Credit card companies can and do sue for nonpayment. State and federal laws determine possible compensation, time frames and a creditor's right to sue. Some income and assets are exempt from garnishment, liens or levies. Additionally, creditors consider amounts owed and your financial situation prior to filing a claim. The size of the debt and your ability to pay helps creditors decide whether a lawsuit is worth the effort and cost.
Lawsuit Process
Slight payment delays do not necessarily trigger collection proceedings or lawsuits, but if your debt becomes severely delinquent or you avoid working out a payment plan with your credit card issuer, they may send the account to collections or attempt to sue you. Once you receive notice of an impending lawsuit, you generally have 20 to 30 days to respond. The court notice details time frames, pending court dates and your rights. During the proceedings, the court makes a judgment based on arguments from both parties.
Defense
Your defense depends on the circumstances and may include denying the debt outright, disputing the amount owed or contractual disagreements. Each state has a statute of limitations --- generally three to 10 years --- on credit card debt from the date the account became delinquent. If your account is beyond the statute of limitations, you have a valid defense against a lawsuit. Additionally, you are protected from liability on fraudulent charges and you may dispute such claims.
Concerns
Judgments will end up on your credit report, possibly hindering future lending and credit offers. Dependent on state laws, if a judgment is brought against you and you are unable to pay, debt collectors may request court-ordered bank levies, wage garnishments or possible property liens. Most government pay and benefits are exempt from garnishment for consumer debt. Failure to respond to a summons by a specified time may cause you to lose the lawsuit. Respond with any disputes, defense or financial hardship proof you have to lessen or prevent a judgment against you.
Considerations
Old debt may pop up at any time regardless of a statute of limitations. The debt doesn't expire; only a creditor's ability to sue is limited. Additionally, when a credit card issuer claims a "charge-off" on an account, the debt doesn't disappear. A charge-off simply means the creditor feels the debt is beyond collection and they need to write it off for tax purposes. Credit card issuers often sell delinquent accounts to outside collection agencies, which then try to collect on the debt.
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