If you carry unpaid credit card debt, you might be used to ignoring calls from creditors, pulling the wool over your eyes, and simply hoping they will eventually disappear. And unfortunately, when the calls do stop coming, it’s not necessarily good news: in many cases, it is likely because the creditors have sued you to collect on that debt.
However, if you are hit with a lawsuit, do not despair! While many people tend to ignore debt collectors, you absolutely should not ignore them once they’ve served you with a lawsuit. If you do not respond to a lawsuit filed against you, you face serious consequences, like a default judgment and, possibly, your property being taken.
Here, we review what to expect in a credit card lawsuit and how you can best handle the situation if you find yourself on the receiving end of one. As in all legal matters, however, keep in mind that it is always imperative that you engage an attorney. The information in this article is meant to provide a high-level overview and does not substitute the tailored guidance of a retained attorney experienced in handling credit card lawsuits.
The complaint and summons
While it will negatively impact your credit score, a missed credit card payment here or there will generally not result in legal action. However, if a credit card issuer is unable to collect on your debt for months at a time, it might sell your unpaid debt to a debt collector. That debt collector will contact you to try to collect on the debt and, if it cannot reach you or you do not pay, the debt collector might file a complaint against you in state civil court. The complaint will set forth what you are being sued for (the amount of debt, interest, and, sometimes, attorneys’ fees and court costs). It will also detail how to file a response with the court or advise you as to your court date. The specifics will vary by jurisdiction.
It is extremely important that you respond to the complaint and summons and show up for your hearing, no matter what. If you do not, all of the allegations in the complaint will be deemed admitted, and the judge can file a default judgment against you. This means that your creditor will have a legal judgment – a piece of paper entitling it to recover the amount claimed in its complaint – without you having the opportunity to defend yourself in court. In many cases, the amount the creditor claims in its complaint may be more than the debt actually owed, so you might end up with a judgment against you in a much higher amount than you would have paid if you’d reached an agreement with your creditor.
When a creditor has a default judgment against you, it is entitled to hire a sheriff to attempt to satisfy the judgment from your personal property. Permissible property will vary by jurisdiction but in many states, this may include your bank accounts, equity in your home, and your vehicles.
Reviewing the complaint
The first thing you should do when you receive a complaint and summons is carefully review the documents. You will want to confirm all the information is accurate. Carefully review the amount of debt claimed and make sure it matches your records. If anything is inaccurate or you think you do not owe the debt, this will be something to raise with the court. Your attorney will advise you as to the right approach to take in court.
Second, check the date on the summons and respond by that deadline. Generally, you will have between twenty and thirty days from when you were served to file your first response with the court. If you are unsure how to respond, ask your attorney and he or she will draft a formal response, known as the “answer.”
Responding to the complaint
A complaint contains a list of statements made by the creditor (or debt collector). Your response to the complaint must respond to every one of those statements. You will state whether a statement is true (meaning, you admit to it) or false (meaning, you deny it).
For example, you might deny the amount owed or even the fact that you are the debtor. It is important that you respond promptly and accurately. An attorney can help guide you through this process, as even small mistakes could cost you your right to argue the case.
Out of court options
Even if you owe the debt, you still have some options as to how to proceed. First, you might be able to negotiate a settlement with the creditor. Approach the creditor before the hearing (again, this is where an attorney comes in handy – to assist you with these negotiations) and discuss whether they will settle the debt for less than the amount owed. Often, creditors are happy just to receive a portion of the debt, so they will be willing to settle with you.
If you cannot agree on a settlement, the creditor may agree to a payment plan. In that case, you will make regular payments on the debt until it is all paid off (as opposed to owing the entire amount all at once).
The hearing
After your initial response is filed, and if you cannot come to an agreement with the creditor, you will have to appear before the judge at a hearing. You can appear with an attorney or on your own; the choice is up to you (although having an attorney by your side to help with your defense is always a wise idea).
If you do not think you owe the debt or think it is an incorrect amount, you can fight this at the hearing. You have the opportunity to present a defense and the creditor must prove that you owe the amount claimed in the complaint. The creditor must present the documentation to prove the debt, and if you have documentation proving otherwise, bring that to the hearing. In some cases, lawsuits are brought against someone who does not owe the debt (e.g., as a result of identity theft). That is another reason why it is important to verify the information in the complaint and summons the moment you receive it.
The ruling
If you still have not settled with the creditor at the end of your hearing (or hearings), the judge will decide one of three things.
- You win – The judge rules in your favor and you do not owe any payment on the debt. In some cases, you can request that the creditor pay for your legal costs.
- You lose – The judge rules in the creditor’s favor and the creditor will be given the authority to collect on the debt. Depending on the laws in your state, your wages may be garnished or your property seized.
- Case dismissed – When a case is dismissed, the lawsuit is over, but the creditor usually can refile the lawsuit at a later date.
A credit card lawsuit is not the end of the world: But take it seriously
Nobody wants to be involved in a credit card lawsuit. But if you do find yourself a defendant in one, know that if you take swift action, get the help of an attorney, and face the lawsuit head-on, you can survive it, take care of the debt, and move on with your life.
