Can you be sued for credit card debts?

By Good Nelly

Ask Nelly

If you have fallen behind on your payments, the credit card company may sue you depending upon the amount you owe. There are some credit card companies that may file a lawsuit when you're only 60-90 days behind on payments. To avoid being sued, negotiate with your creditors so that they offer you a payment plan you can afford. If you don't feel comfortable negotiating with your creditors on your own, get help from a debt relief company. Go for a free counseling session with a reputable debt solutions company and find out your options to get rid of credit card debt. If you are curious to know about what happens when the credit card companies actually sue you, then take a look at the topics given below:

• Do credit card companies actually sue debtors?
• What happens if you are sued for credit card debts?
• Being sued for credit card debts - How do you get out of it?
• Sued for credit card debts - How does it affect your credit?

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Do credit card companies actually sue debtors?

In most cases, a credit card company will threaten to sue you if you haven't made any attempts to pay off the bills. However, they may not actually sue you because it's expensive and time-consuming. However, if there is a joint account holder on your credit card account, the credit card company may call the cosigner and try to recover payments rather than filing a lawsuit against you. Most often credit card companies transfer or sell off your debt to a collection agency that will try to collect payments from you. They may even agree to negotiate a settlement on your account.

Certain credit card companies are more prone to taking legal action when they feel that debtors are trying to escape their credit card payments. But if the Statute of Limitations on your debt account expires, you cannot be sued for credit card debts. The Statute of Limitations (SOL) varies from one state to another and is different for each type of account.

What happens if you are sued for credit card debts?

If the SOL has not expired, the credit card company can file a lawsuit and get a judgment against you for the full amount of the debt, plus interest, penalties, court costs, and attorney fees. Through the judgment, the court orders you to pay off credit card bills. The judgment also gives the credit card company the right to ask the court to garnish your wages if your state's law permits it. However, there are some states, like Texas, that do not allow wage garnishment unless it is the only way for a creditor to satisfy the judgment.

States that do not allow garnishment may seize your bank accounts (and sometimes part of a joint account), sell off non-exempt property, or place a lien on your property. However, no state can order a forced sale of your primary residence unless the debt is your mortgage. In an equitable property state (a non-community property state), your creditors can only reach 1/2 of all joint assets. In community property states like Texas, if you are sued for credit card debts, your creditors can seize or place a lien on joint marital property even if your spouse's name is not on the account.

Being sued for credit card debts - How do you get out of it?

Here's what you need to do when you’re sued for credit card debts.

Use SOL defense: If you're sued for unpaid credit card bills even after the SOL has expired, send an Expired SOL Notification Letter to the creditor stating that he cannot take a legal action against you because your account is well past the SOL. You will have to show proof that the SOL has expired, such as statements with the dates when you defaulted and when you were charged-off. Copies of your credit report showing the exact date of default will also serve as proof of the SOL.

Reply to court summons: If the SOL hasn't expired and you're sued for credit card debts, then you will receive a court summons, which you need to reply to within a certain time period. The time you have to reply to a summons varies from state to state, for example, New York law gives you 20 days from the day you receive the summons to reply.

In order to reply to the summons, you need to file two documents, known as the "Answer" and "Appearance" with the court. In the "Answer", you dispute the allegations made in the complaint. You need to send a copy of the "Answer" and "Appearance" to the attorney representing the creditor via certified mail. The copy should be sent by Certified Mail with a Return Receipt Request.

By replying to the summons, you prevent your creditor from getting a default judgment, which will end the case. Moreover, replying to the summons gives you additional time to negotiate with your creditor and prevent a judgment.

Sued for credit card debts - How does it affect your credit?

If you're sued and the creditor receives a judgment, it stays on your credit report for 7 years from the date the judgment is filed. This brings down your credit score by 50-100 points and makes it difficult for you to qualify for credit (at least for the next 2-3 years) at a favorable interest rate. So the best way to avoid a lawsuit is to negotiate a payment plan or a settlement with your creditor.