Having credit card debt is unpleasant but not catastrophically disruptive to your life. People’s main fear is that they do not know what consequences it carries, what rights and obligations a debtor has, and what to do after receiving a letter about a lawsuit. The Debt Stoppers specialists know how to act in such a situation properly. Read more about the ins and outs of working with credit card debts in the article below.
When You Can Be Sued
If you missed one or two monthly payments, it will affect your credit score but will not force bank employees to initiate legal proceedings. However, failure to pay debts within five to six months (exact dates may vary) will do it. As a rule, financial institutions prefer to work with clients directly, without going to court, since this process costs money. Nevertheless, creditors take legal action against hard-core defaulters.
Your First Steps
Once a credit institution has filed a complaint with the appropriate authorities, you will receive a written notice that identifies a respondent (-s), the lawsuit reason, the deadline for filing a response, and the date of a hearing. Here’s what you need to do first:
- Make sure that the notice really refers to your debt. Unfortunately, mistakes sometimes happen, and someone else’s debt may have been attributed to you;
- Check the expiration date of your debt. Depending on the region, it may differ (4-6 years from the last payment). If this period has expired, you have the right to reject the collector’s claim, but it does not relieve you of the obligation to pay it;
- It also happens that you can be sued for the already repaid debt. In this case, find the receipt for all the transactions to confirm the payment;
- If the creditor has not provided full information about your debt within five days after receiving the summons, you can file a counterclaim on this basis.
Recently, the number of cybercrimes and, in particular, identity thefts has increased. If you have never spent a prescribed amount or are not a client of the organization that sued you at all, you should conduct a thorough investigation.
What to Do Next
If you have rechecked all the information and made sure that the debt indicated in the letter is yours, you have several options for action.
You can ignore the subpoena and not respond to the claim. It is precisely what most lenders count on. Of course, your inaction will have consequences. In particular, the court will automatically rule in favor of the plaintiff, and it, in turn, may lead to withholding part of your salary to pay off debts.
Challenge a claim
It should only be done if you really have reason to dispute the collectors’ complaint. For example, the expiration date has passed, or the lender has not provided complete information about your debt. If you decide to use this option to confuse the court, it will play against you. The decision will not be made in your favor.
Pay the debt off
The situation that has arisen can be discussed directly with representatives of the credit institution. If you acknowledge that you have a debt and are ready to pay it off, you can negotiate and agree on a monthly payment plan or make a one-time transaction that will cover most of the debt. Sometimes it happens that lenders are ready to accept a smaller amount from you if you can deposit it right now.
Answer the lawsuit
Depending on the specific situation and state, the debtor has about 20-30 days to respond to the lawsuit notice from the receipt date. Do not ignore any lawsuits as it jeopardizes your income, property, and bank accounts. Writing a competent answer and preparing a defense in court can be difficult for inexperienced debtors. Therefore, it is recommended to seek professional help. They will check all your papers and come up with suitable tactics. By the way, if necessary, you can ask a lawyer to represent you in court.
File for bankruptcy
If you have a complicated credit situation and do not see the possibility of debt repayment (with numerous interest, penalties, and legal costs), you can file for bankruptcy. It is a complex debt relief process that requires going to court, but it does not take much time. You will be able to quickly resolve a painful issue and get partial or complete cancellation of debts due to your financial insolvency. Please note that depending on which Chapter you choose (7th or 13th), the consequences of declaring you bankrupt can affect you for 7-10 years.
Don’t Panic and Follow the Plan
Receiving a letter about a credit card lawsuit can be an embarrassing moment. However, there is no need for panic. For your own peace of mind, you can familiarize yourself with the rights of debtors. In particular, read the Fair Debt Collection Practices Act, which protects you from some collector actions. You have enough time to check everything, think it over, consult with experts, and make the right decision.