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Can They Sue You For Credit Card Debt

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How To Respond To A Collection Lawsuit

If Credit Card Companies Sue You During Debt Settlement

Most credit card companies often sell their debts or delegate the duty of following up on credit card debts to independent debt collectors. For this reason, a debt collector might contact you to pay the debt on behalf of the credit company. If you fail to make any payments, the debt collection agency can file a lawsuit against you in court.

It’s always advisable to respond to a lawsuit as soon as you’re served SoloSuit can help you file an answer document if you don’t know where to start.

But before doing this, there are a few things you should do. These include:

Nine Reasons Why Your Creditor Might Never Sue You

Posted by CP Publisher | Nov 10, 2014 | Blog | 0 |

Collection Agency Insider Mark Silverthorn

You might be receiving collection calls from your creditor, a collection agency, or some company that has purchased your outstanding account. You might be receiving letters from lawyers threatening to sue you. You might be very anxious, depressed, and experiencing problems sleeping because you are concerned that you are going to be sued. In fact, there are nine key reasons why you might never be sued.

Over a twelve year period, between 1995 and 2007, I worked as a lawyer for four of the ten largest collection agencies operating in Canada. Over this period I dealt with collectors, collection supervisors, collection managers, senior executives, and collection agency owners at many of the largest collection agencies in Canada. For several years, I managed the Legal Department at some of the largest collection agencies in Canada. Based upon this experience, as well as the months I spent researching my book, The Wolf At The Door: What To Do When Collection Agencies Come published by McClelland & Stewart, I have a good idea whether or not a debtor might be sued in connection with a particular account.

Your odds of being sued are slim within the first six months you stop making payments

If you are going to be sued then you are more likely to be sued by your creditor than a collection agency.

Collection agencies sue a very small percentage of consumer accounts

  • Your debt is too small
  • Statute Of Limitations Summary

    Ultimately, the decisions of whether or not to pay outstanding credit card debt and when to do so are yours alone to make. However, as is the case with any major decision, its imperative that you have all of the facts and know your options. Be sure to understand the statute of limitations, and do not let a creditor bully you into doing or saying anything that will extend the time during which you are liable. Finally, if a creditor files a lawsuit when your debt is time-barred, remember that you must take action to have the courts throw it out. If you dont prove that the debt is too old, the creditor will likely win his case.

    This can all get a bit confusing at times, especially when you have debt collectors breathing down your neck. To help, we compiled the following table, which provides quick tips and information for you to reference at different times during the process of handling credit card debt.

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    Bankruptcy After A Collection Lawsuit

    Bankruptcy stops all collection activity. This includes lawsuits. The automatic stay of §362 of the Bankruptcy Code is what stops all collection activity. This pause in collection activity is necessary to give the court time to figure out what’s dischargeable and what’s nondischargeable in bankruptcy. If a debt is discharged in bankruptcy, the prohibition on collecting the debt will become permanent.

    Secured debts can only be discharged in a Chapter 7 bankruptcy by surrendering the collateral. Unsecured debts are those that are not secured by collateral. For example, if you have a car loan, it’s secured since the car is the collateral securing the creditorâs interest in the loan. By contrast, credit cards are usually unsecured since there is no collateral associated with these accounts.

    Since credit card debt is usually unsecured, a Chapter 7 bankruptcy can eliminate these debts with no issue. However, if the credit card company gets a judgment against you and then records that judgment, it becomes a judgment lien. Judgment liens are treated as secured debts. With a judgment lien, this collateral can include everything you own to the extent you have non-exempt equity in those assets.

    Refusing To Answer A Credit Card Debt Complaint

    Credit Card Debt: Your Options if You Were Sued

    If you simply ignore the complaint by not replying with a formal answer, your inaction may result in a default judgment against you. This means they will find you guilty, and the judge will decide your penalty.

    They can go directly to your paycheck and use wage garnishment to repay your debts. Companies can also access your bank account to take assets to repay debt. If this is happening to you, you need legal advice on the federal laws that can help or hurt you.

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    Negotiating And Settling A Credit Card Debt When Youre Being Sued By A Collection Attorney Representing A Debt Buyer Is Different

    Debt buyers buy defaulted accounts in bulk from credit card issuers. They pay different amounts for the legal rights to the debts they buy. The fresher the debt the higher the purchase price. As defaulted credit card debts age, the less it costs to buy them. Credit card debts that get charged off by your original creditor are often bought and resold several times. The cost to purchase debts that have already been sold once or twice will be much less than was paid originally.

    Debt buyers invest in unpaid debts and are taking a risk that they can get troubled credit card borrowers to pay up. Debt buyer collection has proven to be profitable. They dont get people to pay on all of the accounts they buy. Not by a long shot. They only need to collect enough money on the portfolio to cover the cost of the purchase, the overhead to collect, and meet projected portfolio profits.

    Debt buyers settle credit card debts they own for less than the total you owe on the account. They will either collect debts using in house debt collectors, assign accounts to a subsidiary collection agency, hire another debt collection firm, or place accounts with attorney debt collection law firms they have relationships with.

    What To Do If A Collection Agency Sues You

    If a collection agency sues you for a debt, its in your best interest to talk to an attorney who can help you weigh your options and defend you in court. Some attorneys even offer free no-obligation consultations to advise you on your rights.

    The worst thing to do if a collection agency sues you is to ignore the lawsuit. Ignoring a lawsuit summons can hurt you in the long run, even if the debt is time-barred.

    If youre sued for a debt thats outside the statute of limitations, you may be able to have the lawsuit dismissed if you have proof that the debt is no longer enforceable. However, failing show up in court gives the collection agency a chance to win a default judgment against you. This means the court has ordered you to pay the debt.

    A collection agency who wins a judgment against you may be able to ask the court for permission to garnish your wages or levy your bank account. The judgment will be added to the public records section of your credit report and your credit score could take an additional hit.

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    Things To Do If A Credit Card Company Is Suing You

    If you find yourself in the middle of a lawsuit, here are some measures you can take to help address the situation.

    Verify the debt

    Talk to an attorney

    Acquiring legal representation is always a smart strategy. A lawyer can help you navigate this situation by negotiating a settlement deal, handling complaints, and, most importantly, by establishing your defense and presenting that defense to a judge.

    In some instances, your lawyer may discover that you are a victim of fraud or identity theft or if the statute of limitations surrounding your actions has expired.

    Hiring counsel can be expensive, but don’t fret legal aid programs can help you out, and some lawyers may be willing to take on your case pro bono.

    Don’t ignore the court summons

    Avoiding the issue doesnât make it disappear and will only increase the severity of the lawsuit and any subsequent sentences. If you ignore a summons, youâll automatically lose your case.

    Determine how you’ll respond

    You have a maximum of 30 days to respond once you receive the summons. Research and review your options to determine how you should move forward, but do so quickly.

    Call The Collections Law Firm And Make A Payment Plan

    Can A Credit Card Company Sue You After 7 Years?

    Settling the lawsuit out out of court by making a payment plan may be the best way to end the lawsuit. Your credit card company will most likely be represented by a collections law firm who is handling the lawsuit.

    It’s best to call the collections firm directly to make a payment plan, but remember that these phone calls are recorded and that anything you say can be used against you in your lawsuit.

    Smith says that each situation is different, but generally, you should avoid taking responsibility for the debt unless you review the details of the debt itself and confirm that those details are accurate. Make sure that you are still responding to the summons within the deadline alongside contacting the collections law firm.

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    Learn Your Options If Sued For Credit Card Debt

    Debt has consequences, some of which will surprise the average American.

    For example, if you default on credit card debt the major consequence could be a lawsuit.

    Hold on. Can a credit card company sue you? Yes, it can. And pushed into extreme circumstances, it will. In a heartbeat.

    Which leads to the bigger question: What to do if you are sued by a card company?

    First, never ignore calls. That just makes things worse and paints you as negligent. Study the complaint carefully for accuracy. Try to negotiate a settlement, if possible.

    Heres the bottom line: Credit cards are not play toys that allow mass purchases on the Home Shopping Network.

    Most importantly, make sure the lawsuit is accurate. Sometimes, your account is sold to a debt collection agency, which specializes in harassment and strong-armed tactics. The amount they say you owe? It might be incorrect.

    If it gets to this stage, be ready for a fight, which may include hiring a lawyer. Its never pleasant when a giant financial institution sets its sights on you, but you do have rights.

    But when signing up for the card, you accepted those terms, whether you read them or not. Somewhere in that sea of legalese, it spelled out the conditions if you defaulted.

    Falling behind on credit cards is not uncommon. According to the Federal Reserve, U.S. credit card debt stood at $770 billion in early 2021.

    Heres a step-by-step action plan on what to do if you are sued by a credit card company.

    What Happens If You Leave The Us Without Paying Credit Card Debt

    No matter where you go in the world, a debt is a debt until it is paid or formally forgiven. While you are away, the credit issuer can take a couple of different actions. It may sue you for the unpaid balance. If you are not in the country and dont answer the summons to appear in court, the credit issuer can continue with the legal action, and you may lose the case with a default judgment.

    All the late payments that preceded this action will appear on your credit report for a total of seven years. Interest, fees and court costs will apply, too. The credit card issuer will likely send the account to a collection agency. Collections agencies can also sue debtors for unpaid balances.

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    How Debt Collectors Obtain Files

    There are two ways debt collection agencies obtain accounts of unpaid debt either through assignments or they buy files.

    Assignment of a debt means that a lender, like a bank or credit card company, has hired the collection agency to collect money on delinquent debts. In assignments, the collection agencies receive a commission, usually 30% of the debt they were able to collect on behalf of the bank.

    Another way a debt collection agency can obtain unpaid debt accounts is by buying them. Lenders that are no longer trying to collect a debt will sell their debt accounts to a collection agency willing to buy them. The collection agency will then own the debt and begin contacting the debtor to recover money. This is often the case for very old debts which can explain why you may be receiving calls and collection demands from a debt collector after years of no contact.

    Consequences Of Debt Forgiveness

    Financial mistakes that can push you into credit card debt ...

    The main consequence of debt forgiveness is the effect it has on your credit. There also might be tax consequences.

    • If the creditor writes off the debt as uncollectible, the consequences include a blemish on your for the delinquent payments as well as the write off. Additionally, the creditor will likely sell the debt to a collector, who will aggressively pursue you for the money and may sue you.
    • If the creditor settles the debt with you, it will note on your credit report that the debt was settled for a lesser amount, which can have a negative impact on your credit. Additionally, the forgiven amount will likely be considered taxable income by the IRS and your state government, and you will have to pay taxes on it.
    • If you file bankruptcy, your credit report will reflect the bankruptcy for up to ten years however, debts wiped out in bankruptcy are not considered taxable income.

    Learn about other ways to handle high credit card debt in our Managing Credit Card Debt topic area.

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    Basics Of Answering A Credit Card Lawsuit

    You may have to pay a filing fee to the court clerk when submitting your answer to the complaint, but low income defendants may qualify for a waiver.

    Your answer typically will include:

    • Admission or denial of the claim
    • Any legal defenses
    • Potential counterclaims
    • Your signature

    If you have income that is exempt from wage garnishment, such as Social Security payments, it may be included in the answer, as well.

    Defending You Against Credit Card And Debt Buyer Lawsuits

    Have you gotten a summons for a credit card or debt buyer lawsuit? Have you discovered that a creditor or debt buyer already has a judgment against you and is now garnishing your wages and freezing your bank accounts? Are you wondering what to do next?

    At The Law Offices of Kenneth Hiller, PLLC, our experienced attorneys provide quality defense representation against credit card and debt buyer lawsuits. Contact us today to set up a free consultation.

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    Statute Of Limitations For Credit Card Debt

    Time is one of the most important factors related to . Your level of delinquency, the state of your credit report, whether you can be successfully sued for what you owe: each of these things depends on time. This, in and of itself, is not confusing however, the nuances and state-by-state variations characterizing the relationship between debt and time are.

    Nevertheless, its important that you understand them in order to avoid a lawsuit, minimize credit score damage, and stick up for your consumer rights. And while things certainly change throughout the process, as youll see below, it all starts with the statute of limitations.

    Discovery: Getting The Information You Need To Defend Against The Lawsuit

    What happens when you get sued for old credit card debt? by Florida lawyer Mike Wasylik

    Filing discovery requests forces the credit card company share relevant information to your case. If you believe the credit card company possesses documents or other information that supports your arguments, file a request with the court. The request should specifically describe the items you seek and why you believe they’re relevant to your case.

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    Debt Claims Increasingly Dominated Civil Court Dockets

    The most recent national data show that, as of 2013, debt collection lawsuitswhich most often involve unpaid medical, auto loan, or credit card billshave become the single most common type of civil litigation, representing 24 percent of civil cases compared with less than 12 percent two decades earlier.11 From 1993 to 2013, the number of debt cases rose from fewer than 1.7 million to about 4 million.12 These figures correspond with an increase in share from an estimated 1 in 9 of 14.6 million state civil cases nationwide to about 1 in 4 of 16.9 million cases 13. Further, in a national survey by the Consumer Financial Protection Bureau , nearly 1 in 20 adults with a credit report reported having been sued by a creditor or debt collector in 2014.14

    Notably, the 2013 data show that 75 percent of civil case judgments were for less than $5,200,15 which means that in most states, debt claims are typically filed in a limited or small claims court. In fact, NCSC observed in 2015 that small claims courts have become the forum of choice for attorney-represented plaintiffs in lower-value debt collection cases.16 As was the case for the business-to-consumer cases shown in Figure 3, the data in Figure 4 probably undercount debt claims because they do not include any debt collection cases filed in small claims court.

    Factors Contributing to the Rise of Debt Claims

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