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Legal, Regulatory, and Privacy Issues

Taken to court for card debt? What to expect and how to respond

The journey from summons to judgment unfolds in 6 stages

Summary

If a debt goes unpaid and you’ve made no plans to repay it, your credit card company may sue you in civil court for the balance, hoping a judge will order you to pay. If it happens to you, there are several ways you can proceed.

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If you think ignoring a creditor’s calls about an unpaid credit card debt will make the calls stop, you may eventually be right. The creditor may stop calling, and instead knock on your door with a notice of a lawsuit.

If a debt goes unpaid and you’ve made no plans to repay it, your credit card company may sue you in civil court for the balance, hoping a judge will order you to pay.

Not only could a judgment in the creditor’s favor possibly allow them to seize your property or take the money you owe directly from your bank account or salary, but it also could leave you responsible for all court-related costs associated with the lawsuit.

Debt collection lawsuits are among the most common types of legal proceedings to end up in civil courts, according to a 2020 study by research group The Pew Charitable Trusts. While any legal action taken against you is a serious matter, there are steps you can take after receiving a summons to appear in court that could lessen the blow.

See related: Can debt collectors come to your house at any time?

1. Try to stop the lawsuit

Most creditors would rather settle a case without the hassle of going to court.

If you’ve been sued, contact the creditor immediately to see if there is anything that can be done to stop the lawsuit from moving forward.

That strategy worked for Kenny Golde, a filmmaker who was producing a movie when his business partner died suddenly in 2007, leaving him in debt.

After receiving a summons from a credit card issuer to which he owed $22,000, “I was like, ‘Oh my gosh, I’m being sued,’” says Golde, who wrote about getting out of debt in the book, “The Do-It-Yourself Bailout.”

Before the case could go further, Golde spoke to the creditor. He agreed to settle the case by paying the issuer $10,000 and the lawsuit was withdrawn.

See related: Original creditor is still reporting my paid-off judgment

2. Contact a lawyer

Sometimes a creditor isn’t willing to withdraw the lawsuit, or you may believe you aren’t responsible for the debt.

While you don’t have to get professional legal representation, a lawyer can help you construct a defense and guide you through the court proceedings.

While the Pew report found that less than 10% of people sued over debt hire a lawyer, those who do are more likely to win their case or reach a settlement that is satisfactory to both parties.

You can find a lawyer who specializes in debt collection law through the National Association of Consumer Advocates or your local bar association, says Colin Mabrito, founder of the Houston-based consumer law practice The Mabrito Law Firm.

If money is an issue, you may qualify for free or low-cost legal aid through such programs as LawHelp.org, a volunteer network of attorneys. You also can represent yourself, but hire an attorney for a limited-scope engagement, meaning he or she would consult with you on a limited basis, Mabrito says.

“Most lawyers offer a free consultation. You have nothing to lose by taking advantage of it,” Mabrito adds.

3. Consider your defense

Just because you’re sued by your credit card company doesn’t mean you should expect an automatic loss.

The creditor must prove that you owe the money, says Erik Kardatzke, a credit card debt attorney in Coral Gables, Florida.

For example, you may win if the creditor doesn’t have all of the records pertaining to your case, which is not uncommon particularly when you’re being sued by a company that bought your debt from a credit card issuer, Kardatzke adds.

Third-party debt collectors are those that take over the debt collection from the original creditor. In 2018, more than 1 in 4 consumers – 28% – had at least one debt that a third-party debt collector was trying to collect on, according to the Consumer Financial Protection Bureau.

Among the other reasons you might win your case: The statute of limitations is up for collecting on the debt in your state, the creditor failed to credit you for payments that were already made or you were only an authorized user on the account and not liable for the debt.

4. Respond to the summons

Once you’re served, you have a set amount of time – typically 20 to 30 days – to prepare and file a response.

A failure to prepare and file a response is arguably the worst thing you can do because the creditor automatically wins a default judgment against you and, in some states, can garnish your wages or bank account.

Unfortunately for consumers, default judgments are all too common. In the last decade, they’ve accounted for more than 70% of debt collection lawsuit outcomes, the Pew study found.

When you respond to a lawsuit, you agree or disagree with the allegations that have been brought against you and raise any defenses you have.

See related: What happens if you ignore debt collectors?

5. Follow the court proceedings

Depending upon what state you live in and the particulars of your case, a number of proceedings can occur.

There may be a process called “discovery,” in which both parties get more information from each other and from other witnesses.

For example, your attorney or the creditor’s attorney may take depositions, which are oral statements conducted under oath before trial.

If you have no defense and don’t deny owing the money, the creditor may request a summary judgment, which is a ruling by the judge in favor of the creditor without the need for a trial.

Likewise, your attorney may seek to have the case dismissed because of a lack of evidence.

If the proceedings go forward, there will eventually be a trial date for which you must show up in court to argue your case and respond to the allegations against you before a judge. Other witnesses, such as employees of the credit card company, may also testify.

Most cases never make it to trial, says Kardatzke, as both parties typically find it beneficial to come up with some kind of settlement before it gets that far.

6. Decide whether to accept the judgment

If you lose the lawsuit and are found liable for the debt, you still have choices. You can:

File for bankruptcy

This is your nuclear option, and it has long-lasting consequences, so it is a step to be taken only with great care and professional guidance.

Fight the judgment

This is an option if you find yourself the victim of a “default judgment,” in which you were not properly notified of the case against you and do not find out about it until after it has occurred.

Stay judgment-proof

State and federal laws limit how much of your property can be seized. People with modest income and little property may be exempt from seizure of their wages and assets to satisfy a debt.

Settle the debt

Work with the creditor to come up with a payment plan so you can avoid drastic measures such as garnishment. Most prefer slow money to no money at all.

Bottom line

Getting sued by a creditor can turn your life upside down, not to mention the financial damage you’ve likely already incurred. But once the case is over, you can get to the business of putting your financial life back together.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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