How To Beat A Credit Card Lawsuit In Court

Getting sued by a credit card company can be intimidating. Maybe you’ve become so good at ignoring collection calls that you’re tempted to trash the complaint and summons. Don’t. You have legal rights and defenses that you’ll lose by not contesting the lawsuit. Plus, if you fight back in court, your chances of winning the case are much better than you might initially expect.

Most credit card lawsuits are brought by debt-buyers who don't expect you to fight back. They win about 95% of cases by default. Because facing a no-show is easy, they come to court unprepared and without the documents needed to prove their case.This article provides information about where creditors can go wrong and discusses affirmative defenses that may help you beat a credit card lawsuit.

Do You Recognize The Debt?

The debt in question may not be yours. Credit card companies generally don’t want to take legal action unless you’ve made zero payments for about six months and ignored their calls. A lawsuit is a last resort. So long as you’ve been communicating with credit card companies and making monthly payments on time, even if it’s less money than what you owe, they’re less likely to sue. But that doesn’t mean they won’t. So if you’ve been sued, make sure that the creditor bringing the suit has targeted the right account holder. If you’ve been making good faith repayment efforts, the creditor filing suit may be going after the wrong person.

When you’re sued, you’ll be served with two legal documents:

• A court summons ordering you to appear in court giving the time, date, and location, and

• A legal complaint describing the basis of the claim and stating how much you owe

Taking into account a high interest rate and late penalties, the amount should still be one you recognize. The suing party (plaintiff) should be the credit card company or place where you have a bank account (or a company that has purchased outstanding debt that originally belonged to one of these entities). The party being sued (defendant) should be you or a co-signer of the account. If you have no idea who the plaintiff is (unless the plaintiff is a debt buyer of your original debt, as explained above), the situation could be a case of:

• Identity theft or credit card fraud: You didn’t make or consent to the purchases.

• Mistaken identity: Someone opened a credit card account or did business with a company you don’t recognize.

• Clerical error: The credit card company made a mistake in bookkeeping.

All of these cases involve mistakes that are not your fault. Learn how to protect yourself against identity theft and report credit card fraud. Also remember that credit card companies get names and addresses wrong, too. Debt buyers especially. Get a free credit report to make sure any claimed debt is yours and has not been reported twice.

If the credit card company sold a list of accounts to another agency, the debt buyer may not have the legal right to sue you. You may have already paid or settled the debt with the original creditor or there may have been some error in the purchase procedure. Both are solid legal defenses.

Is This An Old Debt?

After making sure that the debt in question is yours, check to see if it's "time-barred” or too late to sue you. Credit card companies only have a certain amount of time to bring a case in civil court. Depending on state law, this can range between 2–6 years. You’ll want to check your local rules to see what statute of limitations applies. Time generally begins to run from the date of your last credit card payment. If too much time has passed, you can say so to the judge and your case should be dismissed.

Other Important Questions To Ask Yourself About The Debt

Did a debt collector harass you while trying to collect this debt? The Fair Debt Collection Practices Act (FDCPA) forbids lenders and creditors from engaging in fraudulent and deceptive behavior. They also can’t harass you by:

• Making early-morning or late-night calls

• Telling family, friends, or others about your debt

• Phoning after you’ve told them they can’t call at work

• Trying to speak to you once you’ve hired an attorney

• Contacting you after you’ve written a letter telling them not to

If any of these have happened to you, you may have grounds to raise an FDCPA complaint that could result in you collecting enough or more than enough money from the debt collector to pay the debt. Learn more about how the FDCPA protects consumers and your rights against harassing debt collectors. You can also learn how to deal with debt collectors and get them to stop calling you.

Even if you think that you legitimately owe the creditor money, you should still make credit card companies prove that you owe the exact dollar amount they’re claiming. This is called their “burden of proof” and it’s a tough requirement to meet. Most times, their claims are baseless or they’re unprepared to prove their court case. 

Have You Filed For Bankruptcy Since You Had This Credit Card?

Chapter 7 Bankruptcy

Credit card debts are discharged at the end of Chapter 7 bankruptcy proceedings. In “no-asset” cases, the trustee cannot take any assets because they’re “exempted” under state law. In cases of non-exempt assets, some of your property can be sold to pay creditors. However, this scenario is rare. The likelihood of your credit card debt being discharged at the conclusion of your Chapter 7 case depends on what type of case you had:

• In a no-asset case, the debt was likely discharged even if you didn’t list the credit card debt on the bankruptcy petition.

• In an asset case, usually only credit card debts listed on the petition will have been discharged.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy case, if the credit card debt was listed on the petition, it was probably discharged along with your other debts. If the debt was discharged in either a Chapter 7 or 13 bankruptcy, that's a defense and you should ask the court to dismiss the case. You may even have a claim against the credit card company or debt buyer for having violated either the automatic stay or bankruptcy discharge injunction.

Steps To Winning The Lawsuit

After you've considered the facts and know your defenses, find what type of court will be evaluating your answer or response to the complaint brought against you. In some states, for lower-level small claims courts, checking a box admitting or denying the claim may work for an answer.

In a higher-level court, you may have to file a full legal pleading. A legal pleading is the defendant’s formal response to the plaintiff's complaint. You may need the help of a lawyer to do this. Many law firms offer free consultations, but you’ll have to pay for legal services like negotiating on your behalf with creditors, collection agencies, and the judge. 

Getting legal advice and someone to deal with harassing calls may be worth your peace of mind. Plus, if you have a good defense like the ones above, the plaintiff may be ordered to pay your attorney’s fees and other legal fees.

If you can't afford a lawyer, you may be able to get free legal help from a local legal aid society, the American Bar Association (ABA) or the National Association of Consumer Advocates (NACA). You’d only be responsible for minimal court costs like filing fees.

How To Answer The Complaint

Along with the summons and complaint should come instructions concerning what you need to do next. Usually, you’ll have about 20–30 days to submit an answer. If there’s an answer sheet provided or in your written pleading, you’ll want to:

• Admit or deny each claim 

• Raise any defenses

• Counter with your own claims against the company

• Indicate any income (like Social Security) 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, you’ll have to include a filing fee to the court clerk. If you can’t 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 buyer’s 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. Don’t let corporations bully you into joining the 95% of people who don’t contest complaints. Do surprise them by showing up and making them do the heavy lifting. Come prepared by knowing what to say—and leave out—in court. The following section will provide you with some basic do’s and don'ts.

How To Answer The Lawsuit

DO NOT tell the court why you haven't paid. To prevent foreclosure, borrowers often have to write affidavits documenting financial hardship. Many people think that court proceedings work the same way. They don’t. Although you may have a truly sympathetic story, talking about your personal finances may result in a default judgment because it’s not a defense. Instead, bring receipts, court documents, or affidavits proving a proper legal defense. From reading, you already know that these defenses could involve:

• Fraud/identity theft

• Bankruptcy discharge

• Previous debt settlement

• Expired statute of limitations 

• Violation of the FDCPA

• Error by debt purchaser

• Credit card company’s mistake

DO RAISE a proper defense. Without lying, remind the suing parties of their burden of proof. If you have nothing else, answer that you may owe something, but not the amount they say you owe. With this answer, you're at least going to force the plaintiffs to prove that you owe the debt and in the amount they’ve claimed. If they can’t or aren’t prepared that day, various opportunities could open up: 

• You win and the judge dismisses your case;

• You could attempt to reduce the amount owed either in a lump-sum payment or payment plan;

• You may be able to buy more time to either work on an acceptable settlement with the creditor; or 

• If you're in an overall bad financial position, you could consider bankruptcy for more general debt relief.

If you’re interested in filing Chapter 7 bankruptcy yourself, see if you’re eligible to use Upsolve’s free web tool. Upsolve can also help you find a local bankruptcy attorney who can tell you whether bankruptcy  might be a good option for your situation. 

Using Discovery

Discovery is the process of getting legal information from both parties with the hope of uncovering potential evidence that could help either side. Maybe you’ve seen the cartoon of a lawyer photocopying and sending a box of documents to another lawyer and that lawyer doing the same before sending the box back. This is a humorous attempt to explain the process of discovery.

Discovery is labor-intensive, so If you’re in a civil court that allows it, you'll likely need an attorney to take advantage of this process. These are the main tools you’ll be using in discovery:

• Interrogatories: Written questions you can ask the other side.

• Request for admissions from the plaintiff to admit things that would favor your case. Failure to respond is deemed an admission.

• Request for production of documents proving you owe “X” amount to the plaintiff.

In requests for production, you're looking for any chain of documents proving that the debt buyer has the right to collect from you. You’ll also want any accounting statements and contract provisions—or disclaimers—showing that the plaintiff has sued you for the right amount. Because the debt has changed hands, the buyer will need to show a “chain of custody” connecting that account to you. Any mistakes in the exchange break the link to you. The buyer has no case without one.

Let’s Summarize…

Although a credit card lawsuit can be scary, don’t fret. Credit card companies and debt collectors can be wrong. Most of the time, they are, in one way or another. Proving that you actually owe the amount claimed shouldn’t be hard for credit card and debt buying companies. Yet, statistics prove it’s a constant struggle. Protecting their bottom line requires preparing for court. But corporations are so used to winning against no-shows, they’ve come to expect defaults. Judges see their shoddy paperwork but have to rule in their favor if no one argues. 

Don’t lose like this. Answer. Show up. Fight. Your chances of winning or at least reducing the debt are far better than you think.