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What Happens When a Credit Card Company Sues Me?

When the economy is shaky and unemployment is high,  more people end up defaulting on their outstanding credit card balances. Defaulting on your credit card puts you at risk of a lawsuit from your credit score issuer. Knowing this, it’s important to protect yourself as much as possible to avoid being sued by your credit card company.

Can Credit Card Companies Sue Me?

Yes, credit card companies can and do sue customers who have defaulted balances with them. While it is a possibility, there’s no guarantee you’ll be sued. Each credit card issuer has individual policies for when they sue customers with outstanding balances. You’re at risk of lawsuit with any outstanding balance, but your credit card issuer is more likely to sue you for a high balance. The longer it’s been since you last made payment, the higher your risk of a lawsuit.

Related: Why You Should Not Skip Monthly Payments! [1]

A Lawsuit Isn’t the First Course of Action

Your credit card issuer isn’t going to hit you with a lawsuit on the first missed payment, or the second. You’ll typically have a chance to catch up on your past due balance and lawsuit and other collection actions. For example, before taking legal action, your credit card issuer will call you and send letters to get you to pay. They may even make a settlement offer on the outstanding balance.

The Law That Protects You From Debt Calls

Debt collectors are required to follow a Federal law known as the Fair Debt Collection Practices Act. [2] The law allows you to stop debt collectors from calling you as long as you send them a better asking them not to contact you anymore. At that point, the debt collector can contact you directly once more to let you know if they plan to take any additional action the account, like suing you for example.

Note that cutting off communication from a debt collector may put you at a higher risk of facing a lawsuit.

The Court Process for Lawsuits

There’s a good chance your credit card issuer will win any lawsuit they file against you. Remember, that you entered an agreement with them by opening an account and using your credit card. The argument that you couldn’t afford to pay won’t hold up in court as a legal and valid reason that the court should dismiss the lawsuit.

Once the credit card issuer wins the lawsuit against you, they can ask the court for permission to garnish your wages, levy your bank account, or seize certain assets in order to pay the debt.

Don’t try to represent yourself in court. If you receive notice of a lawsuit, you should get help from a legal professional right away. Your attorney may be able to work with the credit card issuer outside of court to reach a payment arrangement or settlement.

Tips to Avoid a Lawsuit

Regardless of your ability to be prepared for court, it’s best to avoid a lawsuit completely. Even when the economy isn’t the best for your finances, there are things you can do to stay current on your bills and avoid a lawsuit.

You can seek help from a professional credit counseling agency or debt reduction company. They can work with your creditors to get you back on track with payments, lower your monthly payment, or negotiate a settlement for you.

In addition to getting professional help, you also must get your finances under control. You can do this by starting with a monthly budget to help you be sure you’re living within your means and making the best of your income. To create a budget, simply subtract your expenses from your monthly income. Make sure you can cover the essentials like food and shelter before you budget for optional spending.

Creating a budget [3]shows you how much money is leftover after all your bills are paid. This is the amount you can put toward paying your debt and avoiding a lawsuit.

Do You Have to File Bankruptcy?

Bankruptcy [4] is one solution you may consider to avoid a lawsuit. But, you may not have to take that route if you can afford to cover your necessary expenses. A professional debt counselor can help you figure out whether that’s a step you must take.