Can You Still Deal With the Credit Card Company If You're Being Sued?

Credit card lawsuits are serious matters and sometimes lead to court judgments and even wage garnishment. A lawsuit is usually a last resort for collecting debt after months or even years of other efforts including telephone calls and letters sent by postal mail. At this point the account is usually managed by a debt collector working for the credit card company. Or the debt collector may own the account after purchasing it from the card company. Either way, the chances of dealing with, or communicating directly with the credit card company are not good.

Timeline

MSN Money reports that credit card companies generally close accounts after payments fall six months behind. They list the account as charged-off for accounting purposes but still expect full payment from you. An internal collections team may manage the account for a while, with the account eventually assigned or sold to an outside debt collection agency. The credit card company no longer has any interest in the account if it is sold and will not talk to you about a lawsuit initiated by the debt collector.

Considerations

Debt collectors assigned defaulted credit card accounts are working on consignment from the credit card company, meaning they are paid only if they collect the debt. Usually the debt collector enters into a written agreement with the card company giving it the exclusive right to collect the debt. Some debt collectors are law firms or have attorneys on staff. Filing a lawsuit is an option they can use at their discretion. Credit card companies that have assigned accounts to debt collection agencies generally will not discuss the account with the customer, even during a lawsuit.

Debt Settlement

Attempting to deal directly with the credit card company is worth a try although it may not yield good results. The worst that can happen is that the card company will refer the call to the debt collector. However, resolving the issue with the debt collector is possible through a process called debt settlement. Card companies and debt collectors sometimes will settle old debts for 20 percent to 70 percent of the balance.

Leverage

The lawsuit gives the debt collector enormous leverage in debt settlement talks, meaning a huge discount is unlikely. The debt collector is likely to ask for say, 90 percent of the balance, with negotiations continuing from there. Settlements for about half the balance are more likely. An installment plan with monthly payments is also a possibility.