How Often Do Credit Card Companies Sue Debtors?

by Craig Berman ; Updated June 11, 2018
A woman paying bills at the kitchen table.

Using your credit card to make a purchase involves a promise to pay the issuer when the bill comes due. Failing to follow up by remitting what you owe allows the credit card company to escalate the measures it uses to collect the debt. If you fail to make payment arrangements over an extended period, the company or a collection agency can file suit to increase its chances of recovering the funds.

Charge-offs at Risk

Signing a credit card agreement commits you to a contract that demands you make payments as scheduled. Once you breach that agreement by failing to pay on time, you place yourself at legal risk. Credit card companies generally give themselves the freedom to sue a debtor any time an account is delinquent when they have account holders sign their credit agreements. Typically, however, legal proceedings don’t start until the account has been charged off, which occurs from 90 to 180 days following the initial delinquency. Companies may not bother suing over small balances, but if your debt is more than a few hundred dollars, a lawsuit is a serious risk.

Outsourcing the Debt

Original creditors often sell delinquent accounts to debt collectors if their own collection efforts fail. Once the agency takes ownership of the debt, it has the same rights to seek a judgment against you as the credit card company did. Regardless of which business sues you, the lawsuit will be filed in state court based on where you live, and the time you have to respond to the complaint and prepare a defense varies according to your state laws.

Don't Ignore Summons

If you get a notice from a credit card company threatening a lawsuit, take it seriously. Companies aren’t allowed to bring up the prospect of court action unless it’s under serious consideration. Don’t fail to respond to a summons, as this could result in a judgment being made against you. Once a credit card company wins a judgment against you, it can get a court order to garnish your wages. However, because the vast majority of such cases end in default judgments, the credit card company may not be prepared if you contest the case and offer a defense.

Demand Proof

Should you be sued, insist that the agency provide proof of the debt. While the credit card company presumably has an easier time getting the information it needs, a debt collector may not have proof that's adequate enough to convince a court that the debt is legitimate. If you were never served with the required paperwork, you may be able to get the case dismissed on those grounds. You can also have the charges waived if the debt is beyond the statute of limitations for collections in your state, if you can prove you didn’t make the purchases or if a payment wasn’t credited appropriately, among other reasons. The statute of limitation for debt varies widely from state to state. For example, the California statute of limitation is four years for written contracts, compared to Kentucky's and Rhode Island's 10 year statute of limitation. Failing to respond to the original summons voids the possibility of these defenses.

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