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 how to avoid credit card debt.)

When You Might Get Sued for Credit Card Debt

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

The credit card company may 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 your and the 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. (Learn what to expect when your debt goes to collection.)

The debt collection attorney’s office may 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. If you don't 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" to begin a lawsuit against you. The complaint lays out how much you owe and why the credit card company thinks you owe it. (Learn more in Creditor Lawsuits: How the Case Begins.)

You may 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. (See Creditor Lawsuits: What to Expect When the Case Is in Court for more information about the procedures of a debt collection lawsuit.)

Common Defenses to Credit Card Lawsuits

When you deny the statements in the complaint, you are 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

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 can't sue you because of the age of the debt. Each state defines how long a debt remains collectible and this typically ranges from three to ten years. (Learn the statute of limitations in your state.)

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. (To learn more, see Debt Collection Defense: Requiring That the Collector Document the Debt.)

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 leaves it with a neighbor or just leaves it at your doorstep. If the credit card company notified you of the lawsuit in an improper manner, you may 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 can't 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 might 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 How Creditors Enforce Judgments.)

Talk to an Attorney

If you need help responding to a lawsuit for nonpayment of a credit card debt, consider hiring a lawyer. But keep this in mind: If it costs more to hire a lawyer than what the creditor seeks in the lawsuit, it might not make sense to seek attorney assistance.

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