Credit Card Debt Lawsuits

Learn when you might get sued for delinquent credit card debt, steps in the lawsuit, and how to defend against it.

If you fall behind on or stop paying your credit cards, your credit card company has a right to file a lawsuit against you. You need to be aware of how and when a credit card lawsuit might happen and what your options are to defend against it.

(Learn more about managing credit card debt.)

When You Might Get Sued for Credit Card Debt

If you are behind on your credit card payments, the credit card company or debt collector hired by the credit card company might sue you to recover the money you owe.

The credit card company will sue you if you break the terms of the contract. When you originally obtained the credit card, you signed an agreement either electronically or in writing. This agreement defines both you and your credit card company’s rights and responsibilities. Falling behind or failing to make payments on the credit card typically constitutes a violation of that agreement and the credit card company may then sue you.

A collection agency might buy the delinquent credit card debt. Before you get sued, credit card companies typically try to minimize their losses by selling your debt to a debt collector. That debt collector becomes the legal owner of the debt and possesses most of the same rights the original creditor possessed. If you fail to settle the debt with the debt collector, it may be sold and resold again until it finally reaches a debt collection attorney’s office.

The debt collection attorney’s office will then sue you in state court. Once your debt reaches the debt collection law firm, it will usually give you one last chance to settle the debt to avoid a lawsuit. If attempts at settlement fail, the credit card company’s attorney files a lawsuit against which you must defend. If you do not defend against the suit, you will automatically be held legally liable for the full amount stated in the lawsuit.

Steps in a Credit Card Debt Lawsuit

State law controls what procedures the credit card company must abide by when filing a lawsuit against you.

The credit card company files a complaint. The credit card company typically files a document called a complaint in the county in which you lived when the debt was first originated. The complaint lays out how much you owe and why the credit card company thinks you owe it.

You must then file an answer to the complaint. In the answer, you simply admit or deny each statement in the credit card company’s complaint. You should also include a section in your answer where you state any defenses to the complaint.

Common Defenses to Credit Card Lawsuits

When you deny the statements in the complaint, you are literally defending against those statements by arguing that they are not true. These denials are typically a question of whether something is factually true or not. In addition to these denials, you should make yourself aware of and allege any affirmative defenses that your case merits.

Affirmative Defenses to the Lawsuit

You can also raise affirmative defenses in your answer to the complaint. With an affirmative defense, you argue that even if everything the credit card company alleges against you is true, it should still lose the lawsuit. Here are some common affirmative defenses to credit card lawsuits:

Statute of Limitations -- the debt is too old for a lawsuit. The statute of limitations is an affirmative defense where you argue that the debt collector cannot sue you because of the age of the debt. Each state defines how long a debt remains collectible and this ranges from three to ten years. Depending on which state you live in, either the first date you fail to make a payment or the date the credit card company sends you a demand letter starts the clock. Check your state’s laws to see if this affirmative defense applies to your case. (To find the law in your state, see Statutes of Limitations in All 50 States.)

Failure to State a Claim. Most states require credit companies or the debt collector collecting on the account to attach to the complaint a complete set of documents. These documents usually consist of the original contract and any document showing that the company suing you actually owns the debt. If the credit card company or debt collector doesn't attach these documents, you can argue that it failed to state a claim.

Invalid Service of the Complaint. Each state’s laws describe how, when, and where a credit card company can give you notice of a lawsuit. Proper service usually occurs when the creditor’s agent personally delivers to you a copy of the lawsuit or leaves it with someone (usually over the age of 15) at your residence. Examples of invalid service are where the credit card company simply mails it to you, leaves it with a neighbor, or just leaves it at your doorstep. If it seems like the credit card company notified you of the lawsuit in an improper manner, argue invalid service.

Discovery -- Getting the Information You Need to Defend Against the Lawsuit

Filing discovery requests forces the credit card company share relevant information to your case. If you believe the credit card company possesses documents or other information that supports your arguments, file a request with the court. The request should specifically describe the items you seek and why you believe they are relevant to your case. (To learn more, see Formal Discovery: Gathering Evidence for Your Lawsuit.)

Possible Outcomes of a Credit Card Lawsuit

The outcome of your credit card lawsuit will likely necessitate further action on your part. Your understanding of those possible outcomes helps you to prepare for the worse.

The court rules in your favor. If the court rules in your favor, the credit card company loses and cannot collect against you for the debt. You should consider requesting damages from the court against the credit card company to help pay for your attorney’s fees.

The court dismisses the case. The court may dismiss the case for many reasons. This may initially sound like a good outcome; however, a dismissal typically still leaves open the possibility for the credit card company to re-file the lawsuit to correct any error that lead to the dismissal. You should always ask the court to dismiss the case “with prejudice” to protect yourself from a future lawsuit.

The court rules in favor of the credit card company. If the court rules in favor of the credit card company, you now have a judgment against you for a specific dollar amount. The credit company will then ask the judge to allow them to collect on the judgment. This includes but is not limited to garnishing wages, placing liens on property, and seizing property. To learn more about methods the credit card company can use to collect its judgment, see Debt Collection: Repossession Wage Garnishment, Property Levies, and More.

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