Posted on Monday, 16th August 2010 by Lucy Hales
Got several credit cards and decided to go on a shopping spree. Big deal, it is an unsecured debt after all. I can not be sued for credit card debt, there is no collateral, what they going to do to me? That was the topic of conversation among three dummies in their 20s that I overheard in the car repair shop. Recent immigrants, rather fresh of the boat. When I tried to explain them that unsecured debt doesn’t mean that repaying such a debt is optional, they looked at me like I was insane. I went quite patiently on, saying – you sign a contract with credit card issuers when you apply for the credit cards, which specifically states various ways to collect the unsecured debt, including turning it over to a collection agency and taking you to court. If you are in default, you are in breach of that contract. And yes, you can be sued to recover unpaid debt. At this point the conversation started getting a bit heated so I wished them all the best and left thinking that I need to write about it. So here goes.
Can I be sued for credit card debt?
If you have become delinquent on your credit card payments, the credit card issuer may sure sue you, period. Will you be sued or not, depends upon the amount you owe and on the creditor. Certain creditors may file a lawsuit when you are only 60 days behind on payments. Others are not that eager and may wait for 90 or even 120 days, but if you do not try to negotiate and offer some sort of an affordable yet sensible for them repayment plan, you are going to be sued, almost guaranteed. Thus, in order to prevent creditor from suing you, negotiate a payment plan or try to settle credit card debt by offering a smaller lump sum that you owe. If you can not do it yourself, enlist a reputable debt relief company and find out your options to get rid of credit card debt.
Credit card companies actually sue debtors
If you owe a lot you will be sued unless you settle before. Filing a lawsuit is expensive and time-consuming so if you are a bum who owes a few thousands, this debt will be probably charged off by the creditor and sold to a collection agency. If you have significant credit card debt, the creditors will sue you. If there is a joint account holder or a cosigner on your account, the credit card company will certainly go after either of them to recover delinquent payments instead of filing a lawsuit against you. Also, you can only be sued if the statute of limitations on debts in your state has not expired. Credit card debt falls under Open Account type in almost every state, at least as far as I know.
What happens when you are sued for credit card debt?
If the statute of limitations has not expired, the credit card company can get a judgment against you for the full amount of the debt, plus interest, penalties, court costs and lawyer fees. The court basically orders you to pay off credit card debt and if you refuse, it also enables the credit card issuers to garnish your wages if your state law permits it, or go after your assets that can be liquidated and the proceeds used to pay off your debts.
The following very unpleasant things can happen through the court judgment to satisfy the unsecured debts,
– creditors can seize your bank accounts
– your portion of any joint bank account can also be seized
– non-exempt property can be sold
– liens can be placed on your property
However, no state can order a forced sale of your primary residence unless the debt is your mortgage. In this case it will lead to foreclosure. In an equitable property or a non-community property state, your creditors can only get a half of all joint assets. In a community property state like Texas or Illinois, when you are sued for credit card debts, the creditors can seize or place a lien on all joint marital property even if your spouse name is not on the account. You can also read Bankruptcy after divorce, can they come after my ex assets?. The other thing to understand is that any judgment obtained by the creditors against you is only enforceable within statute of limitations on judgments which also depends on your state. SOL on judgments however are often renewable.
What can you do once you are being sued for credit card debts?
Collection agencies and some creditors may threaten to sue for unpaid credit card debt after the statute of limitations have expired. You can send an Expired SOL Notification Letter to the creditor stating that no legal action against you can be taken because the SOL has expired. You must prove that the debt is post SOL, so statements with the dates when debt became delinquent and when was charged-off will be needed as well as your credit report showing the exact dates of default.
If the SOL hasn’t expired and you are sued for credit card debt, you will receive a court summons, which you need to reply to within a certain time period, which varies from state to state. Reply to the summons by filing two documents, known as the Answer and Appearance and sending both via certified mail to the attorney representing the creditor. In the Answer, you should dispute the allegations made by the creditors. Also, replying to the summons allows additional time to negotiate with creditors and postpone a judgment. If you don’t reply to the summons, creditors will get a default judgment, which will end the case and such a judgment won’t be a good one for you.
Judgment kills your credit history
If you are sued and the creditor receives a judgment, it stays on your credit report for 7 years from the date the judgment is filed. This brings your credit score by up to 150 points down. See Bad credit time limits and What affects credit score, according to FICO.
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- Debt reaging – what you should know
- How to answer a credit card debt summons
- Top 5 things not to do if you’ve been sued by a creditor
- Credit repair from overseas
- Debtor Faces Judgment And Bankrutpcy With His Name On Title To His Parents’ Home: Will The House Survive?
Tags: Card Debt, Credit Card, Credit Card Debt, Debt
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