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It’s stressful enough dealing with past-due credit card debt, but the level of stress rises when a creditor or debt collector sues you to recover the debt. Fortunately, you can take steps to make a credit card lawsuit much less nerve-wracking.
1. Don’t ignore the lawsuit
Perhaps the worst thing you can do is ignore a lawsuit filed against you by a creditor or debt collector. That won’t make the lawsuit disappear. In fact, it will only prolong your legal headache.
Rather than hoping the matter will go away, it’s best to respond to the lawsuit either on your own or through an attorney. The response typically can be made in writing or in person. You’ll be instructed by a court to respond within a certain period of time, such as 30 days.
The Federal Trade Commission (FTC) says you should respond even if you don’t believe you owe the debt.
“Responding to a debt collector’s lawsuit in court will likely put you in a better situation, cost you less in fees, and give you more control over how you repay the debt,” the FTC advises.
The Consumer Financial Protection Bureau (CFPB) notes that you won’t be able to stop the lawsuit by refusing to accept a formal notice informing you that you’ve been sued. If you don’t pay attention to the suit, a judge might rule against you, siding with the creditor or debt collector and forcing you to pay what you owe. The judge also might tack on fees.
As part of the judgment, the court might give the creditor or debt collector the ability to garnish, or take money from, your paycheck or bank account, says the FTC. Furthermore, a creditor or debt collector also might be handed the power to place a lien on your home or other property.
Former debt collector Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling, says that if you fail to show up at a court hearing about your past-due debt, the judge is likely to decide in favor of the creditor or debt collector.
If you don’t show up, you’re not giving yourself an opportunity to fully defend yourself if you feel that this is unfair or you feel you should be given a second chance.
2. Review the lawsuit
Once you’ve received the lawsuit, look over it to see how much money the creditor or debt collector claims you owe. Compare that amount to your credit card statements. If the amounts don’t match, be sure to notify your attorney or the court about the difference and show proof of any payments that the creditor or debt collector may have missed.
The FTC emphasizes that it’s a creditor’s or debt collector’s responsibility to prove its legal claims, which includes an accurate accounting of what you owe.
Keep in mind that even if you owe a relatively small amount of money, a creditor or debt collector still might take you to court.
“For people who think they might be scooting under the radar by not paying a credit card balance of $500 or $1,000, you might be in for an unpleasant surprise,” McClary says.
“It doesn’t have to be a whole lot of money. But it has to be worth it for the creditor to pursue the balance through legal means,” he adds.
3. Consider getting legal help
Unless you earned a law degree, defending yourself in a court case can be hard. Therefore, you might want to seek help from an attorney to deal with a lawsuit over credit card debt. The CFPB recommends tapping the expertise of an attorney who is familiar with debt collection laws.
You may be able to find an attorney through your state bar association or a lawyer referral service. Or you might qualify for free assistance from a legal aid group where you live.
Obtaining help from a legal professional might be especially important if, for instance, you owe a significant amount of money or you’re being sued over several past-due accounts, says McClary. However, you may be able to represent yourself if you’re being sued in small claims court over relatively little money.
4. Don’t panic
Even though you’re facing a lawsuit, you still may be able to resolve the matter before a judge orders you to pay money. McClary says a creditor or debt collector might be willing to settle for less than what you owe or might be open to working out a payment plan, for example.
But if you let the matter go unresolved for too long — perhaps 120 days or more — then it becomes more likely that a creditor or debt collector will continue with legal action rather than trying to reach an out-of-court compromise, according to McClary.
It’s worth noting that a court judgment requiring you to pay past-due credit card debt will show up on your credit report. That blemish will typically bring down your credit score and can make it tougher to qualify for credit.