If you fall behind in payments on a large a credit card debt, you risk the possibility of being sued in civil court by the company that issued the card. If you lose, you will be legally ordered to pay a certain amount of money to the company in damages. However, you may be able to settle for a smaller amount of money out of court after the civil judgment has been issued.
Credit Card Debt
When you take out a credit card, you must sign a legally binding contract to pay back the money borrowed against the line of credit. Although this contract is legally binding, you may refuse to pay it. To open up a greater number of options for the collection of the debt, the creditor may file a breach of contract suit against you in civil court.
Civil Judgment
When a creditor sues you, the case will be heard by a judge, who will determine whether you in fact have a legal obligation. If a judge finds in favor of the credit card company, then the debtor's legal obligation to pay the debt is upheld in a court of law and a civil judgment for damages will be issued against you, usually in the amount of the debt, sometimes plus legal fees.
Settlement
After you have been the object of a civil judgment, you still have the option of settling with the creditor out of court if the creditor agrees to this settlement. There is no law that restricts the creditor from agreeing to receive less money from you than you owe, even after a civil judgment. The creditor may believe that you do not have sufficient funds to pay the full judgment and will therefore agree to only partial payment.
Considerations
While you could legally settle a debt after a civil judgment has already been issued against you, the creditor may be disinclined to settle. This is because receiving a civil judgment provides the creditor with a number of new legal avenues to receive payment. For example, the creditor now has the option of petitioning the judge to garnish your wages and freeze your checking or savings account.
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