Can You Get Sued for Not Paying a Credit Card? Absolutely. Here’s What Happens Next.

Yes, absolutely. You can be sued for not paying a credit card. It’s a legal obligation, and when you fail to meet that obligation, the credit card company or a debt collector has the right to pursue legal action to recover the outstanding debt. Now, before you panic, let’s break down the entire process and explore what you need to know. This isn’t just about a simple “yes” or “no”; it’s about understanding your rights, responsibilities, and the potential consequences of credit card debt.

The Journey from Delinquency to Lawsuit: A Credit Card Debt Timeline

It’s essential to understand the typical progression of events that lead from missed payments to a potential lawsuit. It’s not an immediate process, and there are several stages in between where intervention is possible.

Stage 1: Initial Delinquency and Late Fees

This is where it starts. You miss a payment. Usually, the first missed payment triggers a late fee. You’ll also likely see a hit to your credit score. The credit card company will typically send you reminders and start contacting you via phone and email. They are hoping to get you back on track.

Stage 2: Escalating Communications and Potential Interest Rate Hike

After a few missed payments (usually 30 days), the communication will become more frequent and potentially more assertive. You might see an increase in your interest rate, often referred to as a “penalty APR”. The credit card company is now starting to see you as a higher risk.

Stage 3: Charge-Off and Collection Agency Involvement

At around 180 days (six months) of non-payment, the credit card company will typically charge off the debt. This doesn’t mean the debt disappears; it means they are writing it off as a loss for accounting purposes. They will often then sell the debt to a collection agency. The collection agency will then aggressively pursue the debt.

Stage 4: The Lawsuit

If the collection agency is unable to recover the debt through traditional collection methods, they might decide to file a lawsuit. This is a significant step, and you will be served with a summons and complaint. The complaint will detail the amount owed, the original credit agreement, and the grounds for the lawsuit.

What Happens After You’re Sued?

Receiving a summons and complaint can be frightening. Here’s what to expect and what you need to do.

Ignoring the Summons Is NOT an Option

The worst thing you can do is ignore the summons. If you do, the creditor will almost certainly win a default judgment against you. This means they automatically win the case without you presenting a defense.

File an Answer

You have a limited time (typically 20-30 days, depending on your state) to file an answer to the complaint. An answer is a formal written response where you admit or deny the allegations in the complaint. You can also raise affirmative defenses.

Potential Defenses

Several defenses might be available, depending on the specific circumstances of your case:

• Statute of Limitations: Each state has a statute of limitations on debt collection. If the lawsuit is filed after this period, the case might be dismissed.
• Debt Ownership: The collection agency must prove they legally own the debt. They need to provide documentation showing they purchased the debt from the original creditor.
• Incorrect Amount: You can challenge the amount of debt claimed if it’s inaccurate.
• Improper Service: If you weren’t properly served with the summons and complaint, it could invalidate the lawsuit.

What Happens If the Creditor Wins?

If the creditor wins the lawsuit (either by default or after a trial), they will obtain a judgment against you. A judgment is a court order requiring you to pay the debt. The creditor can then use various methods to collect the debt:

• Wage Garnishment: They can garnish a portion of your wages to satisfy the debt.
• Bank Levy: They can seize funds from your bank account.
• Property Lien: They can place a lien on your property, which means they can eventually force the sale of the property to recover the debt.

Prevention is Key: Managing Credit Card Debt Before It’s Too Late

The best way to avoid being sued for credit card debt is to manage your finances responsibly and take action early if you’re struggling to make payments.

• Budgeting: Create a budget to track your income and expenses.
• Debt Management Plan (DMP): Consider a DMP through a reputable credit counseling agency.
• Debt Consolidation: Explore options like debt consolidation loans to combine multiple debts into one with a lower interest rate.
• Negotiation: Contact the credit card company to negotiate a payment plan or settlement.

FAQs: Everything You Need to Know About Credit Card Lawsuits

Here are some frequently asked questions to provide further clarification on the topic of being sued for credit card debt.

1. What is a statute of limitations on credit card debt?

The statute of limitations is the time limit within which a creditor can sue you to collect a debt. The length of time varies by state, typically ranging from three to six years. It begins from the date of your last activity on the account, such as a payment. Once the statute of limitations expires, the creditor can no longer sue you in court to recover the debt.

2. Does being sued for credit card debt affect my credit score?

Yes, being sued for credit card debt will negatively affect your credit score. The initial missed payments and collection activity already harm your credit. The lawsuit itself becomes a matter of public record and can appear on your credit report, further damaging your score. A judgment against you will also significantly lower your score.

3. Can a debt collector garnish my wages for credit card debt?

Yes, a debt collector can garnish your wages if they obtain a judgment against you in court. Wage garnishment involves your employer withholding a portion of your paycheck to pay the debt. The amount that can be garnished is typically limited by state and federal laws.

4. What if I’m unemployed or have no income? Can I still be sued?

Yes, you can still be sued even if you are unemployed or have no income. While it might be more difficult for the creditor to collect the debt immediately, they can still obtain a judgment against you. This judgment can remain in effect for several years and can be used to collect the debt if you later become employed or acquire assets.

5. Can I negotiate a settlement with the credit card company or debt collector?

Absolutely. Negotiating a settlement is often a viable option. You can offer to pay a lump sum that is less than the full amount owed in exchange for the creditor agreeing to drop the lawsuit. It’s often best to get any settlement agreement in writing before making any payments.

6. Should I hire a lawyer if I’m being sued for credit card debt?

Hiring a lawyer can be beneficial, especially if the amount of debt is significant or if you have a complex legal situation. A lawyer can help you understand your rights, evaluate potential defenses, and negotiate with the creditor on your behalf. However, legal fees can be expensive, so weigh the costs and benefits carefully.

7. Can I be arrested for not paying a credit card?

No, you cannot be arrested for not paying a credit card. Credit card debt is a civil matter, not a criminal one. You can be sued, and your assets can be seized, but you will not face jail time for simply failing to pay your credit card bill.

8. What is the difference between a charge-off and a debt being written off?

The terms “charge-off” and “written off” are often used interchangeably. When a credit card company charges off a debt, it means they are writing it off as a loss on their books for accounting purposes. This doesn’t mean the debt disappears; it means they no longer expect to be able to collect it themselves and will often sell it to a collection agency.

9. Can I declare bankruptcy to get rid of credit card debt?

Yes, bankruptcy is a legal process that can discharge (eliminate) most types of unsecured debt, including credit card debt. There are different types of bankruptcy, such as Chapter 7 and Chapter 13, and each has its own eligibility requirements and consequences. It’s essential to consult with a bankruptcy attorney to determine if bankruptcy is the right option for you.

10. How can I find a reputable credit counseling agency?

Look for nonprofit credit counseling agencies that are accredited by organizations like the National Foundation for Credit Counseling (NFCC). These agencies can provide you with budget counseling, debt management plans, and other financial education services. Be wary of companies that promise quick fixes or charge excessive fees.

11. What should I do if I think the debt is not mine or is inaccurate?

If you believe the debt is not yours or is inaccurate, you should send a debt validation letter to the collection agency. This letter requests them to provide proof that you owe the debt and that they have the legal right to collect it. They must provide this information within a certain timeframe. If they fail to do so, you may not be obligated to pay the debt.

12. Can a credit card company sue me for a debt that is older than the statute of limitations?

No, a credit card company generally cannot successfully sue you for a debt that is older than the statute of limitations. However, it is crucial to raise the statute of limitations as a defense in your answer to the lawsuit. If you don’t, the court may assume that you are waiving this defense. The debt is still valid, but they can’t successfully sue you to collect it.