Making regular payments to your credit card company benefits your credit rating and prevents the company from closing your account and initiating collection activity. Defaulting on your credit card debt carries severe consequences and places you at risk of a debt collection lawsuit. If sued, you may face wage garnishment, a bank account freeze or even a property lien.
Misconceptions
Many consumers who are struggling financially believe that credit card companies are quick to sue. In reality, this isn't the case. Credit card companies don't often sue consumers. A lawsuit requires time and money that few credit card companies are willing to risk. Your credit card company is much more likely to sell your delinquent account to a third-party collection agency. The majority of lawsuit threats that consumers believe come from credit card companies actually come from collection agencies.
Benefits
Credit card companies don't dispose of debts after a few missed payments. The majority of credit card providers wait a full six months before charging off and selling unpaid accounts. Because lawsuits require the same time and effort from a collection agency as they would from a credit card company, the collection agency will attempt to convince you to pay the debt voluntarily before initiating legal proceedings. Thus, you are unlikely to face a lawsuit over your unpaid credit card debt until months -- sometimes years -- after you stop making payments.
Time Frame
Fail to submit a payment on any unsecured debt, such as a credit card, for 180 days and your state's statute of limitations for debt collection will begin to count down. The statute of limitations varies, depending on your state, and regulates the amount of time any creditor has to sue you for a given debt. Once the statute of limitations expires, your creditor still has the right to collect but can't legally use a lawsuit to facilitate debt recovery.
Features
Not everyone gets sued for unpaid debts. According to New York's Neighborhood Economic Development Advocacy Project, a lawsuit is more likely if the debt you owe exceeds $1,000, you haven't attempted to make payment arrangements, or the creditor that owns the debt has a history of suing debtors.
Warning
Although the statute of limitations restricts creditors from filing lawsuits after a specific period, this doesn't stop out-of-statute lawsuits from occurring. If your creditor files a lawsuit against you and you don't acknowledge the suit or present a defense, the creditor wins the suit by default -- even if the debt it is suing for is beyond the statute of limitations in your state. You must respond to the summons, show up in court and use the expired statute of limitations as your defense to avoid losing the lawsuit.
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