What To Do If You Are Sued By A Credit Card Company

There are a million reasons why people fall behind on their credit cards, especially in the wake of the COVID-19 pandemic. Loss of job, reduction in income, divorce, medical ailments…the list goes on. However, regardless of the reason, your credit card company treats anyone who doesn’t pay the same way: with contempt. If you fall behind, your credit card company can – and often will – take legal action against you. They will go to court to file a lawsuit against you, demanding money. If the credit card company is successful in the lawsuit, the court will issue a judgment in their favor, which will allow the company to not only place a lien on your house, but potentially take money directly out of your bank account through a process called execution.

When the company sues you, the court requires you to respond to the lawsuit promptly. In Pennsylvania, this is only 20 days. If you don’t respond, you may get a default judgment entered against you. Not ideal.

Even though facing a lawsuit might be disconcerting, you still have to respond to the creditor. If you don't know how to respond and what to do, you should seek the advice of your attorney. Here are some things you can do:

You should carefully review the credit card company's complaint against you. It will help you understand the specific allegations against you and what the credit card company seeks in terms of damages or other relief.

This may seem obvious, but sometimes a creditor may sue you by mistake. People with very common names or the same names as a parent may sometimes see this happen. Credit card companies are run by people, and people make mistakes. Check their work.

Moreover, you could be the victim of fraudulent activities. As per Forbes, you should thoroughly review any lawsuit or legal documents you receive to make sure that the account they’re saying is yours wasn’t the result of identity theft.

This is why The Fair Debt Collection Practices Act gives debtors every right to ask for a validation letter from the debt collectors. The letter must contain specific information about the debt, such as the current creditor and the amount owed. You must receive this letter within five days of receiving the initial debt communication.

Even, if the creditor did sue you by mistake, you should immediately seek legal advice. It may be necessary to file a response to the lawsuit or to take other legal action to defend yourself against the claim and assert that you aren’t the person they’re looking for.

Let’s assume the credit card company got it right and the account is actually yours. The next step is dependent on your decision on how to ultimately resolve the issue. Depending on the specifics of your case, your litigation goals and your financial abilities, you may consider either negotiating a settlement with the credit card company or fighting the matter fully in court.

A settlement is an agreement between the creditor and the debtor to resolve a legal dispute without going to trial. To request a settlement, your attorney will contact the creditor’s attorney and propose a settlement offer. Negotiations will go back and forth as the parties discuss the amount you are willing to pay and other terms and conditions in the settlement, such as the monthly payment.

The creditor may decide to accept or reject the offer. If the creditor accepts the offer, you will have to pay the agreed-upon amount, and that will resolve the lawsuit. If they decline, you may proceed with the lawsuit or continue negotiating further.

Some creditors welcome settlement to avoid trial costs. Others thoroughly enjoy litigating a matter to the ends of the Earth. An attorney with a lot of cases under their belt will be able to tell you how stubborn a particular creditor might be.

However, you may feel that fully litigating the matter is the best option, and this can be true for a number of reasons, especially if you’ve been sued by a debt buyer. If you choose this method, buckle-up…but it can ultimately be a way to win outright. If you choose to fight, get an attorney! Going pro se can backfire and cost you a win.

If you cannot afford an attorney, or really just want to avoid going to court at all costs, you may also consider a debt management plan. Under this option, a certified counselor can help you manage your debts more effectively, and ideally you can pay off the debt over an extended period. When you choose this option, your counselor will reach out to your creditors and try to negotiate favorable terms, such as a lower interest rate and waiver of late fees or penalties.

Once your DMP is in place, you will make a monthly payment to the credit counseling agency, which will then distribute the funds to your creditors according to the plan's terms. You will commit to making your monthly payments on time and following the plan's terms to complete the program successfully. While this might not reduce the principal balance of the debt you were sued on, it can be an efficient way of resolving the issue outside of court.

For those who can pay the debt in full, doing so will resolve the matter instantly and can ultimately save you a great deal of time and cost. However, carefully consider your financial situation before paying the debt off in one swoop. You don’t want to drain your reserves and have to resort back to using credit to make your ordinary bills. That can lead to a problematic cycle.

This might make more sense for lower lawsuit amounts. The larger the lawsuit, the less likely this will be an option. In addition, this lawsuit may only be the tip of the iceberg, with many more debts lurking. In that case…

Your best option may be to declare bankruptcy. This is a serious undertaking, but can be a valuable tool if you just simply cannot pay everything you owe. Debt.org also explains how a bankruptcy lawyer can help in bankruptcy matters. Your attorney can explain the differences between Chapter 7 and Chapter 13 bankruptcy filings and advise you on your rights and obligations under each path. However, it is critical to understand that bankruptcy is a serious step and should only be considered a last resort after exploring all other options.

Remember: Bankruptcy can damage your credit score, and depending on what Chapter you file under, you may lose certain. You must consider all the benefits and costs of bankruptcy before deciding to proceed. Your attorney will be able to guide you.

If you get sued, don’t panic! Contact an attorney who will advise you of most suitable option for you considering your situation. Lawsuits may be stressful regardless of your choice, but there is always a solution to everything.

You don't have to feel overwhelmed when facing a lawsuit. You have the right to defend yourself and powerful defenses do exist. Further, you have several options to choose from to move forward.