Can I Be Sued for Credit Card Debts I Owe?

Reader Question: Can you be sued for credit card debts that are overdue?

Sure you can. You can be sued for just about anything these days -- especially in the United States, where we are such a highly litigious society. When you signed up for your credit card, you signed a contract with the company issuing that card. Failure to pay your bills is, in essence, a breach of that contract. So you can be sued for the unpaid debt.

With that being said, it's not very common for a credit card company to sue a customer over their debt, because it's just too expensive and time-consuming for them. Dealing with customers who stop paying their bills is just part of the business model for these folks. Sure, they do what they can to minimize their losses. And you can be fairly certain they will send your overdue account to a collection agency. But it is rare to be sued for credit card debts that are overdue.

Notice the difference between the words "rare" and "never" though. I would say it happens enough for you to be concerned. In most cases, the card-issuing companies will charge off the bad debt and then sell or transfer the account to a collection agency. In a minority of cases, however, they will initiate a lawsuit. You can find plenty of these real-life scenarios online by doing a Google search for "I am being sued for credit card debt" ... without the quotes.

It's also worth mentioning that there are laws protecting you in such cases. In particular, I'm referring to this one:

Fair Debt Collection Practices Act
http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm

If you get sued for a credit card debt you owe, the lawyers who are driving the lawsuit are bound by the stipulations of this act. So is the original creditor, the debt collection agency, or anyone else who tries to collect from you.

So what happens if the company succeeds in their lawsuit? Well, if a court judgment sides with the credit card company, the company will be presented with some form of remuneration at your expense. There might be a court-ordered payment to contend with, or they might even garnish your wages for the amount owed. I can't speculate this far into the process, so I'll leave it at that.

Keep in mind that if you get a legal judgment against you in such matters, you'll have one more negative entry on your credit report, thus lowering your score even more. You'll have the initial late payments on your report, possibly an entry from a collection agency, and the legal judgment on top of it all. Each of things will damage your credit score. So it's wise to avoid being sued over your debt, if at all possible.

How can you avoid all of this? Well, you can work with the credit card company to come up a payment plan of some kind, or even some form of settlement where you pay less than the full amount owed. They would rather get something than nothing, after all. If you choose to communicate with the card issuer on such matters, be sure to document everything for future reference.

I recommend you read this Q&A session on the subject of debt settlement. It explains the consequences of such actions, and also gives a list of different options, ranked from best-case scenario to worse.

Summary and Going Forward

As you can see, you've got some homework to do. This is a serious matter that will affect your credit (and your ability to get future financing) for a long time to come. So you need to educate yourself beyond this blog.

Yes, you can be sued for credit card debts you owe. It doesn't happen often, but it happens enough for you to be worried about it. There are ways to resolve your debt before it reaches the point of a lawsuit. Typically, a credit card company will only threaten to sue if the cardholder has completely ignored them and made no attempt to resolve the issue.

So your homework at this point is to:

1. Research this topic further.
2. Do a Google search for "I am being sued for credit card debt."
3. Follow the link provided above for the Fair Debt Collections Practices Act.
4. Read through the FDCPA so you can understand your rights and protections.
5. Read the Q&A session on debt settlement that I've provided above.

Another common question we receive on this subject is this:
Can a credit card company take my house?