Digging yourself out of credit card debt can be challenging, especially if you’ve fallen behind on your payments. If you fail to make credit card payments for a prolonged period of time, you could end up being sued by a debt collector.
When this happens, you don’t have to deal with it on your own (even though you can). By seeking the help of a lawyer or a certified credit counselor, you can get ahead of the issue, so you don’t end up harming your personal finances in the long run.
Understanding the Importance of Settling Credit Card Debt
Typically, if you fail to make the minimum credit card payments on your debt for 180 days or more, the card issuer will stop trying to collect the debt and write it off as a loss—known as a charge-off. Missed monthly payments affect your credit score, remaining on your credit report for up to seven years.
When a charge-off occurs, you’re still on the hook for debt even if the original creditor stops trying to collect it. Instead, the credit card company may sell your unpaid debt to a debt collector—or a debt buyer. (A credit card company can also employ a debt collector before they charge-off your debt.) The debt collection agency will then try to recoup as much of the debt from you as they can.
However, if you fail to make payments to the debt collector, they may sue you. If they win, it could result in wage garnishment or your bank account being frozen. Plus, if you go to court instead of settling the debt, it can be more costly, stressful, and time-consuming.
What To Do If You’re Sued Over Credit Card Debt
If you are sued by a credit card company or a debt collector, you will be notified with a court summons. It’s vital that you respond within the given time frame, which varies by state.
If you do not respond in a timely manner, the court may issue a default judgment (or a court order against you), making it much more difficult for you to negotiate or dispute the debt, according to the Consumer Financial Protection Bureau.
Your response to the initial court summons is known as an answer. In your answer, you’ll be required to provide a defense or a reason why you shouldn’t have to pay the debt. For example, it could be that the statute of limitations has passed or that you’re a victim of identity theft.
The statute of limitations on debt collection depends on the state and type of debt you have. If the limit has expired, your debt is considered time-barred, which means the collector may no longer be able to sue you for the old debt.
And you do have legal rights in this process. The Fair Debt Collection Practices Act (FDCPA) requires that your debt collector provide you with a validation notice when your debt is transferred between different creditors and debt collectors. The collections agency must inform you about the name of the creditor and the current amount of the debt you owe, among other things.
The law also places restrictions on how debt collectors can try to collect debt. For example, the FDCPA prohibits collections agencies from abusing or harassing debtors.
Negotiating A Credit Card Debt Settlement On Your Own
After you get served with a debt collection lawsuit, you have the option of reaching directly out to the creditor and negotiating the debt. Since debt collectors typically buy debt for a fraction of the original value, they are typically willing to settle your debt for less than the full amount.
Typically, creditors prefer lump-sum payments over a payment plan because it means they won’t have to spend months or years trying to recoup the debt. Make sure that any repayment plan or lump-sum payment you make fits within your budget.
When you’re negotiating with a debt collector, you’ll want to show the creditor that you’re experiencing financial stress and why you can’t pay back the total amount of money you owe.
Exploring Settlement Options
If you need help with negotiation, consider consulting an expert like a credit counselor or a debt relief lawyer.
Credit Counseling Organizations
A credit counseling organization assists people in managing their money. A certified credit counselor will work with clients to create debt management plans. With these plans, you typically make a monthly payment to them. They then use those funds to pay off your creditors. However, a credit counselor typically won’t negotiate a reduction in the total amount of debt you owe and not all creditors will work with them.
Lawyers
But if you need legal advice or want someone to negotiate down your debt, it’s best to work with a debt relief lawyer. A debt relief lawyer can help you negotiate and settle the debt without having to go to court. If you hire a lawyer in the state where the debt originated, they’ll likely have knowledge about state laws regarding debt resolution and debt collection.
A debt help lawyer may also help you determine whether you should file for bankruptcy, like Chapter 7 or Chapter 13 bankruptcy. You can file for bankruptcy on your own, but doing so without a lawyer can be challenging.
Lawyers can be costly, so it’s important to weigh the cost of getting a lawyer against the potential savings and the advice you get from a debt help attorney—although this isn’t guaranteed. (Note that some debt settlement lawyers work on a contingency fee basis, so they don’t charge upfront fees, and clients only pay if a settlement is reached.)
Debt Settlement Companies
Another option is using a debt settlement company, but this can be costly and risky.
Debt settlement companies are for-profit companies that typically require people to stop paying off their debt while they negotiate with the creditor, resulting in increased interest and late fees. Usually, clients will put some money in a designated account. And once a negotiation is reached between the debt settlement company and the creditor, those funds are used to pay off the settlement.
However, it’s possible that the company doesn’t negotiate a better deal for you and the extra interest and late fees result in a higher total amount of debt.
Steps to Negotiate a Settlement and Formalizing the Agreement
Whether you’re negotiating the debt yourself or have the help of a debt settlement lawyer, try to negotiate with the creditor only what you can afford. The creditor may not accept it, but it’s better to start where you can afford the payments of any debt resolution plan with your creditor.
Once you have reached a debt settlement plan with your creditor, it’s important that you get the agreement in writing. If you don’t, the creditor can go back on the settlement agreement and the debt won’t necessarily go away.
Once the settlement occurs, it may show up on your credit report and all reporting stays on your credit for seven years.
Conclusion
Dealing with a credit card debt lawsuit can be stressful and confusing. However, there are ways to fight back. If you’re served with a debt lawsuit, it’s essential to respond to it within the given time frame. By not responding, you risk the court allowing the creditor to take more serious actions such as a judgment which could result in liens against your bank accounts, property or even a wage garnishment.
By settling your credit card debt, you can avoid the hassle, money, and time involved with going to court. Plus, a lot of creditors and debt collectors will settle for less than the total amount of debt you owe so having the right solution to assist you is important.
When you need the extra help, consider reaching out to a an experienced team of debt resolution professionals at Tayne Law.The firm has 20 plus years resolving debt for consumers and business people and can guide you with debt lawsuits, liens and creditor calls. Call today and ask them how to help you resolve your debt and reach a debt settlements with credit card companies, collection agencies, creditor law firms and merchant cash advance companies. You can receive a free phone consultation by calling 866-890-7337 or filling out our short contact form. Your information is confidential and never sold.
