What Should I Do if I’ve Been Sued for Debt?

It usually takes about six months of not making payments on a debt before you can be sued. Generally speaking, creditors and credit card company employees would rather work out a viable payment plan with their debtors than initiate legal action.

This is because taking legal action for debt collection not only costs money but can prolong the collections process. Nevertheless, it is possible to be sued for a debt, especially if you fail to communicate with your creditor and miss multiple payments.

This article covers the basics of what to do if a creditor has filed a lawsuit against you for unpaid debt. It will cover everything from reading the complaint to choosing the right attorney.

See our debt relief section for more information about ways to budget for and deal with debt.

Being Sued After Making Good Faith Efforts

You may be sued by a creditor even if you have offered to make small payments on your balance or to cooperate with a collection agency. But creditors typically do not sue debtors who are at least making a good faith effort to repay a debt, so this is a less likely situation.

Receiving and Answering a Complaint

Usually, the first indication that you are being sued for debt comes in the form of a legal complaint and summons. The complaint describes the nature and dollar amount of the claims against you for unpaid debt.

The summons is a written notification that you are required to appear in court on a given date if you wish to defend yourself against the claim.

So, if you wish to defend against a creditor's legal claim against you — even if you agree with the claim but would rather work out a settlement — you should generally answer the complaint.

Refusing to Answer a Credit Card Debt Complaint

If you simply ignore the complaint by not replying with a formal answer, your inaction may result in a default judgment against you. This means they will find you guilty, and the judge will decide your penalty.

They can go directly to your paycheck and use wage garnishment to repay your debts. Companies can also access your bank account to take assets to repay debt. If this is happening to you, you need legal advice on the federal laws that can help or hurt you.

Basics of a Credit Card Lawsuit

You and/or the cosigner of your loan or account will be listed as the defendant(s). The complaint will describe:

• Why the creditor is suing you
• How much money the creditor is seeking in damages (typically the amount owed, plus interest and any applicable penalties)

You will have a certain amount of time to answer the complaint. Typically, this is about 20 days, depending on the state in which the claim was filed.

Basics of Answering a Credit Card Lawsuit

You may have to pay a filing fee to the court clerk when submitting your answer to the complaint, but low income defendants may qualify for a waiver.

Your answer typically will include:

• Admission or denial of the claim
• Any legal defenses
• Potential counterclaims
• Your signature

If you have income that is exempt from wage garnishment, such as Social Security payments, it may be included in the answer, as well.

How to Win a Credit Card Lawsuit

The key to winning a credit card debt collection lawsuit is strong affirmative defenses. You have rights under the Fair Debt Collection Practices Act (FDCPA) and can fight back in civil court.

If you plan to defend a claim against you, an attorney can help you decide which defenses make the most sense. Since many consumer contracts include a provision for settling disputes through arbitration, the lawsuit may not even be valid.

Also, the claim must be filed within the time limit set by your state (the statute of limitations). If the creditor is outside of this limit, then you can have your case dismissed. Usually, a creditor has two or three years to bring a lawsuit, but in some states, they have as long as six years. Additionally, some states have different statutes of limitations for debt-related lawsuits.

The first step is to reviews the contracts, facts, and evidence with an attorney experienced in credit card lawsuits. Your attorney will be able to determine whether the debt lawsuit is valid. If the evidence does not make a strong enough case in your favor, you can try other defenses or discuss a settlement.

Defense to a Debt Claim: Ownership of the Debt

A creditor suing you for an unpaid debt also must be able to document ownership of the debt.

Creditors frequently sell debts to other entities, which are then considered "debt collectors" for legal purposes. These debt buyers must be able to produce documentation of the debt in order to sue you, a requirement that does not apply to the original creditor.

Therefore, you should request verification of the debt in writing once you are contacted by a debt collector (which may be another financial institution). If it cannot provide written proof, it may not collect from you.

Asking for Proper Documentation

Also, creditors are required by law to attach a copy of the account or written contract to the complaint, or else explain in the complaint why it is not attached. If the creditor or collector cannot produce the proper documentation, you may ask the court to dismiss the lawsuit.

Other Common Defenses for Credit Card Account Debt

Other defenses include:

• Mistaken identity
• Identity theft
• The debt has been discharged in bankruptcy
• Fraudulent charges (if credit card debt)
• The creditor violated the Fair Debt Collection Practices Act
• You have already paid the debt
• The creditor didn't properly serve you

These defenses may depend on your state laws.

In some cases, a family member may have used the card in an authorized or non-authorized way. Since your name and Social Security number are the ones tied to the debt, this still means you are responsible. You can name your family member in a lawsuit to get them to pay you back. However, you will still be facing the original lawsuit and collection activity from the collection agency or credit card company.

Settling or Negotiating Your Debt Lawsuit

You have the option to negotiate with the company bringing the lawsuit against you. You can offer to pay a lump sum that is less than you owe, because the company may find it beneficial to get that money upfront. They may value getting some of the money faster instead of all of the money more slowly.

You usually have the options to:

• Negotiate for less money owed
• Settle for a lump sum
• Set up a payment plan

These options may depend on the original contract and who is in charge of the debt management now.

When to Ask an Attorney for Help

You may need different attorneys, depending on the situation. For example, a bankruptcy attorney can step in if you cannot repay debts and need to declare bankruptcy.

Attorney's fees and court costs can seem intimidating when you already have debt. Keep in mind an attorney can submit a counterclaim or work for an automatic stay, which will get you some time to seek debt relief.

Credit card debt lawsuits can be straightforward. This saves you time and money in legal fees, and chances are you'll have a better outcome with a professional watching out for your best interests.