What is a Credit Card or Collection Lawsuit?

Written by AskTheLawyers.com™ on behalf of David Shuster with Shuster Law, PLLC.

What is a Credit Card or Collection Lawsuit?

If you owe money to a credit card company and are delinquent on your payments, you could find yourself facing a credit card or debt collection lawsuit. This type of lawsuit is filed against you by the credit card company in order to try to recover from you the money that you owe. Credit card or debt collection lawsuits occur when a person who owes money to a credit card company ignores or fails to make sufficient payments on that debt. It then becomes necessary for the credit card company to sue you for the balance or to sell your debt to a collection agency, which can then sue you for that money. In a successful credit card or collection lawsuit, a judge may give the company in question the ability to garnish your wages until the debt is paid off.

It’s a good idea to start talking to a bankruptcy attorney and financial advisor before your debts reach this point of resolution. However, if you find yourself facing a credit card or debt collection lawsuit, there are ways you can try to minimize the damage of the lawsuit and protect yourself and your family from unnecessary financial harm.

Verify the amount you are being sued for.

It’s a good idea to make sure the amount you are being sued for is accurate. If you are being sued by your credit card company, this number should be fairly straightforward. However, if you are being sued by a debt collections agency this number could be harder to verify, as there could be added penalties and fees. In fact, you might not even have been aware that your debt was sold to that collections agency.

Before making any payments, request documentation from the debt collector to make sure you are not being sued for more than you owe. This can also help you establish whether the statute of limitations in your state for a collections agency to file a lawsuit has already run out. If it has, they can no longer take legal action against you for that debt.

Seek legal counsel from an experienced attorney to decide how to respond to the lawsuit.

It’s a good idea to seek legal counsel from an experienced attorney regarding your situation. Many attorneys offer free consultations, so it’s wise to seek them out and get a trustworthy opinion of your situation. Depending on your circumstances, you could be eligible to fight the lawsuit; if you were not properly notified of your debt by the credit company, that could give you a footing to fight against the lawsuit.

Additionally, if you already paid off the debt or do not recognize it, you can fight the lawsuit with evidence that the debt does not belong to you. Barring these circumstances, however, some other options for you to consider with the help of experienced counsel when faced with a credit card or collection lawsuit include:

  • Requesting a settlement. It’s important to keep in mind that litigation can be costly for both sides of a lawsuit, so a credit card company or collections agency might be willing to settle for a lower amount than the actual debt in order to avoid going to trial. However, it should be noted that settling to pay a lesser amount than the actual debt can affect your credit score for up to seven years.
  • Paying the debt in full. If you can find a way to pay the owed amount in full, this can preserve your credit rating and put a relatively quick end to the matter. However, if your credit score is already damaged from years of missed payments, this option loses some of its benefit.
  • Creating a debt management plan. Speaking to a credit counselor and/or financial advisor can help you come up with a doable debt management plan. In this situation, you would continue to make monthly payments, often to the credit counseling agency, and those payments would then be transferred to the credit card company or collections agency. However, the credit card company or collections agency would have to agree to drop the lawsuit.
  • Declaring bankruptcy. Request a free consultation with a bankruptcy attorney to learn more about your options in this regard. If you qualify for a Chapter 7 or “clean slate” bankruptcy, this might be a great option for you to avoid having your wages garnished and credit score negatively impacted for years to come.

If you have received a notice that you are being sued for outstanding debt, take action right away.

Waiting to address this kind of lawsuit can make it nearly impossible to mitigate the damages. It may be tempting to ignore a summons or complaint regarding a credit card or collections lawsuit if you know you don’t currently have the money to pay that debt, but failing to respond or acknowledge the summons could result in a default judgment being made against you. Unfortunately, default judgments in these situations often result in more harm than necessary to your financial situation.

If you would like to learn more about your rights in a credit card or debt collection lawsuit, as well as steps you can take to mitigate the damage of these proceedings, seek legal counsel.


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