I Am Being Sued for a Credit Card Debt. Now What?

If you don’t pay your credit card bills, the company may turn your account over to an in-house collection department. Or, the original creditor may charge off the unpaid balance and sell your past-due debt to a third-party debt collection company. Debt collectors will try to collect unpaid credit card debt through phone calls and letters. If that’s unsuccessful, they may choose to sue you.

Getting notice of a debt collection lawsuit can be stressful and scary, but you can empower yourself by understanding how these lawsuits work and how to defend yourself. This article covers both.

What Happens if You Get Sued for Credit Card Debt?

If you get sued for credit card debt, you’ll receive a summons and complaint. These official documents let you know what you're being sued for, who is suing you, and how much time you have to file a response to the lawsuit. In legal terms, your response is called an answer. 

Your deadline to file your answer will depend on your state's laws. Some states give you as little as 10 days, but 21 or 30 days is more common. 

If you fail to answer the complaint within the allotted time frame, the court will likely enter a default judgment against you. In other words, if you don't file your answer within the time allowed, you can lose your case automatically. 

That’s why it’s always a good idea to answer a lawsuit. It can be intimidating to navigate this legal process when you’re up against lawyers, but thankfully there are resources available to help you file an answer and present your defenses. You have a greater chance at winning than you might think!

How Do You Respond To Being Sued for Credit Card Debt?

As soon as a debt collector contacts you, it’s a good idea to ask the creditor or debt collector to verify the debt. If you haven’t done this and a credit card company sues you, you can still ask for debt validation. Then, you’ll respond to a credit card lawsuit by filing an answer with the civil court clerk at your local courthouse where the complaint was filed. 

If you answer the lawsuit, the attorney representing the creditor or collection agency may reach out and offer a debt settlement to avoid the cost of a debt collection lawsuit. You can negotiate a settlement and pay less than the full amount due, though you may need to make a lump-sum payment to do so.

Ask the Debt Collector To Verify the Debt

Debt collection agencies buy and sell debt as part of their regular business. Details about your debt and payment history can sometimes get lost or distorted as the account is transferred from one company to another. 

If a debt collector can’t prove that they own your debt or the specifics of your account, they usually won’t be able to win a lawsuit against you. Because of this, simply writing and sending a debt verification letter can sometimes stop debt collectors from suing you. 

If you haven’t received a debt validation letter from the debt collector within five days after their first contact, request one or send your own debt verification letter.

The Fair Debt Collection Practices Act (FDCPA) is the main federal debt collection law that protects consumers. Under this federal law, debt collectors must send you a debt validation letter either before they contact you or within five days after they first contact you about the debt. If they haven’t done so, request one when you speak with someone from the debt collection agency.

Generally, the debt validation letter (sometimes called a validation notice) must say that it is from a debt collector and must include, at a minimum:

• Your name and mailing address

• The debt collection company’s name and mailing address

• The name of the original lender you owe the debt to, along with your account number, if any

• The current amount of the debt, including any interest and fees, as of a certain date 

• A notice that you have the right to dispute the debt in writing within 30 days after receiving the validation letter and that, if you don’t dispute the debt within this time, the collector may assume the debt is valid

• A form you can detach and return to the debt collector to dispute the debt or request more information

• An ending date for the 30-day dispute window

If the debt collector hasn’t provided the required information within the allotted time, you can use this as a defense if a credit card company takes legal action against you. You can also file a complaint with the Consumer Financial Protection Bureau (CFPB), which is the federal agency tasked with enforcing the FDCPA and protecting consumer rights. 

Keep in mind, though, that the FDCPA rules typically only apply to consumer debt collectors — they don’t usually apply to the original creditor or to business debts. 

File an Answer to the Credit Card Lawsuit

In a lawsuit, the person or company that files the complaint is called the plaintiff, and the person or company being sued is called the defendant. Many states provide defendants with the forms they need to file an answer. This makes it easier for everyday people to file their own answers without having to hire an attorney. 

Call or visit the court clerk’s office and ask if they have answer forms. You can also look up your local court online and search for answer forms on their website.

Your answer should point out any information in the complaint that is not correct and list your other defenses. As discussed below, even if you owe the money the debt collector is suing you for, you may have viable defenses to the lawsuit. 

You must file your answer with the court clerk within the required time. You must also send a copy to the attorney for the creditor or debt collector (called the plaintiff’s attorney). The attorney’s name and contact information should be included on the complaint and/or summons you received. Sending your answer to the plaintiff’s attorney is sometimes called delivering, serving, or service upon the plaintiff.

What Defenses Can You Use in a Debt Collection Lawsuit?

Your answer is where you’ll raise (list) your defenses. Some of the most common defenses in credit card lawsuits include:

• The debt is an old debt and it’s time-barred due to the statute of limitations.

• The debt was a result of identity theft.

• The debt collector violated the FDCPA.

• The debt collector didn’t follow the proper court procedures when suing.

• The debt collector doesn’t have standing to sue because they don’t own the debt.

• The debt amount is wrong or not calculated correctly.

If you (or your lawyer) file an answer to the complaint, then to win the lawsuit, the debt collector must typically prove to the judge that:

• You owe the debt. They must usually prove this by presenting your original credit agreement or other valid documentation.

• They (the debt buyer or collection agency) have the legal right to collect the debt. To prove this, they must show some documentation that they purchased the debt from the original creditor or tracing ownership of the debt back to the original creditor.

• The amount of money you owe is correct, including the original debt, interest, and court or other fees.

In addition to your defense(s), your answer should also identify any mistakes or inaccuracies in the plaintiff’s court documents (the summons and complaint). 

You can check this information against your account statements, letters from the debt collector, your bank statements, and any correspondence from the original creditor. 

Wherever possible, attach documentation to support your defenses and any claims that the plaintiff’s information is incorrect.

If the debt collector has reported inaccurate information to the court, it may also be incorrect on your credit report. You’re entitled to a free credit report annually, so it’s a good idea to check your accounts on that report and dispute errors there as well. Doing so can help boost your credit score.

How Long Can You Be Sued for Credit Card Debt?

Every state has statutes of limitations for debt. These laws provide a time frame that debt collectors and creditors like credit card companies can sue you to try to collect a debt. These time frames vary by state and sometimes by the type of debt or contract.

If your debt is past the statute of limitations, it’s considered time-barred. This means that the creditor missed the window to legally sue you to collect the debt. 

This can be a strong defense in a debt collection lawsuit. If the court finds that the debt is time-barred due to the statute of limitations, the court will dismiss the case. 

For that to happen, though, you must file an answer telling the court that the statute of limitations on the debt has expired. Even for time-barred debt, the court won’t automatically dismiss the case if you don’t raise this defense. 

What Happens if the Creditor Wins the Debt Lawsuit?

If the creditor wins its debt lawsuit against you, the court will grant them a judgment against you. The judgment is a court order that authorizes the creditor or collector to collect the money from you using methods that aren’t available without a judgment. 

Some common examples of these methods include:

• Wage garnishment

• Bank account levy

• Property liens

How Do Wage Garnishment and Bank Levies Work?

Wage garnishment is the most common method of post-judgment collection. Garnishment allows creditors to take money from your paycheck. 

A court judgment also allows creditors to collect the debt by levying your bank account. A bank levy is similar to wage garnishment, but instead of taking money from your paycheck, they take it directly from your bank account. Some types of income (like Social Security benefits) are protected from garnishments and levies.

How Do Liens Work?

If you own property like a home or real estate, the creditor may record a lien on the property. Technically, a creditor with a lien on your property can force you to sell the property and use the proceeds to pay your debt. But this process is expensive and time-consuming for creditors, so they rarely take this approach. Instead, a creditor with a lien against you will typically wait until you try to sell some valuable property, such as your home or car. Before the sale can go through, you must pay the creditor to remove the lien.

What Are Your Options for Debt Relief?

If you’re struggling to make your monthly payments on credit cards and other bills, seek help sooner rather than later. Many credit card companies apply penalties, late fees, and higher interest rates for missed payments. This can make your debt snowball quickly. 

Luckily, help comes in many forms. The option that’s right for you will depend on the types of debt you have, your financial situation, and your financial goals.

Start With Credit Counseling

Nonprofit credit counseling can be a great place to start on your path to debt relief. Credit counselors can explain different debt relief options and help you decide which is a good fit for you.

A credit counselor may suggest:

• A debt management plan

• Debt consolidation

• Debt settlement

• Bankruptcy

Of these debt relief tools, only bankruptcy can directly affect a credit card lawsuit. If you’re being sued for a debt, chances are good it’s not the only payment you’re behind on. After you deal with the lawsuit, look into your debt management options to set yourself on a better path moving forward.

Bankruptcy Stops All Collection Activities, Including Lawsuits

Filing bankruptcy isn’t the best option for everyone. Many think of it as a last resort, but it’s worth considering if you’re drowning in debt and don’t think you’ll ever be able to catch up.

One major advantage of bankruptcy is that it stops all collection activity, including lawsuits, thanks to the automatic stay. The stay takes effect immediately the moment you file your bankruptcy case.

Chapter 7 vs Chapter 13 Bankruptcy

Bankruptcy is often an effective tool for those with a lot of credit card debt. Credit card debt is unsecured, meaning there’s no collateral the creditor can take from you if you don’t pay. Most unsecured debts can be discharged (eliminated) in Chapter 7 bankruptcy within a few months. 

If you don’t qualify for Chapter 7, or you’re behind on paying secured debts like a mortgage or car loan, Chapter 13 bankruptcy might also be an option. Chapter 13 cases use a 3-5 year repayment plan to help people get caught up and eliminate debt, so they take much longer to complete than Chapter 7 cases. 

Upsolve Helps People File Chapter 7 Bankruptcy for Free

Upsolve has a free tool to help you file your Chapter 7 bankruptcy for free without a lawyer. For more complicated cases, it’s best to get legal advice from an experienced bankruptcy attorney or legal aid organization in your area. Attorneys usually offer a free consultation.