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Created By : Andy Masaki
On 4th Jun,20
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Sued for credit card debt? Here's what you must do now
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Do you have unpaid credit card dues?

If yes, then you might be getting calls from your credit card company to make the necessary payments asap!

Usually, the credit card companies will reach out to you when you don’t make any payment for almost 30 days from the original due date!

And once your account becomes delinquent for more than 60 days, it may go for collection. And often, the debt collection involves legal action and selling off unpaid credit card dues to a third party debt collection agency! Besides, the credit card company marks delinquency on your credit reports.

And I hope you can understand how adversely it’s going to affect your credit score! Usually, a delinquency report can slash your credit score by almost 25 to 50 points and it remains on your credit report for around 3 to 5 years!

Once an account is reported delinquent, the credit card company will try to contact you. But if you ignore the credit card company’s call or fail to make an agreement with them, you might get sued for credit card debt!

Well, usually, the credit card companies don’t file a lawsuit against you as soon as you become delinquent. They continue with their collection practices for around 6 months to 1 year.

During that time, the original creditors often sell off the delinquent debts to some third party debt collection agencies. And trust me, buddy, these collection agencies have specialization in harassing and tormenting people. That’s why the Federal Trade Commission (FTC) has framed a law named as Fair Debt Collection Practices Act or FDCPA, in short.

This federal law clearly states that debt collectors are not allowed to use abusive or unfair means to collect debts. For example, debt collectors can’t:.

  • Call you before 8 AM and after 9 PM
  • Call at your workplace
  • Use abusive language
  • Call your friends or family

These are a few points of FDCPA rules. To know more about your rights under FDCPA, check here!

However, if you feel that your rights are violated, you can consult an FDCPA attorney to fight against abusive debt collection practices! .

If you fail to pay off your credit card debt even during this tenure, your creditors or the debt collectors can file a lawsuit against you! Yes, you heard it right!

In that case, usually, you will have about 20 to 30 days to respond. And if you fail to respond to the lawsuit, the judgment will automatically go against you!

Eventually, your creditors or debt collectors will proceed with your wage garnishment!

However, if you are already sued for credit card debt, you have still got options! But remember, the clock is ticking. You don’t have ample time to look into this matter! The consequences of any legal course of action can be devastating!

Here are steps that you should take immediately after you receive a summon to appear in court! Let’s find out!

1. Check out the validity of the debt

The credit card companies often sell unpaid debts to debt collection agencies. And sometimes, more than once!

Therefore, the debt collectors might sue a wrong person who doesn’t owe that debt! For example, you might have a similar name to the person who owes the debt. And eventually, confusion arises.

The credit card company or the debt collector is legally required to show proof that you owe the debt.

So, one of the ways to avoid a credit card debt lawsuit is to ask for necessary documents to prove that you owe the debt. The credit card company must show:

  • The credit agreement signed by you
  • And in case of debt collection agencies, the proof of paperwork when they bought the debt from the original creditor.

If the creditors or collectors fail to provide such documents, the judge is likely to dismiss such credit card debt lawsuits!

2. Know about the statute of limitations (SOL) in your state

Do you know about the statute of limitations?

Well, it’s the time till when the creditors or collectors can sue you for an unpaid debt. The SOL varies from state to state and types of debts.

For example, in Colorado, the SOL for credit card debt is 6 years; while in the case of Alabama, the SOL is 3 years for credit card debt.

In case you are sued for time-barred debts (debts that have crossed the SOL), you are not legally obligated to pay it off.

You need to show necessary documents like the information provided by the creditor or collectors, proof of the date of your last payment, etc. to the judge. If the judge finds that the debt is time-barred, the lawsuit is likely gonna be dismissed!

3. Respond to the summons:

You get a set amount of time (typically 20-30 days) to prepare and file a response once you’re served. Failing to do the same will be catastrophic as the creditor will automatically win a default judgment against you, and in some states, will be able to garnish your wages.

4. Request to withdraw the lawsuit and try settling your debt (out of court)

Yes, you heard it right! Let me tell you about an incident!.

It is about Julie Evans, a Nevada resident, when her husband died prematurely after a massive loss in business, leaving her in debt. After receiving a summons from the creditors for a massive $39,000, she immediately talked to them. They agreed to settle the case outside the court for just $15,000 and the lawsuit was withdrawn..

Seems impossible? Well, it’s possible, buddy!.

The reason being, most creditors dislike the hassles of settling a case within the court premises. So, if you’ve received a summons from the court, get in touch with your creditor immediately to see if there is any scope to cease the credit card debt lawsuit from going any further.

You can negotiate with your creditors or collectors and try settling credit card debt by making a lump sum payment of a less amount than you owe.

Thereby, you can pay off your debt with ease and brace yourself from the consequences of a lawsuit too! .

5. Get in touch with a lawyer:

Sometimes, you may find it difficult to convince the creditor to withdraw the lawsuit, or you may believe that you’re not responsible for the debt..

For either reason, getting in touch with a lawyer can help you construct a solid defense and guide you through the court proceedings..

So, you can consult a lawyer specialized in debt collection law. Check with your local bar association or find someone through the National Association of Consumer Advocates.

If finances are an issue, you may qualify for free or low-cost legal aid through programs like lawhelp.org , or even hire a debt settlement attorney for a limited period of time. Most lawyers offer initial free counseling. You don’t lose anything by opting for it..

6. Consider your defense:

Just because you’ve received a summon, it doesn’t mean that you’re going to lose it all. The creditor has to prove before the court that you owe the money.

You may even win if the creditor fails to present all the documents pertaining to the case!

Possibility of such an event increases when the creditor is a collection agency and the debt is bought. Again, the statute of limitations of your state can talk in favor of you!

7. Follow the legal proceedings

Depending on your state and the complexities of your case, a number of proceedings can happen. A process known as ‘discovery’ can come into a place where both the parties will exchange information gathered from other witnesses.

If you accept to owe the money, the creditor may request for a summary judgment, which is simply a ruling by the judge in favor of the creditor without a trial.

Likewise, if you have a defense, your attorney may ask to have the case dismissed just because of the lack of evidence.

If the proceedings continue, there will probably be a trial date when you must show up before the court and face the allegations.

However, most cases don’t make it to the trial as both parties usually find it of greater hassle and conclude with some kind of settlement.

8. File bankruptcy

If you owe the debt and are unable to pay off due to financial hardship, you can file bankruptcy. As soon as you file bankruptcy, an automatic stay occurs.

Well, bankruptcy has some serious consequences on your credit report like reducing your credit score by almost 150 to 200 points! But in this situation, it can be the best possible solution for you. Filing bankruptcy will cease all the collection activities.

In most cases, Chapter 7 and Chapter 13 bankruptcies are filed. But you need to meet certain eligibility requirements for filing bankruptcy. To know more, read when and why should you file Chapter 7 or 13 bankruptcy and find out which is right for you.

So, if you are going through financial hardship and unable to pay off your credit card debt, don’t wait. As soon as your creditors sue you, file bankruptcy. Otherwise, you may have to file an emergency bankruptcy and that is more expensive!

So, the bottom line is, when you are sued for credit card debt, don’t ignore and never fail to respond! If you do so, the judgment will automatically go against you! And you might have to pay off the debt that you don’t even owe! So, take it seriously but don’t panic! Rather, act responsibly!

Last Updated on: Thu, 4 Jun 2020