How to Settle Credit Card Debt When a Lawsuit Has Been Filed

settle credit card debt when a lawsuit has been filed

A lawsuit from a creditor can be scary and stressful. However, with the right plan and attorney on your side, you can resolve your lawsuit and get out of credit card debt for good. One option to consider: debt settlement. 

You might be wondering how to settle credit card debt when a lawsuit has been filed. Is that even possible? The answer is yes. But you need to know how to navigate a credit card lawsuit and the right strategy to convince your creditor to settle. 

Sued for Credit Card Debt? Here’s Why

When you’re late on a credit card payment, you will likely incur a late fee. Plus, your credit score may take a hit. It’s not a great thing to happen, but lots of people make a mistake every now and then.

If you keep missing payments, however, the credit card company will make multiple attempts to get that money from you. They may call, text and/or email you and demand payment. If your payments are still past due after about three to six months, they may charge-off the account. That means they’ve given up trying to recover that money and have passed your account off to an internal collections department or third-party debt collector.

Understand that a debt that’s been charged-off isn’t forgiven. You’re still legally responsible for paying it back, whether it’s to the original creditor or a debt collection agency. So if you don’t, the company you owe could sue you in civil court for the balance.

How to Settle Credit Card Debt When a Lawsuit Has Been Filed

A lawsuit over a delinquent debt can feel like a worst-case situation. Sure, a lawsuit is definitely not a good thing. But it’s not the end of the world. For one, you can’t go to jail over unpaid credit card debt. And you have options for resolving the matter. Here’s what you should do if you want to settle credit card debt after a lawsuit has been filed.

Respond ASAP

Contact a competent debt settlement lawyer. They will explain your rights and how to proceed to avoid getting a judgment placed against you.

Note that when a creditor files a debt collection lawsuit, you’ll receive two important sets of documents:

  • A court summons, which is a legal document notifying you that there’s a lawsuit against you.
  • A formal complaint letter, which outlines the allegations against you.

Pay close attention to these, as they contain extremely important information. That includes instructions for how to respond and the deadline for doing so. Usually, that’s no more than 30 days out. Failing to respond to the court on time could result in a default judgment against you. This gives the creditor legal authority to pursue your unpaid debt through more aggressive means. That can include wage garnishment, liens against your property and even freezing your bank account. 

Also, be sure to respond even if you have a settlement agreement in the works. The creditor may still file for a default judgment. And if the court doesn’t have your answer on file, you’re still at risk of losing in court.

Hire an Attorney

When facing a lawsuit, it’s a good idea to hire an experienced debt relief attorney. They can walk you through your options and help negotiate a settlement, as well as verify that the lawsuit is even valid. For instance, the judge may dismiss your case if the collection firm made a procedural error. Your lawyer may also share ideas for winning the lawsuit. Or you could be eligible to file a counterclaim. These are all good points to go over with a debt relief attorney when discussing your matter. 

You should also inquire with a debt help attorney about the following:

  • Can the debt be verified? You have the right to have certain details about your debt verified. For example, the creditor or collector needs to prove that you are the person who owes the debt and they are the company it’s owed to. Your attorney can request that the entity suing you prove these facts.
  • Has the statute of limitations passed? Creditors have a certain amount of time when they’re able to file a lawsuit, known as the statute of limitations. Once that period is up, creditors can’t sue you for a debt (the statute of limitations on debt in New York, for example, is three years). Your attorney will be familiar with the statute of limitations in your state. 
  • Were your rights violated? Collectors that are pursuing consumer debts have to follow certain laws under the Fair Debt Collection Practices Act (FDCPA). For example, their collection efforts can’t involve harassing or threatening you. They also can’t share information about your debt with anyone else or show up at your job. The court may throw out the case and/or you could file a lawsuit of your own if your lawyer determines that the creditor broke certain debt collection laws.

Decide How You Want to Proceed

Once you’ve gone over your situation and debt relief options in detail with a reputable debt help attorney, you can decide whether pursuing debt settlement is a good idea. Debt relief attorneys have experience negotiating settlements and working regularly with the creditors and their attorneys in these kinds of debt collection cases. This experience can help ensure you receive the best deal possible without having to communicate with collectors directly or deal with annoying phone calls. Plus, you don’t have to deal with the stress that comes with having outstanding debt that is now in the lawsuit stage. Some things are better left for experienced professionals to resolve so you know for sure that the matter is properly handled and won’t creep back up in the future. 

If your financial situation is dire and you owe a large amount of debt to many creditors, your attorney may decide that it’s better to file bankruptcy. Again, a legal professional can walk you through the process of first qualifying for bankruptcy and recommend the best type to pursue. 

Make an Offer

Once you’ve determined that debt settlement is the best choice, it’s time to present an offer to your creditor. Again, your attorney can handle the stressful negotiations so you don’t have to. They are likely familiar with the legal teams of various creditors and know what needs to be done to secure a settlement. 

And if you don’t have enough money to settle with a lump sum payment, your lawyer may be able to negotiate a payment plan that prevents your wages from being garnished or bank accounts frozen. Remember, your creditors just want to get their money back. So a deal that allows you to make several smaller payments as opposed to one large lump sum payment is still better than no payment at all.

It’s in your best interest to act quickly when being sued for unpaid credit card debt. Debt settlement may still be on the table, but you’ll need the help of an experienced attorney. Tayne Law Group has been assisting borrowers with debt management and resolutions for over 20 years. We offer a free consultation with one of our experienced debt relief attorneys. They can go through your options and explain our process. Then you can decide if hiring an attorney is right for you. When you’re ready, call our law firm at (866) 890-7337 or fill out our short contact form. We never share your information and all discussions are confidential.

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