What Happens When A Credit Card Company Sues A Consumer In Debt

Failure to pay back your credit card debt when it comes due is considered a breach of contract. I own a San Diego credit card debt settlement law firm. Every day I am working with clients that have more debt than they can afford to pay back due to hardships beyond their control. Many of them have been sued. Let’s take a look at what happens with a credit card lawsuit.

Getting served with the Summons and Complaint
Perhaps the most shocking and embarrassing part of the lawsuit process is getting served with court papers. When your creditor files suit, they must find and serve you with a copy of the Summons and Complaint. Process servers aren’t always the most polite people in the world and they show up unexpectedly. Once you get served it’s time to get a plan together.

Ignoring credit card lawsuits
Not a good idea! Creditors hope you won’t fight the credit card lawsuit. In California you have 30 days from the date of service to file an answer to the suit. If you don’t answer the suit, the creditor will get a default judgment against you without you having your day in court. Creditors hope you take this route because it’s an easy win for them.

File an answer to the lawsuit
A better idea! Timely filing an answer to credit card lawsuits will prevent the quick and easy default judgment. The court will schedule a Case Management Conference. That is a very informal hearing. No evidence is considered. The court simply schedules a trial date. In San Diego County, that trial date could be 12 months away or longer from the date you were served with the Summons and Complaint.

Hire an attorney
Great idea! Attorneys are trained to analyze the allegations in a lawsuit and raising what are called affirmative defenses that you may not be aware exist. Hiring an debt settlement attorney could end up saving you thousands of dollars in the end. The fees you will pay are well worth it.

What happens if the creditor wins and gets a judgment?

  • Judgments earn interest of 10% per year until satisfied. They are good for 10 years and renewable thereafter until fully paid. Creditors have three options to attempt to collect on a judgment:

Wage Garnishment – Your wages can be garnished to pay a judgment. The creditor can get up to 25% of your net wages per paycheck until the judgment is paid. This amount can lowered by the court depending on your income and living expenses or if your wages are already being garnished. You have limited time to fight a wage garnishment and it may be worth speaking with an attorney to help you if you are intimidated by this court process.
Bank Levy – The creditor can seize money from ANY account with your name on it. They can take out all amounts up to the judgment amount. You get no warning of a bank levy and the results can be financially crippling. Certain money in your accounts may be exempt from a levy. Again, you have limited time to fight a bank levy and speaking with an attorney is recommended.
Property Lien – Your creditor can record a lien against your property. If you have enough equity in your home, the judgment will be paid through the close of escrow before you receive any net proceeds.

Getting sued by a creditor isn’t a pleasant experience and appearing in court can be downright scary if you don’t know what you are doing. If you are getting threatening letters from collection agencies or law firms, you need to take action now. Consult with an attorney (most offer free consultations) to figure out the best plan to handle the debt. I have had success in settling debts for less than the amount claimed due, without having to get involved in expensive litigation. That’s a much better option than the judgment collection options I have described.