When can a credit card company sue you?

Yes, it’s scary to fall behind on your debts. If your credit card debt is seriously delinquent, it’s smart to think about steps you can and should take—such as negotiate with your creditors or explore debt resolution—to protect yourself from aggressive collection efforts, including lawsuits.

Here’s the thing. It costs money to come after you in court, so that’s not the first step your credit card issuer will take, even if you’re struggling to pay. Even if your financial situation is bad, you have a few options to move forward, and they don’t all end with you in court.

The information provided below is intended for general informational purposes only and should not be considered legal advice. For personalized legal advice, consult with a qualified attorney licensed to practice law in your state.

Can a credit card company sue you? 

Let’s get the bad news out of the way. Yes, credit card companies can sue you for non-payment. According to the Consumer Financial Protection Bureau (CFPB), credit card companies sue their customers about 12% of the time. On average, credit card companies sue to recover balances over $2,700—this isn't a set amount, but an average. Credit card companies can and do sue on debts both larger and smaller than $2,700.

How likely your credit card company is to sue you for credit card debt depends on a few things:

Communication

Do you communicate with them about your payments? Or avoid their calls? If you send a cease-and-desist letter or avoid your credit card issuer, suing you might be the only way they have to communicate with you about your balance. 

Balance

How much do you owe? There might be a higher chance of getting sued if you have a higher balance. 

Account status

How many months past due are you? Creditors don’t use lawsuits as their first attempt to collect. Going longer without voluntarily paying could put you into lawsuit territory.

Resources

Do you have money to repay the debt? Creditors are allowed to check your credit report when pursuing you for repayment. If you make other payments on time, they could assume that you'll be able to pay a judgment and court costs when they sue. If your credit card issuer is also your bank, in some cases it could check your account balances.

Location

Some states are more consumer friendly than others. For instance, 16 states prohibit debt buyers from suing in small claims court, where the rules are more relaxed and informal. (Debt buyers aren’t original creditors. They buy debts for pennies on the dollar, and then have the right to try to collect.) Fifteen states require debt buyers to provide information proving the debt’s accuracy and validity in the lawsuit notice and the request for a default judgment. These rules might seem like they wouldn’t pack much punch, but in fact, they were designed to slow or even stop the flow of aggressive debt lawsuits in the states where these rules apply.

Now the better news. Lawsuits are often a tool of last resort for most credit card issuers. If you’re feeling fearful, you can breathe now. Through solutions like debt resolution, credit card issuers are often willing to help their customers who are having payment problems. 

So stop stressing and start solving—you’ve got this.

When can a credit card company sue you?

A credit card company could sue you if you default on your debt. Debts typically go into default after 180 days of missed payments. At this point, the company may take legal action to recover the owed amount.

Here’s a general timeline of what happens leading up to a credit card lawsuit:

• 30 days late: Your payment is considered late. A late fee may be added to your balance. The credit card company may send you an email to remind you of the missed payment.

• 60-90 days late: The creditor will intensify its collection efforts. This could include multiple calls, letters, and emails. Your late payment is likely to be reported to the credit bureaus. This may hurt your credit score. You might not be able to use the credit card.

• 120 days late: The creditor might transfer your debt to its collection department, or sell it to a collection agency. Your account is now severely delinquent. The creditor will continue to report the delinquency to the credit bureaus. The more late your payment is, the more your credit standing could suffer.

• 180 days late (6 months): For most creditors, when your account is this late, it's officially in default and you’re at much greater risk of being sued. The credit card company may charge off the debt. This means it’s a loss for accounting purposes. However, it doesn't erase your obligation to pay. The company may then sue to recover the debt. Or, it may sell your debt to a collection agency, which could also sue you.

You can take steps that could reduce the chance of a lawsuit:

• Contact your credit card company when you can't afford your payments. Don't avoid their calls.

• If you're uncomfortable negotiating a debt solution yourself, enlist the help of a debt resolution professional. They can contact your credit card company for you and help you through the process.  

• Remember that your creditors can see how you handle your other credit accounts, and possibly what you've got in the bank.

What happens when you don’t pay your credit card bill?

Your credit card company will probably take these actions before considering a lawsuit:

• Charge you a late fee after a missed payment

• Report your payment as “late” to credit bureaus (31 days after the due date)

• Reduce your credit limit or even close your account 

• Increase your interest rate (if at least 60 days past due) for at least six months

• Try to contact you

Your credit card company will try to get hold of you many times via calls, emails, letters, texts, or social media before they file a lawsuit against you. These are opportunities to ask for help and discuss solutions.

Open up communication with your creditors. Explain why you can’t pay, how much you can afford, and how long you expect to need help paying your bill. For instance, if you recently lost your job and you’re struggling, explain why you need a break from payments and when you expect to start making them again. Or ask them to reduce your payment or allow you to make partial payments.

Don't send in less than your minimum payment unless the creditor has agreed to a lower amount. Be sure the agreement is in writing. Credit card companies and collectors can sue you even if you make partial payments. If your problems are more serious or permanent and you're approaching the charge-off stage, it might be time to propose a settlement (an agreement to clear the debt for less than the full amount you owe). That could be a single lump sum payment, or a series of payments. 

If you continue ignoring your credit card company, however, collection efforts will intensify. And they may ultimately result in a charge-off and a lawsuit. 

What is a charge-off?

Credit card companies usually try to collect past-due amounts for 120 to 180 days before “charging off” your balance. Charging off debt doesn't make the debt go away. It’s just an accounting term that means writing off the balance for their own tax and accounting purposes. Therefore, even if your debt is “charged-off,” it's still valid and collectable.

In fact, your chances of a lawsuit could go up after a charge-off. The credit card issuer will not expect you to voluntarily pay your balance at this point, and if your balance is large its collection department may file a lawsuit. Alternatively, it may turn you over to a collection agency or sell your account to a debt buyer. Those professionals make their living by suing for debt and are not shy about it.

Before they charge off your account, your card issuer may try to help you out (and cut its losses) with account re-aging, forbearance, debt management, or debt resolution. 

• Account re-aging allows you to bring your account current with three consecutive minimum monthly payments or an equal lump-sum payment. 

• Forbearance can take several forms—usually lowering your payments or letting you skip some payments. 

• Debt management happens through a credit counselor. You make a single monthly payment into a plan, and your counselor distributes it to your creditors. The creditors may agree to lower your interest rates and monthly payments and waive late fees.

• Debt resolution means the creditor accepts less than you owe as payment in full. You can negotiate your own debts or hire a professional debt resolution company to help you. Debt resolution may help you clear your debts. 

Some credit card companies will sue before charging off a balance. This isn't common, but it’s possible, especially if you owe a large amount and have assets or a steady income.

Once the card is charged off, the credit card company might sue you. Or it could sell the debt or transfer it to a collection agency (and let them sue you). You’re more likely to be sued if you haven't come to an arrangement, especially if your balance is large and, in some states, you’re not judgment-proof. Judgment proof usually means you don’t have enough assets and income for the creditor to seize. 

Can a debt collector sue you?

Debt collectors can sue you for credit card debt. And they are more likely to if you ignore them and they believe they can collect a judgment. 

Understanding the difference between credit card companies, your original creditors, and debt collectors or debt buyers is important. Collectors get hired or buy the debt you owe. Your rights depend on who is coming after you.

If a debt collector contacts you, ask them (in writing) to validate the debt, especially if there is any doubt that the debt is yours. It’s smart to ask the collector to prove that you owe the money and that they have the right to ask you for payment. Verify the debt's age and look up the statute of limitations for collecting a debt in the state where you live. (Do an internet search for “statute of limitations on debt in [your state].”) If the statute of limitations has passed, you’ll want to point it out to the court when you or your attorney answers the lawsuit.

Once you have all the information you need, you have choices:

• Pay the debt

• Deny the debt

• Negotiate the debt

• Ignore the debt (not recommended) 

You can often head off a debt collector lawsuit by simply communicating with them to work out a solution you can afford. Going to court is expensive for collectors, and results aren't guaranteed (unless you fail to show up, which means they automatically win). You can try to negotiate a payment plan that allows you to repay the debt in full with affordable payments, or to resolve the debt for less than you owe. 

What happens if you get sued by a credit card company?

Don't ignore a credit card lawsuit. It’s the one thing you can do to make the situation worse. If you don't answer a credit card lawsuit, the credit card company, collection agency, or debt buyer can get a default judgment (that means they automatically win their case). Then they can garnish your wages or go after your bank account and other assets. 

Read your summons, and make sure the suit is legitimate. Ask the debt collector to validate the debt. Your summons will tell you the deadline to file an answer and how to do it. You must answer the summons and appear in court to avoid a default judgment. 

In most places, you'll have about three weeks to respond to a summons for credit card debt. You'll go through a series of steps and complete some paperwork. 

• Determine your deadline and put it in your calendar.

• Decide if you're going to pay in full, negotiate a settlement or fight the lawsuit, and whether you're going to go it alone, hire a lawyer or contact a debt resolution company.

• Gather any documents you need to file your response. Contact any professionals you decide to consider hiring. 

• You'll need to answer your summons. If you don't think you owe the money or that you have an affirmative defense, include that information in your response. (An affirmative defense is a fact that essentially shuts down the lawsuit. For example, if you can prove that the debt is the result of identity theft, that could be an affirmative defense.) Complete your response according to the instructions that you'll receive with your summons.

• File your answer within the deadline.

The worst possible thing you can do is ignore the lawsuit. It can take years to pick up the pieces after a default judgment, and there's no reason for that to happen. 

Should you get a lawyer if sued for credit card debt? According to Pew Research, you're more likely to settle or even win your case if you’re represented. Consider hiring an attorney if you don’t feel comfortable navigating the process alone and you can afford the help. You can also ask your local legal aid society for assistance.

What if you owe the money? And expect to lose in court? It’s better to avoid a lawsuit. Contact your creditor and ask for what you need—more time to pay, an affordable payment, reduced interest, a one-time settlement. This is when it can be really helpful to have a professional debt negotiator on your side to help work out the details.

Your bargaining position may be stronger if your credit and income aren’t great. But if you earn a good living or have money in the bank, settle as best you can. 

What happens if you can’t afford a lawyer?

Not everyone can afford representation. Or maybe the fees would exceed the amount you owe. If you're being sued in small claims court, you can represent yourself. Many people do, and those courts are used to helping people without legal backgrounds get through their cases. Your city may also offer free help from a legal aid society. You might also be able to negotiate debt resolution yourself or call upon a debt resolution company. 

How does a credit card lawsuit affect your credit score?

Judgments don't appear on your credit report and don't directly impact your credit score. 

Even so, the judgment could cause financial effects that ripple out to your credit standing. For example, if your wages are garnished, or you have to pay your balance plus court costs and attorney fees, you'll have less money available for other expenses. That could lead to missed payments, credit report damage and future financial trouble. 

The debt that led to the lawsuit could appear on your credit report for seven years past the original date of delinquency. Unpaid debts are all but guaranteed to have a negative impact on your credit standing.

Steps to negotiate debt before a lawsuit

You may be able to stop a lawsuit by negotiating a settlement with your credit card company.

• Decide what you can offer—a series of payments, a lump sum, or a combination. And determine how you'll get that money—save it up, borrow it, or sell things you own. 

• Contact your creditor or consult a debt resolution company. 

• If you reach an agreement, get it in writing and signed before sending any money.

• Once the negotiated account has been paid off, check your credit report to make sure that the balance has been reported as zero.

Getting out of debt usually isn’t easy or quick. But it can be done. You just need a plan and the willingness to follow it. Sometimes it’s easier to stay willing if you have someone in your corner every step of the way. Start by talking with a debt expert—someone who understands the situation and can offer real-world solutions.