Defenses to Credit Card Debt Lawsuits

If you're sued by your credit card company, you might have some defenses. When a credit card company or debt collector sues you, it will serve you with a summons. How service is accomplished varies from state to state but, no matter where you're sued, you'll need to respond to the suit within the time provided in the summons.

In most instances, you will need to raise your defenses in that response or they will be waived.

Common Defenses to Credit Card Debt Lawsuits

The following are common defenses which might apply in your case.

Improper Service of the Summons and Complaint

Each state has its own requirements on how service of process—or delivery of the summons and complaint to start the suit—must be accomplished. You will need to check the laws in your state to determine the requirements.

Keep in mind that the service requirements can vary depending on the amount being sought by the creditor (often called the jurisdictional limits of the court). If the creditor has not served you correctly, you need to assert this in your initial response to the suit.

Statute of Limitations

A defense that the statute of limitations has expired means the debt is too old to be enforced. The time a creditor has to file suit against you is limited by law in each state. The time limit varies from state to state. In most states, it is anywhere from three to six years.

The time usually starts running from the last date you make a payment. If the statute in your state is three years and you haven't made a payment in two years, a payment to a debt collector who is hounding you will start the time running all over again.

Fair Debt Collection Practices Act (FDCPA)

The FDCPA is a federal law that governs the actions that can be taken to collect debts. Debt collector is defined broadly to include anyone from the companies that call you when your payment is late to attorneys hired to file suit. It requires collectors to provide you with validation of your debt when you request it and stop collection activities until they do. It prohibits certain collection activities such as threatening to sue on debt that is beyond the statute of limitations.

If a suit has been filed against you, you can assert FDCPA violations as a countersuit or setoff in that action. You can recover actual damages, attorneys' fees, and additional damages of up to $1,000 per violations if the violations are found to have taken place.

Lack of Standing

A creditor can only sue you if it has a relationship to you. Credit card companies often sell bad debt to debt purchasers. If the party that sues you is not the original creditor and you assert lack of standing as a defense, it will have to prove that it has the right to sue you. Often these debt purchasers will attach bills of sale or other documents to the suit which show that it bought debt from your creditor, but not that it bought your particular account. If you assert lack of standing, the debt purchaser must show proof that your account was one of those that it did purchase. While it sounds easy, some debt purchasers can't do it.

Sometimes the debt is sold more than once. When this happens the current debt owner may have trouble getting documentation that is sufficient to meet the proof requirements of the court. Much of this debt is transferred using computer generated lists without signatures nor affidavits. Once the debt has been transferred to two or three different entities, the original creditor often will not supply any further information. If this is the case, it may make it difficult for the creditor to meet the proof requirements of the court which generally require that the creditor have a witness that can testify as to the accuracy of the business records (at the time they were made) from personal knowledge.

Payment of the Credit Card Account, in Part or in Full

Payment is always a defense to any collection action. Often it is a valid defense even if you paid another party. For example, if your debt was sold and you accidentally paid the wrong party, the new owner might be required to obtain the payment from the original creditor if you did not receive adequate notice of the debt transfer or sale.

You can also assert payment as a defense if you paid only part of the debt. A creditor is not entitled to a judgment for more than what you owe.

Fraudulent Credit Card Charges

This defense applies in the case of identity theft, a stolen credit card, or when a business processes your credit card improperly.

But if this happens to you, don't wait until you have been sued. Notify the credit card company as soon as you see the charge and make a police report. This will provide you with evidence for your case if the charge is not removed from your statement. (Learn more about how to dispute fraudulent or unauthorized credit card charges.)

Discharge in Bankruptcy

If you have received a discharge in bankruptcy and you properly listed the credit card debt in your schedules, you are not responsible to pay the discharged debt. You must assert the discharge in bankruptcy as a defense to the suit. (To learn more, see our Credit Cards in Bankruptcy area.)

Mistaken Identity

If you have been sued on a debt you do not owe because you have a name that is the same or similar to the name of the person that owes the money, you can assert mistaken identity as your defense. Make sure you demand proof that you owe the debt and ask the court to make the creditor produce the original documents so that you can show that they don't include your signature, address, social security number, or other important information.

Not a Valid Defense: Divorce Settlements or Judgments

Often, a divorce court will divide the debt in a divorce, making one party responsible for a particular obligation. Unless the debt is refinanced, the divorce decree has no impact on the creditor. If your ex-spouse is ordered to pay the credit card debt that you were obligated on and does not, the creditor still has the right to sue you for the unpaid balance. You can go back to the divorce court to try to get reimbursement or other relief from your ex-spouse, but your divorce settlement will not be a defense to the credit card suit.

Talk to a Lawyer

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.