Can a Credit Card Collection Lawsuit Be Settled Before Trial?

by Craig Berman
Settling credit card debt before a lawsuit starts can save money and reduce the creditor's risk.

Any lawsuit can be settled before trial, and credit card collection lawsuits are no exception. It’s easier for the creditor to avoid the risk and expense of a trial, especially if it knows you’re planning to offer a defense. Preparing an offer that gives the creditor an acceptable profit and keeps you from paying more than you have to may make the lawsuit go away.

Know Where You Stand

Your chances of settling the case for an amount you can live with may depend on who the plaintiff is. You can be sued by the credit card company or an agency working directly on its behalf, which gives you more of a chance of securing a settlement that involves monthly payments instead of a lump sum. However, if the credit card issuer sold the debt as a charge-off, and you’re being sued by an outside collection agency or debt buyer, it likely acquired your debt for pennies on the dollar and will make a profit in a settlement. You’ll likely have to make an upfront payment to settle legal actions with those creditors, but you also may have an easier time mounting a defense.

Play Tough

You're in a stronger position in settlement talks if the company thinks there's more of a risk you'll defend yourself in court. Respond promptly to any court summons, which lets the issuer know you're not ignoring the situation -- and that the creditor is not going to get a default judgment against you. Depending on the amount at stake, it may be worth hiring an attorney who specializes in debt-related cases. You’ll also need to develop thick skin – collection firms are good at making you feel guilty for not paying in full and urging you to raid retirement funds or sell possessions to make a better settlement.

Burden of Proof

While the creditor may take it for granted that you owe the money, that’s not how the court sees things. The burden of proof is on the credit card company or debt agency to prove you owe what they say you owe, which means it has to produce records showing you incurred the debt and that it hasn’t passed the statute of limitations. Use that to your advantage when negotiating by insisting on seeing paperwork proving you incurred the debt.

Make an Offer

Creditors take a risk by bringing a case to trial. The judge may not rule in the creditors' favor, particularly if you bring a vigorous defense or if their paperwork isn’t in perfect order – a possibility with a debt buyer who may not have all of the documentation from the credit card issuer, nor the means to get it. The collection agency may tack on fees and penalties onto your original balance when making its initial demand for payment, but don’t start your offer with that higher amount in mind. Make your ceiling the alleged overdue credit card balance only, and start with a lower offer. You may have better luck negotiating a deal at the end of the month if you’re dealing with an agent looking to meet his quota.

Get Settlement Documented

Because an agent agrees to a settlement over the phone doesn’t offer sufficient protection to ensure the legal action will cease. Make sure you get a document in writing that the payoff amount settles the account, such as a faxed or scanned letter, before you hand over any money. Otherwise, you may wind up in court anyway over a disagreement as to whether that payment was intended to be a partial or full payment.

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