Credit card companies sue for non-payment in about 15% of collection cases. Usually debt holders only have to worry about lawsuits if their accounts become 180-days past due and charge off, or default. That’s when a credit card company writes off a debt, counting it as a loss for accounting purposes. But even after a charge-off, credit card companies can still pursue a debt holder for repayment or sell their debt to a collection agency. If the debt holder still doesn’t pay whomever is collecting the debt, the creditor can file a lawsuit against the debt holder in civil court. However, the creditor is less likely to do so if the balance owed is under $1,000, or if the debt is settled. Plus, they might not be able to sue successfully if the statute of limitations (generally 3 to 10 years, depending on the state) has expired.
The reason lawsuits are not a credit card company’s first response in cases of non-payment is that litigation is costly in terms of both time and money. It’s also possible that the judge may not rule in their favor. If there’s any way for creditors to get paid without beginning a lawsuit, like lowering your minimum monthly payment to make it more manageable, they will usually choose that option.
As a consumer, you obviously want to avoid lawsuits, too. They’re expensive, and a court judgement against you will go on your credit report, hurting your credit score. So, it’s worth learning more about when you could be sued for credit card debt and what to do if you are.
Here’s when credit card companies sue for non-payment:
- You’ve been delinquent for at least 180 days: This is the point at which the creditor has to write off your debt as a loss. But they still can sue for repayment, and they often do.
- The company believes they have no other options: The likelihood of a lawsuit increases if your credit card company or collections agency can’t get in touch with you. Facing your creditors can be frightening, but it’s the only way to figure out an alternative to court. By law, debt collectors can only contact you between 8 a.m. and 9 p.m. unless you give them express permission to do otherwise, so make sure you’re reachable then or set up a different time.
- The balance owed is large enough to justify a lawsuit: Most credit card companies won’t sue for a small balance. And if you owe a lot, the company might be willing to forgive part of it in exchange for a lump-sum payment. This is called debt settlement. While it will hurt your credit (because your credit report would show you didn’t pay your debt in full), it could be worthwhile if it can help you avoid a lawsuit or bankruptcy.
Credit card companies won’t often sue for non-payment until they have tried other options. And while missing payments will hurt your credit, working with your creditors to repay your balance will at least contain the damage.
If creditors have filed a suit against you, don’t panic. Contact the creditor and a lawyer. The creditor may still be open to working with you, and a lawyer can help you prepare your defense. For example, if the debt collection agency doesn’t have all the necessary records, or if the statute of limitations has expired, you may not have to pay.
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