Credit Card Debt and Small Claims Court

Credit card debt can lead to lawsuits in small claims court. Although state laws vary, small claims courts usually review lawsuits for credit card debt under $10,000. Credit card companies and debt collectors sometimes file lawsuits to collect a credit card debt that you failed to pay. It's usually a last resort to collect the debt after months or even years of trying to collect by mail or telephone.

Avoiding Court

Payment plans and debt settlement are two options for avoiding a lawsuit in small claims court. Debt settlement is popular with credit card debt because it allows you to settle credit card debts for much less than the full balance. SmartMoney reports that credit card debts can be settled for 20 to 70 percent of the balance. Payment plans allow you to chip away at the full amount due in installments. A final option is bankruptcy, which can completely eliminate credit card debt in just three months under Chapter 7 bankruptcy.

Credit Reports

Lawsuits are public record but nothing is added to your credit report unless the credit card company wins a judgment. Judgments are legal decisions reached by a judge and order you to pay a specific sum to the credit card company. Major credit bureaus Equifax, Experian and TransUnion regularly monitor court documents and will add the judgment to your credit report. The information remains on your credit report for seven years, making it difficult to obtain new credit at competitive rates for a while.

Summons and Complaint

Lawsuits originating in small claims court are usually hand-delivered by a courier, although in some states they are sent by certified mail or left at your last known address. The courier can deliver the lawsuit to you anywhere, but attempts are usually made to your home and sometimes your place of employment. Once the courier touches you with the lawsuit you are considered served. The document is legally considered a summons and complaint. The summons is similar to a cover letter, and is generally one or two pages long. It is the notification of the lawsuit. The complaint is the actual lawsuit and includes allegations being made by the credit card company. It is attached to the summons.

Tall Odds

Illinois Legal Aid reports that credit card companies are virtually guaranteed to win in court if you legally owe the debt and they prove it by showing the judge documentation such as your signed credit card application and your payment history. The judge will quickly rule in favor of the credit card company unless you have a suitable defense such as identity theft or you allege that you paid the bill but your account was not properly credited. Telling the judge that you were having financial problems is not a suitable defense.

Garnishment

After siding with the credit card company the judge will issue a judgment. If you refuse to make payment arrangements the credit card company or debt collector can return to court to ask that your bank account or wages be garnished. That can result in a percentage of your paycheck being sent to the credit card company each month or your checking account being frozen while the creditor freely withdraws money.

Legal Advice

See an attorney if you are sued in small claims court for credit card debt. The attorney can protect your rights, negotiate a settlement or payment plan with the card company or debt collector and help you avoid a judgment.

References

About the Author

Robert Lee has been an entrepreneur and writer with a background in starting small businesses since 1974. He has written for various websites and for several daily and community newspapers on a wide variety of topics, including business, the Internet economy and more. He studied English in college and earned a Bachelor of Arts in liberal arts from Governor's State University.