Top 5 reasons a credit card company might sue you

Dealing with credit card debt can feel overwhelming, and the prospect of a lawsuit only adds to that stress. Falling behind on payments isn't a personal failure; it happens to many people. Taking steps to get caught up and consolidate or resolve your debt could help you avoid a situation where your credit card company takes you to court over unpaid debt.

Generally speaking, lawsuits are near the end of the list of ways a creditor will try to get paid. A lawsuit shouldn’t take you by surprise. Here’s when they could happen.

Can a credit card company sue you?

Credit card companies could sue you in civil court when a debt goes unpaid. If they win, they get a judgment against you for an amount of money. Then they have the right to get a court order that allows them to collect in ways they couldn’t before they sued you. Those methods include:

• Wage garnishment. Your employer is ordered to withhold money from your paychecks and send it to the court. The court gives it to your creditor.

• Bank account levy. Your bank is ordered to give your creditor money from your bank account. 

State law determines when a creditor can use wage garnishments, bank account levies, or both to enforce credit card lawsuit judgments. 

If you get sued by a credit card company you should respond to the summons; don't ignore it. You have the right to appear in court, and if you do, your creditor must prove that:

• You owe the debt you're being sued for

• The amount of the debt is correct

• They have the legal right to collect the debt from you

Responding and going to court could give you some control over what happens going forward. For example, the credit card company might agree to let you resolve the debt for less than you owe.

If you’ve received a summons from a creditor, don’t panic. There are steps you can take if you get sued by your credit card company.

5 reasons a credit card company might sue you

Generally, a credit card company may sue if you default on your card agreement in any way. Here are five reasons why a credit card company might take you to court. 

1. Nonpayment

When you don't make a payment for an extended period, the credit card company might sue you to get you to pay. 

How long can you go without making a payment before a credit card company will try to sue? There’s no standard amount of time that creditors wait, but most don’t file a lawsuit until your account is at least six months delinquent.

If you can’t make your payments, communicate with your creditors. They may be able to help by letting you skip one or more payments.

2. Fraud

You could be sued by a credit card company if there's fraudulent activity on your account. 

Fraud can happen without your knowledge. For instance, someone steals your account details and uses them to make unauthorized purchases, or uses your identity to open credit cards in your name, then doesn't pay the bill. 

To the credit card company, it looks like you've defaulted even though you never opened the accounts. If the fraud goes undetected by you, you could find yourself facing a surprise lawsuit. 

One way to prevent accounts from being opened without your knowledge is to freeze your credit reports with all three major credit bureaus. If your credit report is frozen, you need to take the extra step of unfreezing it when you want to apply for credit (you can do it online). Most creditors won’t approve an application if they can’t check your credit, so a fraudster using your personal information could be turned down if they try while your file is frozen.

3. Illegal usage

Most people don't get a credit card with the goal of using them for something illegal. This situation is rare but could lead to a credit card lawsuit. 

Examples of illegal card usage may include using the card to commit fraud or purchase stolen goods. The latter could happen without you realizing it if you're using a credit card to pay for things you're buying from sellers on local marketplace sites. 

If the credit card company views your account as being in default or in violation of your card member agreement, then you could be sued. 

4. Exceeding credit limits

Exceeding your limit once might not result in anything worse than an over-limit fee or a penalty APR for the overage. Your card issuer might require you to bring your account below your limit by your next payment due date. If you exceed the limit regularly or do so and then stop paying, the credit card company could sue. 

It's difficult to exceed your credit card limit unless your credit card company allows transactions that would put you over the limit. They might ask you to opt in, and charge you a fee each time it happens. 

Avoid the financial consequences by not opting in. Also, set up account alerts to let you know when your balance is getting close to your credit limit. 

5. Rejected payments

Your credit card company might decide to sue if you schedule payments that don't go through.

For example, you schedule a payment for $500 but it's rejected because you don't have enough money in your bank account to cover it. 

If it's a one-time mistake on your end, your credit card company might charge you a fee and give you a chance to get caught up. But repeatedly having payments rejected could lead to a lawsuit if your account ends up in default. 

How to avoid creditor lawsuits

Getting sued is scary, sure. If you’re already dealing with a lawsuit, take a deep breath. You can get through this, but it might be easier if you get expert help, such as a credit card lawyer.

If you haven’t been sued yet but you’re worried, there are ways to avoid creditor lawsuits. Pay your credit card bills on time, and if you're experiencing financial hardship that's making it difficult to pay, reach out to your creditors. They may offer temporary relief by waiving certain fees or lowering your interest rate. It’s a good idea to talk to a debt expert for suggestions on how to handle overwhelming debt.