If you fall behind on your monthly payments or stop making payments, your credit card company can sue. Lawsuits can be filed by credit card companies under the Fair Debt Collection Practices Act.
Before filing a lawsuit, the credit card company will generally turn your account off. During this time, interest will continue to be added to your debt.
Not all credit card company lawsuits follow the same chain of events. However, this is the typical chain of events in credit card debt lawsuits:
- You breach your agreement with the credit card company. When you first received your credit card, you signed an agreement. The agreement could have been electronic or physical. The agreement defined the rights and duties of you and your credit card company. Usually, if you fall behind on your monthly payments or stop making payments, you have breached your agreement. If you breach your agreement, the credit card company has the right to sue you. To try to avoid a lawsuit, communicate with your credit card company; explain your circumstances and, if possible, try to pay off your debt.
- Your credit card company might sell your debt to a debt collector. Credit card companies usually try to cut their losses by selling your debt to a debt collector. The debt collector then becomes the legal owner of your debt. If possible, you should try to settle your debt with the debt collector to avoid a lawsuit.
- Your credit card company or debt collector sues you. If you fail to settle your debt with your credit card company or debt collector, your credit card company or debt collector might sue you. Your debt collector or credit card company will file a complaint, which will explain why you have been sued and set forth the facts and legal claims that form the basis for the lawsuit. You will also receive a summons, which tells you where to appear to defend your suit.
- You respond to the complaint. You should always respond to the complaint and summons by filing an answer. Your answer should set out all of the defenses that you want to raise. If you simply ignore the summons and the complaint, your credit card company or debt collector will probably ask the court for a "default judgment" against you. A "default judgment" usually awards the credit card company everything that they asked for.
- You attend your court date. After you file an answer, the court will schedule your court date. You should never miss a court date. If you miss a court date, the judge will award a "default judgment" against you. An experienced attorney can defend you in a lawsuit.
The best way to defend your credit card debt lawsuit depends on the unique circumstances of your case. However, here are two of the most common techniques for defending a credit card debt lawsuit:
- Make the credit card company or debt collector prove what you owe. Because the credit card company or debt collector is the "plaintiff" (the party bringing the lawsuit), it has the "burden of proof." This means that the credit card company or debt collector must prove that it has the right to sue you, that the debt is yours, and that you owe the exact amount that they claim you owe.
- Challenge the debt collector’s standing to sue. The plaintiff needs to prove that it has "standing to sue" (the right to sue you). For debt collectors, this can sometimes be a challenge. Debt collectors must prove that they have the right to collect the payment, which is evidenced by a transfer of the signed credit card agreement. Sometimes, debt collectors do not have the chain-of-custody paperwork.
If you have received a debt collection notice or if a credit card company or debt collection agency has filed a complaint against you, you should consult an experienced consumer credit lawyer. Your attorney can file an answer to the complaint, defend you in the lawsuit, and help you understand your legal rights. Depending on the circumstances of your case, your attorney may also be able to help settle your debt.