:
You Have an Outstanding Balance Over $1,000
Credit card companies are more likely to sue if you have a large unpaid balance over $1,000. The legal fees are worthwhile for them to recover a larger sum of money.
When You Have Not Made a Payment in 6 Months
If you have not made a minimum payment in over 180 days and have been unresponsive to their collection attempts, a lawsuit becomes more probable. At this stage, they may view suing you as their last resort to get repaid.
You Have Retained Debt After Bankruptcy
If you file for bankruptcy, credit card debt can potentially be discharged. However, there are strict rules around qualifying certain debts for dismissal. If a credit card company alleges you obtained the credit fraudulently or did not qualify it for bankruptcy discharge, they can still legally pursue the debt.
The Credit Card Debt Lawsuit Process
If a credit card company does sue you over unpaid debt, here is what you can expect in terms of the lawsuit process:
You Will Receive a Court Summons
The credit card company must legally provide written notice that they are suing you for the debt. This comes in the form of a court-summoned complaint delivered by a process server or sheriff. You will need to respond to the complaint within a strict time frame, usually 20-30 days.
You Will Have to Appear in Court
As part of the lawsuit, you will have to appear before a judge and potentially a jury in a civil superior court. The credit card company will present their evidence and documentation as to why you owe the debt and their legal grounds to pursue it. You will have the right to fight their claims if you disagree or have evidence to the contrary.
Your Assets Could Be at Risk
If the court rules in favor of the credit card company, they could win the right to seize assets or garnish wages to satisfy the unpaid debt. The court can order remedies such as:
- Placing a lien on the property
- Freezing bank accounts
- Garnishing paychecks
This demonstrates the serious legal risks you can face if found responsible for credit card debt in court.
How Can They Sue if the Debt is Old?
You may be wondering how a credit card company can sue you to repay a debt that is several years old. There is a time limit, called a statute of limitations (SOL), for how long a company can legally sue you to collect a debt. The SOL time frame depends on what state you live in and the type of debt.
For credit card debt, the SOL is usually between 3-6 years. The SOL clock starts ticking once you stop making payments or admitting that the debt is yours. So if you make a payment, enter a repayment program, or even verbally say you still owe the debt, it can “reset” the SOL timeline back to zero.
This means the debt does not automatically expire after a certain number of years. Before a credit card company sues you, check your state’s SOL law for debt and review your payment history to see if they are still within the permitted timeframe to take legal action.
Negotiate with the Credit Card Company
Even after being sued, it may still be possible to resolve credit card debt out of court through negotiations. If you can come to a payment agreement, the credit card company can voluntarily dismiss the lawsuit.
Some potential options to explore include:
Payment Plans
Propose a monthly payment plan within your budget and ask to settle for less than the full amount owed. Getting on consistent payments shows good faith.
Hardship Programs
If facing financial difficulties, inquire into special hardship programs. These programs can potentially waive fees, lower interest rates, and reduce required minimum payments.
Settling Debt Before Court
Offer a lump sum payment to wipe out some or all of the debt immediately. Even if you can only manage to pay off a portion, it demonstrates a willingness to resolve the debt.
Find Legal Assistance
If you are unable to reach a payment agreement directly with the credit card company, having a consumer debt attorney represent you can be extremely valuable. They understand debt collection laws and proper legal procedures. They can defend you if the credit card company has not followed fair debt practices or industry regulations.
There are a few options to receive legal assistance with credit card lawsuits:
- Hiring a private consumer debt defense lawyer
- Contacting legal aid societies
- Reaching out to law school clinics
Take the lawsuit notice seriously and explore your options. Through negotiations or claiming consumer protections under federal and state law, you may be able to resolve the lawsuit or have the debt forgiven.
Can Credit Card Companies Garnish Wages?
If you lose a lawsuit filed by a credit card company, one way they can force you to pay the debt is by garnishing your wages or bank accounts.
Wage garnishment means the credit card company can legally seize part of the following:
- Up to 25% of your weekly paycheck
- Money in your bank accounts above protected amounts
- Any tax refund checks you receive
- Other assets you own that are not exempt
Sources of income like social security, disability, veteran’s benefits, and pensions cannot be garnished. But creditors can still take money from regular paychecks and savings accounts not protected by law.
Through garnishments, they put a hold on these accounts to automatically deduct money towards what you owe on the debt judgment. Getting your wages or accounts garnished can be devastating financially. This is why it’s critical to address lawsuits over credit card debts before a garnishment order can happen by setting up alternative repayment arrangements.
How to Protect Yourself from Credit Card Lawsuits
While credit card companies have wide legal powers to file lawsuits for unpaid debts, there are some key steps you can take to reduce your risks and liabilities:
Maintain Open Communication
Being upfront about job losses or financial troubles can result in banks waiving fees, reducing minimum payments, and allowing more time to get back on track. Document all correspondence showing your efforts to resolve debts.
Seek Debt Relief Options Proactively
If unable to handle minimum payments over an extended 6+ month timeline and facing hardship, explore options early for debt management, consolidation, or bankruptcy filing before creditors assign accounts to collections or legal teams.
Review Account Histories Meticulously
Carefully analyze credit card and bank statements to confirm you recognize all transactions and contracts. Dispute any errors in billing or unfamiliar opened accounts not authorized by you.
Seek Legal Counsel About Your Protections
Understand federal and state laws around debt collection, bankruptcy, and appropriate legal procedures you are entitled to. Consult qualified consumer debt attorneys to leverage available protections.
Being aware of the serious legal consequences you can face for unpaid credit card debt will motivate you to urgently address financial problems head-on. Seeking help through credit counseling programs, negotiating directly with banks, or working with lawyers can help shield you from garnishments or other economic harm – while still taking responsibility to eventually repay rightful obligations.
Conclusion
If a credit card company sues you over unpaid debt, they can get the legal right to take your assets or garnish your wages. However, even after being sued, you may still be able to negotiate affordable payment plans or settlements and avoid harsh collection methods.
Some tips:
- Keep records showing your efforts to pay
- Check your credit reports regularly
- Know your rights under debt collection laws
While being sued is stressful, staying proactive can help. Communicate directly with the creditor about your financial struggles and ability to repay realistically. This good faith effort makes mutually agreeable solutions more likely, instead of court orders allowing asset seizure or wage garnishment.
The best way to deal with impossible debt is to face it head-on before things get worse. Talk to financial or legal advisors about consumer protections you qualify for, while still committing to repay what you can over time.