Monday, March 20, 2023

Can You Be Sued Over Credit Card Debt

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What Happens If You Cant Pay Your Credit Card Debt In Canada

Sued for a Credit Card Debt?

The reality is creditors expect regular recurring payments and will pursue all options to collect when you are unable to pay when you owe money. Ignoring the bills means you risk phone calls from a debt collector, lowering your credit score, and other potential impacts.

Beyond the stress of knowing you owe money, the consequences of unpaid credit card debts, vary depends on the situation and the credit card issuer. I am Scott Schaefer, a Trustee with Hoyes Michalos and Associates. Some of the possible outcomes are you will be charged a late payment fee, youll be charged interest, you could have details reported on your credit report of the late payment. The longer it remains outstanding, the more significant hit it will be on your credit report and the worse your score can become. Your interest rates could get increased.

But here are some of the more extreme outcomes: you will have debt collectors calling you the account could be written off your credit report which really significantly reduces your score. There could be court action. You could have your wages garnished or your bank account seized. But keep in mind that these circumstances are usually done over time. Time makes a difference. So the longer things are, the worse it will be. Late payments can be reported on your credit report for up to six years.

The longer the outstanding debts remain unpaid, the more severe the actions your creditor will take to collect.

You May Then File An Answer To The Complaint

In the answer, you should admit or deny each statement in the credit card company’s complaint or state that you don’t have sufficient information to admit or deny a statement. When you deny the statements in the complaint, you are defending against those statements by arguing that they’re not true. These denials are typically a question of whether something is factually true or not.

In addition to making denials, you should make yourself aware of and allege any affirmative defenses that your case merits. Include a section in your answer where you raise any defenses to the complaint.

Common Defenses to Credit Card Lawsuits

With an affirmative defense, you argue that even if everything the credit card company alleges against you is true, it should still lose the lawsuit.

Here are some common affirmative defenses to credit card lawsuits:

Statute of limitationsthe debt is too old for a lawsuit. The statute of limitations is an affirmative defense where you argue that the debt collector can’t sue you because of the age of the debt. Each state defines how long a debt remains collectible and this typically ranges from three to ten years.

What Happens If I Dont Respond

Ignoring the legal notices and papers wont make the lawsuit go away. And despite what you may have seen in TV shows, you cant stop things by refusing to accept delivery or service of the lawsuit. In fact, the case can go ahead without you. That means the court can rule without hearing your side and the debt collector could win by default because you didnt show up.

If the court rules against you and orders you to pay the debt, the debt collector may be able to garnish or take money from your wages or bank account, or put a lien on property, like your home. The debt collector can also ask the court to award them additional money for collection costs, interest, and even attorneys fees. A judgment will likely show up on your and might make it harder to get credit in the future. That can affect whether you get a job, insurance, a phone, or a home.

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How To Answer The Complaint

Along with the summons and complaint should come instructions concerning what you need to do next. Usually, youâll have about 20â30 days to submit an answer. If thereâs an answer sheet provided or in your written pleading, youâll want to:

  • Admit or deny each claim

  • Raise any defenses

  • Counter with your own claims against the company

  • Indicate any income exempt from garnishment

Sign the bottom of the page and keep a copy of the complaint and your answer for your records. Along with your answer, youâll have to include a filing fee to the court clerk. If you canât afford the filing fee, you may qualify for a waiver.

Make sure you answer the complaint within the time allowed or a default judgment could be entered against you. A default judgment in the credit card company or debt buyerâs favor allows them to take more aggressive steps like:

  • Wage garnishment – taking money from your paycheck

  • Levying bank accounts – direct access to withdraw funds

These are harsh punishments to collect on a debt you may not even owe. A money judgment also lowers your credit score. Donât let corporations bully you into joining the 95% of people who donât contest complaints. Do surprise them by showing up and making them do the heavy lifting. Come prepared by knowing what to sayâand leave outâin court. The following section will provide you with some basic doâs and don’ts.

What If I Cant Make My Credit Card Payments

What Should I Do if a Credit Card Company is Suing Me?

Did you know that only 25% of Canadians pay off their credit card debt in full each month?

That means 75% of us carry a balance on our credit cards each month. In fact, its quite common for Canadians to carry outstanding balances each month on several credit cards, which can result in paying several thousand dollars each year in interest. Many Canadians eventually need credit card debt help.

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Debt Collectors Are Harassing Me Is That Legal

A federal law called the Fair Debt Collections Practices Act prohibits debt collectors from:

  • Making false statements or using offensive language.
  • Telling you that failure to pay your debt is a crime, or threatening you with jail time.
  • Threatening to collect the debt from a third party, like your family or neighbors.
  • Threatening to take your homestead or your paycheck.
  • If a collection agency, they cannot call you at work or call you between 9 pm and 8 am .

You can also send a cease and desist letter to the debt collector by certified mail demanding that they stop harassing you at your home or work. Keep a copy for your records. If the debt collector continues to harass you, you may have grounds for a lawsuit.

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.

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Call The Collections Law Firm And Make A Payment Plan

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.

Lastly Consider Filing Bankruptcy

I’m Being Sued By Credit Card Collectors!

If you cant make a viable consumer proposal and you are not creditor-proof, bankruptcy may be an option.

Need help choosing between these debt relief options? Give us a call to book a free, confidential consultation where we will discuss your situation and set you up on the path of becoming debt-free.

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Send A Debt Lawsuit Settlement Letter

You can resolve your debt after the suit is filed by sending a Debt Lawsuit Settlement Letter.

After filing your Answer into the case, you should begin the process of negotiating a settlement. Most creditors/collectors want to reach a settlement, and they will often settle for less than the amount you actually owe.

You should wait about 20-30 days after you’ve filed your Answer to send the settlement letter, before the collector makes any other moves in court. This gives the collector enough time to know you’ve responded, and it shows you won’t give up so easily.

You have the most leverage right after filing your Answer, because it proves that you plan to fight back and that you know what you’re doing . Most collectors would rather settle with a portion of the debt than continue in court, which takes up a lot of time and resources.

Can You Still Negotiate Credit Card Debts If Youre Being Sued

I have unpaid credit card debt.

Can you negotiate a credit card debt if you are being sued?


Yes, you can negotiate and settle a credit card lawsuit. In some cases, if you cannot raise enough money to settle in a lump sum, you will be able to set up affordable payment arrangements to keep from being garnished, or your bank account levied.

Being sued for a happens at different stages of collection. Are you being sued by a collection law firm on behalf of your original creditor?

Lawsuits in the first stage of credit card collections is not that common, but it does occur. Most of the time , you have at least 6 months of nonpayment before the risk of being sued begins. The risk of being sued increases incrementally from there. Your original credit card bank may target your account for placement with a collection attorney based on several factors. The following is not an exhaustive list, and not all that helpful to you , but others reading this later may get some benefit from it:

  • The credit card is new, saw heavy use and was nearly maxed out, then payments were missed.
  • The balance on the credit card is mostly made up of a balance transfer that was recently made .
  • Recent purchases using the card make up a significant portion of the balance owed on the credit card.
  • Use of a software package or manually identifying an account for placement with a debt collection attorney with authorization to sue because the account analysis shows you are paying other unsecured creditors .
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    Getting The Law Firm Suing You To Agree To A Lower Negotiated Balance Pay Off And Settle The Debt Will Depend On A Host Of Things

    Are you being sued by the original creditor or a debt buyer? Look on the court papers you received for who the attorney identified they are working for.

    Are you experiencing personal financial hardships that are verifiable unemployment, underemployment, medical or health concerns, are you on a limited income from federal benefits, are you currently being garnished from other unpaid debts. depending on the answers to these questions, the amount you pay to settle the account, or the amount of the monthly payment you may consider agreeing to can be impacted.

    When it comes to being sued by a debt buyer, you may want to consider defending against the lawsuit as an alternative to settlement or payment arrangements.

    Debt buyers typically get a scant amount of detail about your debt from the creditor they buy it from. If your account was purchased and then resold again, the degree of separation from your original lender is even more of a problem.

    Debt buyers may be limited in the way they can back up their claim about your debt in court. They often have an excel spread sheet that lists all the accounts they purchased in the portfolio that had your account in it. They may only have access to your name, account number, social security number, the balance owed at the time of sale, your address and phone number, where you work. In other words, just the basic details.

    What If I Go To Court And Lose The Case

    See How to Stop Paying Credit Cards Legally

    If the court rules against you, there will be a judgment entered against you. This is a formal finding that you owe a certain sum of money to the person or company that sued you. You have appeal rights. If you want to appeal, you must do this within 21 days of the judgment going on the court record. Try to get a lawyers advice immediately if this happens. If you don’t appeal, the judgment becomes final and can be enforced for the next 20 years.

    This probably won’t be the last time you have to go to court. The creditor has the right to find out if you can afford to pay. A creditor who has a judgment against you can subpoena you to appear at a disclosure hearing. At this hearing the judge will decide if you can afford to pay the debt. We have a guide about the Disclosure process: How To: Get ready for a Disclosure Hearing in Maine

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    Your Options If Sued By A Credit Card Company

    Post by Christopher Migliaccio

    Some situations like debt are unavoidable, as they can save you in your hour of need. However, left unchecked, debt, such as that of a credit card, has repercussions and could land you in court. For a credit card company to reach the point of suing you, it will have exploited all other means of getting you to settle your debt.

    You have probably ignored their calls, causing them to resort to the best way they know how, filing a lawsuit against you. Being sued for credit card debt can be a nerve-wracking experience, but only when you arent aware of your legal options. A credit card company has every right to sue you for defaulting on your payments, but you also have rights.

    What Happens If I’m Sued In Small Claims Court

    The Clerks of the District Courts can provide you with a free brochure on Small Claims Court. It explains how Small Claims Court works and your appeal rights.

    Basically, Small Claims is a simplified court process. Small Claims are limited to $6,000.00. Read the Courts brochure to learn more about the Small Claims process. You can be summonsed to Small Claims Court by mail or by sheriff service.

    If you get a Small Claims summons, go to court on the day listed on the summons or the notice you get from the court clerk. You may be required to go to a mediation session before any hearing with a judge. Mediation is a chance to reach an agreement if possible. But don’t agree to payments that you can’t make. If you can’t reach an agreement during mediation, you will have a hearing with the judge. The hearing may be that day or at a later date. When your case is called, tell the judge your side of the story. Bring all papers, photos or records you may need to support your story. You should also bring any important first-hand witnesses.

    Read more here about some common defenses where the company suing you is not the company you borrowed the money from .

    If you don’t think you owe the debt, or you think the amount is wrong, go to the court hearing. If you dont go, you will lose the case. But, it is not a crime if you dont go.

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    Reasons A Collection Agency Wont Take You To Court

    Like we said earlier, the chances of a creditor or collection agency taking you to court are small. Here are the reasons why they might not:

    • Your debt is too small

    It costs a lot of money to take you to court. If the amount you owe isnt worth the costs the creditor would incur, they might not take you to court.

    • Your debt is too old

    All creditors and collection agencies must be mindful of the statute of limitations. If too much time has passed, they cannot take you to court for the debt.

    Collectors Use The Court System To Maximize Profits

    Being Sued By Credit Card Company?

    Many people think debt buyers prefer to avoid lawsuits to collect old credit card debts because it requires them to pay lawyers and incur costs of litigation. If this were true, however, credit card lawsuits would be far less common than is the case. In fact, there were nearly 200,000 credit card collection lawsuits filed in New York in 2011 alone. Moreover, a report by ProPublica found that these lawsuits accounted for 48% of the court judgments filed in New Jersey in 2011.

    Those consequences can include wage garnishment, funds seized from bank accounts, liens on property, and even the forced sale of automobiles and other assets to pay the debt. Whats worse is that the judgment continues to accrue interest, rising steadily over the years as the balance remains unpaid.

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