Some consumers ignore credit card debt until a creditor files a lawsuit. But even after being sued for credit card debt, you can make an agreement with the creditor in which you promise to pay the debt. Agreeing to pay credit card debt after being sued prevents a creditor from taking further action to collect the debt, such as garnishing your wages or levying your bank account.
Avoid a Lawsuit
A creditor or debt collector may threaten a lawsuit before filing papers. Take the creditor's threats seriously and make arrangements to pay the debt. Failure to pay may eventually lead to a court hearing. Going to court increases the likelihood of being found guilty and having a judgment on your record for the next seven years. Past delinquencies and judgments harm credit scores and can trigger rejections if you need financing for a car or house.
Paying a Judgment
Repairing the relationship with a credit card company entails satisfying the judgment order by paying the past-due balance. Paying a judgment will clear the outstanding balance on your account, but this move will not remove the judgment from your report. Any creditor pulling your credit history for seven years after the judgment will see this derogatory information. Establish an agreement with your creditor where it agrees to update your credit report and list the judgment as "paid."
Settlement Offer
Creditors are usually eager to recover some of the outstanding balance owed, and some creditors work with debtors to settle the balance after a lawsuit. This is often the case when a debtor files Chapter 7 bankruptcy and petitions the court to erase his liabilities. Debtors who cannot afford to pay a debt in its entirety can make an offer for less than what's owed. Creditors then counter the offer or accept the amount.
Considerations
Settling a credit card debt after a lawsuit may trigger a credit-report update that reads, "settled for less than balance owed." This notation also has a negative impact on credit ratings because you didn't fulfill your obligation with the credit card company. This can hinder approvals for future credit cards. Talk with your credit card company and inquire as to how it plans to report the debt settlement. Push for the company to report the debt as "paid as agreed." Get this agreement in writing before writing a check for your final payment.
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