What Happens in Court Judgments for Credit Cards?

When you leave credit card debt unpaid, your credit card company or the collection agency that purchased your debt has the right to sue you in court. A court judgment is the result of a successful lawsuit. The civil judgment serves as legal acknowledgment of the creditor's right to recover the unpaid debt and provides it additional legal tools with which to do so.

Lawsuit Notification

A court judgment begins with a lawsuit. Once your creditor files suit, it must serve you with formal notification of the lawsuit via a summons and complaint. The complaint details the reason why your creditor sued, and the summons provides you with the date and time of the impending court hearing. If you respond to the summons and complaint, the hearing proceeds as scheduled. If you do not respond, the court grants a default judgment in the creditor's favor.

The Hearing

At the court hearing, the judge will give both you and the creditor's representative an opportunity to present your case. The credit card company or collection agency will present as much evidence as possible documenting your credit card debt. Thus, you must also bring evidence to support your defense. Because the grounds on which you can defend yourself vary, so too does the documentation you will need to bring to court. If the debt was incurred as a result of identity theft, for example, you must provide the court with evidence of the theft, such as a police report documenting the event. After listening to both sides of the case, the judge makes a decision regarding whether your unpaid credit card debt merits a judgment in favor of the creditor.

Judgment Amount

If the judge grants the creditor's motion for a judgment, you must repay your unpaid credit card in addition to any fees the debt has incurred since you originally defaulted. Although not all debts collect interest after the debtor defaults, credit card debt is an exception to this rule. The Fair Debt Collection Practices Act notes that any debt subject to interest charges from the original creditor will continue to incur interest until paid in full. In addition to basic credit card interest charges, judgments incur interest annually. State laws vary regarding how much interest a creditor can charge each year on an unpaid judgment. In general, however, state interest rates range from 8 to 12 percent.

Judgment Recovery

You can pay off your judgment at any time. If you do not make arrangements to pay voluntarily, however, the creditor can force you to pay your credit card debt by seizing your bank accounts, garnishing your wages and, in some states, placing liens on your real estate and personal property. Your state laws determine how long your creditor has to collect your credit card debt before its judgment is no longer valid (see Resources). Once the judgment expires, the creditor can still collect the debt but only if you pay it voluntarily.