When you let credit card debt go unpaid for a long time, the creditor may decide to sue you for the amount owed. And if you lose the lawsuit, you will have a judgment against you. So if there’s a lawsuit against you for your credit card debt, knowing how to stop a judgment for credit card debt is crucial. Otherwise, you could face severe consequences for your finances and credit score.
Trying to figure out what to do? Don’t worry. We’ll explain how to avoid getting sued by creditors and where to turn for help with delinquent credit card debt.
A judgment is a formal decision by a court that the debtor owes the creditor a certain amount of money. Once there’s a judgment in place, the creditor can take stronger measures to collect the debt.
There are a few steps that take place before a judgment happens:
- Delinquency and default: Once your credit card debt goes unpaid for 30 days, it’s considered “delinquent.” If you fail to pay at least the minimum on your credit card bill for an extended period, around six months, your credit account will be considered in default.
- Charge-off: If you allow your credit card account to default and still don’t attempt to pay off the debt, the credit card company may charge off the debt. This means they consider it a loss for their accounting purposes. However, this doesn’t mean you’re off the hook for the debt.
- Debt collection: Once the account has been charged off, the credit card company may send it to its internal collections department or sell it off to a third-party debt collector, debt buyer, or collections agency. The debt collector will then repeatedly attempt to collect your debt to get paid.
- Lawsuit: If the collector can’t get you to pay, they may sue you in court for the amount they claim that you owe.
- Judgment: If you don’t respond to the lawsuit, the court will likely issue a default judgment in favor of the credit card company. However, if you respond to the lawsuit and fight it in court, you could still end up with a judgment. This happens if the court determines you are fully responsible for repaying the debt. If a judgment is entered against you, the credit card company (or whoever owns the debt at that point) can then use various methods to collect the money.
The methods involved in collecting a debt after a judgment are much more aggressive. If you have a judgment against you for credit card debt, you could face any of the following consequences:
- Garnishment of wages: The creditor may be able to garnish your wages until the debt is paid off. This means that a certain portion of your income is taken directly from your paycheck and given to the creditor.
- Levy of bank accounts: The creditor may also be able to take money directly from your account to pay the debt. You will have no warning of a frozen bank account.
- Lien on property: In some cases, the creditor may place a lien on your property, such as your home. If you try to sell the property, the lien must be satisfied to transfer the title. It’s typically paid off from the sale proceeds.
- Credit score impact: A judgment will also likely have a significant negative effect on your credit score. That can make it more difficult for you to obtain credit, rent an apartment, or even get a job in some cases.
- Legal fees and interest: The judgment may include court costs and interest, increasing the total amount you owe.
- Public record: Judgments usually appear on public records. Anyone doing a background check on you could find out about it.
First, if you’re served a credit card debt lawsuit, it’s extremely important to respond to the lawsuit by the deadline. This is your formal response to the lawsuit, which you will file with the court. Note this only sometimes means you show up to court. In many cases, it’s a written response. In it, you admit or deny each of the plaintiff’s claims. You can also assert any defenses you may have.
If you don’t respond or have a valid defense to the lawsuit, the court will likely grant a default judgment. This means the plaintiff automatically wins and can begin to collect the money. The timeline for responding will be outlined in the lawsuit. It’s typically within 20 to 30 days, depending on how you were served and where you live.
It’s highly recommended that you consult with an experienced debt relief attorney. They can help you understand the lawsuit, your rights, and the best strategies for a response. There may be free or low-cost legal help available in your community if you can’t afford a lawyer.
In addition to properly responding to the lawsuit, there are other steps you can take to avoid a judgment.
Ensuring the debt is yours, and the claimed amount is accurate is important. You can request this information from the creditor with a debt validation letter. If there are discrepancies, this could help in your defense. However, This must occur before you are sued and shortly after receiving your first communication from the collection agency or attorney firm.
If you owe the debt and cannot successfully challenge the lawsuit, you can consider trying to settle out of court. This could involve negotiating with the creditor to pay a reduced amount or establish a manageable payment plan. It’s usually best to get help from a debt help attorney to ensure it’s done right and you don’t end up with a judgment anyway.
If your financial situation is dire and there’s no other way out, you might consider filing for bankruptcy. This is a significant decision with long-lasting implications. It should only be considered after consulting with a bankruptcy attorney near where you live or a financial advisor that understands the ins and outs of bankruptcy law and how it will impact you. You have to qualify for bankruptcy by meeting a “means test” related to your income. The bankruptcy attorney can review the differences between a Chapter 7 and Chapter 13 bankruptcy and see what you qualify for.
There are several defenses to credit card lawsuits. For instance, you might challenge whether the plaintiff has the legal right to sue (standing) or the debt is too old (statute of limitations). It may also be possible to challenge the amount of the debt, especially if fees and interest have excessively accumulated or claims of fraud if it wasn’t your debt to begin with.
You must craft a defense if you challenge the credit card debt lawsuit. There are several potential defenses; the right one will depend on your situation.
As we mentioned, working with an experienced debt help attorney is often a good idea. They will have a much better understanding of the legal process, best defenses to pursue, and working relationships with the creditor’s attornies. However, there are some challenges and drawbacks to hiring legal help.
- They have the expertise. An attorney specializing in debt law can help you understand your rights, what defenses might be available, and how to best navigate the court system.
- You’ll have representation. A lawyer can represent you in court and negotiations with the credit card company or debt collector. They can often negotiate more effectively than you could on your own. Plus, they’ll make sure the agreement is in your favor.
- You can save a lot of time and stress. Dealing with a lawsuit can be time-consuming and stressful. Hiring a debt help lawyer can alleviate some of this burden, allowing you to focus on getting your finances and life back on track.
- The outcome will likely be better. A debt settlement lawyer may be able to get the lawsuit dismissed, negotiate a lower settlement, or establish a manageable payment plan.
- Hiring a lawyer can be expensive. If you’re already struggling with debt, the additional cost of attorney fees might be difficult to afford. However, some attorneys offer flexible payment options or might accept your case on a contingent fee basis.
- It’s not always necessary: You may not need a lawyer for small claims cases. Some legal procedures are designed to be manageable for individuals to handle independently.
- There’s no guaranteed outcome. Even with an experienced debt relief attorney, there’s no guarantee that you’ll win the case or get a significantly reduced settlement.
Overall, the decision to hire an attorney specializing in debt relief and settlement is up to you. It should depend on your specific circumstances, including the complexity of your case, the amount of the debt, and whether you feel comfortable handling the matter on your own. If you can’t afford an attorney, you might qualify for free legal aid. Or you may be able to find resources to help you understand and respond to the debt lawsuit on your own.
You have the right to defend yourself in a credit card debt lawsuit. There are several possible defenses you can use, depending on your situation:
- The debt isn’t yours: This can happen due to identity theft or a simple mistake. You can dispute the claim if you believe the debt doesn’t belong to you. Of course, you’ll need to provide evidence to support your claim.
- The statute of limitations has passed: Every state has a statute of limitations for how long a creditor has to sue you for unpaid credit card debt. If this time has passed, you can use this as a defense against paying old debt.
- The creditor can’t prove you owe the debt: The creditor must be able to provide detailed account records showing that you owe the debt and the amount is correct. If they can’t give this information, you can challenge the lawsuit on this basis.
- The creditor used unfair debt collection practices: If the creditor or debt collector violated the Fair Debt Collection Practices Act (FDCPA) or similar state laws, this could be a counterclaim. For example, if they have harassed you, lied to you, or made illegal threats, you may be able to counter-sue for damages.
- There were errors in the lawsuit or service of process: If there are significant errors in the case or you were not properly served with the lawsuit, these could be defenses.
- You’re being sued for the wrong amount: If you believe the amount the creditor claims you owe is incorrect — perhaps due to excessive fees, interest, or charges for items you returned or did not receive — you may be able to dispute the amount of the debt.
You may be reading this too late, and there’s already a judgment against you. If that’s the case, it’s not the end of the world. You can still take steps to minimize the damage and move on from your debt.
- Comply with the judgment: If the court has ordered you to do something, such as making a payment by a certain date or permitting wage garnishment, you must comply to avoid further legal consequences. Until you have a new action plan, ensure you follow the court’s orders.
- Consider an appeal: An appeal isn’t a chance to retry the case. Rather, it’s an opportunity to argue that legal errors were made in the initial trial that affected the outcome. In other words, you can’t appeal just because you’re unhappy with the decision.
- Negotiate a payment plan: If you cannot pay the full amount of the credit judgment at once, you could try to negotiate a monthly payment plan with the creditor. They might be willing to accept smaller, regular payments over time rather than trying to collect the full amount immediately. Alternatively, you may be able to negotiate a lump sum settlement that’s less than the amount owed.
- Consider bankruptcy: If you cannot pay the judgment and have substantial other debts, you may want to think about filing for bankruptcy. Even though it’s a last-resort option, it can provide a clean slate and allow you to move on from your debts if you qualify. It also has consequences, so speak with a qualified debt assistance attorney or bankruptcy lawyer to discuss all options.
It’s possible to deal with credit card debt issues on your own. But you’ll likely save a lot of time, headache, and money by getting the assistance of a legal professional. An experienced debt relief attorney may be able to provide you with valuable legal advice and guidance, ensure your rights are protected, represent you in court, and more.
If you’re facing legal issues related to credit card debt and can’t afford a lawyer, there are resources available. For example, legal aid societies offer free legal services to those who qualify (typically low-income individuals). You can find a local legal aid society by visiting the Legal Services Corporation website. This is a nonprofit organization that helps provide legal aid to low-income Americans.
Many state and local bar associations also have pro bono programs where lawyers volunteer their time to help people who can’t afford legal services. You can check with the American Bar Association (ABA) for pro bono programs in your state.
Tayne Law Group has assisted borrowers with debt management and resolutions for credit card debt, student loans, and personal loans for over two decades. We offer a free, no-obligation phone consultation with one of our experienced debt relief teams. During this consultation, you can learn more about your options and how our process works. Call us at (866) 890-7337 or fill out our short contact form, and we’ll be in touch. We never share or sell your information, and all conversations are confidential.