Yes, a credit card company can sue you if you stop paying your bills. Typically, credit card companies will contact you several times before escalating the matter to legal action or charging off the debt to a debt collection agency. Though there’s no set timeline, you can expect legal action after six months of nonpayment. While there are no guarantees, you’re less likely to be sued if you owe less than $2,000.
When Can a Credit Card Company Sue You?
If you miss one credit card payment, there will be consequences, but you won’t be sued right away. Credit card companies and debt collectors don’t usually sue borrowers until their account has been in default for six months or more.
In that six-month period, if you keep missing payments, the creditor will report them to the major credit bureaus and they’ll be reflected on your credit report. This can cause serious damage to your credit score.
What Are Some Signs You Might Be Sued?
Most credit card companies and debt collectors tend to use the same overall approach toward collecting past-due accounts. Filing a debt collection lawsuit costs creditors time and money, so it’s rarely the first step in the process.
Once you get behind on your credit card bill, your account is considered delinquent. You’ll first receive a notice in the mail about your outstanding payment. You may also get an email if you have an online account.
If you haven’t made a payment by the time the next payment is due (30 days later), you will likely receive phone calls. The original creditor may choose to hire a third-party collection agency to help recover the debt. After a couple missed payments, the credit card company may charge off the debt and sell it to a debt buyer. Then another collection agency may call or contact you for the debt. They, too, may choose to sue you if you don’t pay.
A credit card company or debt collector can’t sue you without your knowledge. If a credit card company sues you, you’ll receive a court summons and complaint.
How Long Do You Have Before a Credit Card Company or Collection Agency Sues for Nonpayment?
It’s important to know that each creditor or lender sets its own terms. Filing a debt collection lawsuit is usually a creditor’s or debt collector’s last resort to recover payment. Most companies don’t take legal action until an account has been past-due for six months or more.
Whether or not you get sued depends on the amount of debt you have, too. Generally speaking, you’re less likely to be sued if you owe less than $2,000 and more likely to be sued if you owe more than $2,000.
What Happens in a Debt Collection Lawsuit?
If a credit card company or collection agency brings a lawsuit against you, it will first file papers in a local civil court. This includes a summons and complaint. The company that files the complaint is called the plaintiff. The person being sued is called the defendant.
The summons and complaint outline the debt collector’s claims against you. The papers should also tell you how long you have to respond to the lawsuit. You must file a response to the lawsuit within the time frame stated on the summons. This time frame varies by state, but it’s often 20–30 days.
It’s critical to answer (respond to) the debt collection lawsuit. If you don't, the creditor will probably win the case by default. If this happens, the creditor will have access to collection tools like wage garnishment, a bank account levy, or a property lien.
What Happens if You Don’t Respond to a Debt Lawsuit?
Simply put, if you don’t respond to the lawsuit, you’ll usually lose by default. The court will issue an order called a default judgment.
Losing a debt lawsuit opens you up to serious collection measures like wage garnishment, a bank account levy, or a lien on any property you own.
Wage garnishment allows the creditor to take a certain amount of money directly from your paycheck. A bank levy is similar, but instead of taking money from your paycheck, the creditor takes money from your bank account. Certain types of income, such as Social Security income, are protected from levies and garnishments. But income you earn from working can typically be garnished or levied until your debt is repaid.
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How Do You Respond to a Debt Collection Lawsuit?
An answer is your chance to address each of the items the plaintiff listed in the complaint. Though this is a legal process, you can do it yourself! Many courts have self-help centers online to help you with the paperwork and to understand court rules. If you feel uncomfortable doing it yourself, seek legal advice. If you can’t afford a lawyer, look into legal aid or volunteer lawyer organizations in your area.
Do not assume the information in the complaint or about the debt is true. Even if you know you have unpaid credit card debt, the creditor may have made incorrect claims in the complaint.
You can deny the statements in the complaint or reply that you don’t know or understand certain statements in the complaint. The legal phrase for this response is “denied for lack of information.” If you choose this route, you force the creditor to prove what they’ve alleged in the complaint. This may also give you some power to negotiate a settlement with the creditor outside of court.
What Else Can You Do if a Credit Card Company Sues You?
It’s important to answer the complaint if you’re sued, but you can also pursue other options simultaneously.
Negotiate a Debt Settlement Agreement
In a debt settlement, you negotiate to pay less than the full amount you owe. The caveat is that you usually need to pay it in one lump-sum payment. In rare cases, you may be able to negotiate a payment plan.
Coming to the table with a settlement proposal shows the credit card company that you want to make good on your debt even if you can’t pay in full. Sometimes this goes a long way toward settling the matter.
Work With a Creditor Counselor on a Debt Management Plan
Credit counselors provide free consultations and can be a tremendous help in getting your financial affairs in order. They’ll negotiate with the credit card company on your behalf, so it can also be a stress-reliever to work with them, too.
A debt management plan allows you to simplify repayment and can even get you a lower interest rate. You can learn more in our guide to debt management plans.
Pay the Amount in Full
Paying the debt in full is the obvious solution to make a collection lawsuit go away. Most of the time, though, if you could afford to pay the debt, you wouldn’t be getting sued. That said, if you agree that you owe the debt and you can afford to pay it in full, doing so can spare you the hassle of a debt lawsuit.
Many people view this as a last resort. But if you have a lot of past-due credit card debt you can’t afford to pay, it’s worth considering. If you speak with a credit counselor, they can help you decide if bankruptcy or another debt relief option is better for you.
One major advantage of filing bankruptcy is that it will immediately stop all collection activities, including lawsuits, phone calls, and wage garnishment. If your case is successful, you’ll be able to erase any unsecured debt you have, including credit card debt, medical bills, and outstanding personal or payday loans.
Understand Your Rights and Defenses in a Debt Collection Lawsuit
Being in financial distress causes mental and emotional strain. Knowing that you’re being sued or fearing it might happen compounds this stress. But try to remain calm. Learning about the process can empower you to take action. Reading this article is a great first step!
Here are some important actions to take to protect your consumer rights in debt cases:
Ask any creditor or debt collector that contacts you for a debt validation letter to verify the debt. This may seem simple, but doing this shows the creditor you’re serious and not going to let this slide without fighting it. Make this request in writing (here’s how) and also send it via certified mail.
Ask if the statute of limitations has passed for the debt. By law, the creditor or debt collector must tell you. If the debt is outside the statute of limitations, it’s a time-barred debt. While a creditor or debt collector may still sue you for old debt, you can use the statute of limitations as a strong defense to try and have the case dismissed. Statutes of limitations are determined by state law and vary from state to state.
Check your credit report regularly to ensure that you haven’t been a victim of identity theft. If you notice suspicious activity, contact your credit card company right away.
Know your rights under the Fair Debt Collection Practices Act (FDCPA). This federal law prohibits third-party debt collectors from harassing you or engaging in unfair practices to collect a debt. If a debt collector violates the FDCPA, you can use this as a defense in a debt collection lawsuit.
The Consumer Financial Protection Bureau (CFPB) helps enforce the FDCPA. If you believe a debt collector has violated the law, you can file a complaint with the CFPB.
If you don’t make your monthly payments, you can be sued. First, the credit card company or a debt collection agency will contact you to try to collect the past-due debt. If the creditors can’t successfully recover the debt within six months or so, a debt lawsuit may be in your future.
If you get sued for credit card debt, try to stay calm. Read the complaint carefully and decide how you want to proceed. Whatever path you choose, answer the lawsuit by the deadline listed in the summons. You can also try to negotiate a settlement with a credit card company, get on a debt management plan, or file bankruptcy.