Friday, July 30, 2004

Can I Be Sued in a Credit Card Debt Settlement Program?

When people borrow money using their credit cards, they are legally required to pay this money back. Failing to pay this money back according to the repayment terms in their credit card agreement places the person in breach of contract. A debtor can, in some cases, be sued by his credit card company. A person can be sued even if he is enrolled in a debt settlement program, although it may be less likely.

Credit Card Debt

    A person incurs credit card debt by borrowing money against the card's line of credit. If a person doesn't pay the money back within the same payment period at which he borrowed it, he will likely be charged interest. In addition, if the person fails to make the required minimum payment on the card, he may face additional penalties and punitive interest rates. These fees can cause his debt to snowball.

Debt Settlement Programs

    As a solution to credit card debt, some debtors enroll in debt settlement programs. These programs provide financial counseling to the individual and help him negotiate with his creditors to settle his debts for a smaller amount of money. In many cases, credit card companies will not require that the person pay the full amount of money owed to them. However, companies are not obligated to accept less than full payment.

Lawsuits

    If a person breaches his credit card agreement, the credit card company is legally allowed to file suit against the person, as he has violated a legal contract and, in doing so, caused it to suffer financial losses. Enrolling in a debt settlement program provides no financial protection. The only way debt settlement could protect a debtor from a lawsuit would be if the credit card company signed an agreement through the program in which it agreed to accept partial payment and this payment was made.

Considerations

    While a credit card debt settlement program cannot legally protect a person from being sued by a credit card company, it may postpone the filing of the suit. This is because if the company learns that a person has enrolled in a debt settlement program, it may wish to hear the person's settlement offer before filing suit. However, the fact that the person enrolled may also make no difference.

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