Will I Get Sued for Credit Card Debt?

The answer to the question "Will I get sued for credit card debt?" proves complex. Federal laws, state laws and the debt collection options available to creditors weigh heavily on whether a credit card company or debt collection agency sues an individual over unpaid debts. Considerations affecting a creditor's decision to sue a debtor include state wage garnishment laws and insolvency and bankruptcy options. The amount of credit debt involved also impacts a creditor's decision regarding legal action.

Credit Card Companies and Lawsuits

Credit card companies possess the legal right to sue individuals over unresolved debts. Many companies threaten debtors with lawsuits as a scare tactic or means of extracting payment. However, lawsuits are costly endeavors, and credit card companies generally don't sue debtors if the amount the company would spend during the process exceeds the amount of money the company stands to gain from a lawsuit. Creditors prefer negotiating payment schemes to lawsuits given the high cost of the latter.

Wage Garnishment

Almost all states permit creditors to garnish wages in the event of unpaid credit card debt. Wage garnishment constitutes the process by which a creditor obtains a writ of garnishment through filing suit and gains the legal right to take wages directly from a debtor's paychecks as a means of collecting outstanding debts. Federal law only permits garnishment on wages exceeding 30 times the federal minimum wage -- some states have even stricter garnishment limits. As of 2011, four states do not permit wage garnishment for credit card debt. These states are North Carolina, Pennsylvania, South Carolina and Texas.

Insolvency and Bankruptcy

In the United States, United Kingdom and British Commonwealth nations such as Australia and South Africa, debtors may initiate bankruptcy proceedings by filing a suit claiming insolvency. Insolvency arises when an individual possesses insufficient assets to pay debts or make payments as they come due. Bankruptcy results in the liquidation, or sale, of a debtor's assets. Depending on state law, assets run the gamut from automobiles to furs and jewelry. Bankrupt individuals are generally allowed to keep their homes. Bankruptcy only arises in cases of extreme debt and entails a measure of last resort.

Statute of Limitations and Consumer Rights

Statute of limitation laws are important for those facing legal action at the hands of creditors. In many cases, creditors assume that debtors don't understand the extent of the law regarding credit and attempt to exploit that presumed ignorance for financial gain. In most states, the statute of limitation on credit card debt is less than six years. In Texas, it is four years. This means that credit card companies do not possess the right to attempt to claim debt after the statute of limitations has lapsed on that debt. In the event of bankruptcy, creditors must legally stop attempting to collect debt; this includes all phone calls and mailed notices. Creditors who contact debtors after bankruptcy proceedings are in violation of federal law.