If you fall behind on your credit card bills and the issuer loses confidence that you’ll voluntarily pay the debt, you may find yourself receiving correspondence threatening a lawsuit to recover the money. When that happens, act quickly to determine the appropriate course of action. If the debt isn’t legitimate, you’ll have to start fighting back right away. If it is, you’ll need to make payment arrangements or consider other options.
Don’t Ignore It
It’s easy to panic when you get the message that a credit card company is threatening legal action, but ignoring the situation won’t make it go away. While credit issuers don’t always follow through and file suit, throwing the envelope in the trash and hoping for the best isn’t a good idea. Read the message carefully to note the amount of the debt, how late it is and whether it offers any options to avoid the lawsuit.
Don’t Assume It’s Valid
Debt collection scammers may leave official-sounding messages alleging that court proceedings are underway and you have just hours or days to settle the matter. Ask any debt collector to provide validation notice of the alleged credit card debt in writing, including the amount of the debt and the name of the creditor. Confirm that the collection agency is real and check your credit report to confirm the debt is accurate. Don’t confirm information or provide access to your bank account over the phone until you get this verification.
Check for Legitimacy
Even if the collection agency checks out, make sure the debt itself is legitimate. If the unpaid balance is the result of identity theft, unauthorized purchases or a dispute with the merchant, contact the credit card company with those concerns. If the issues are tacked-on fees and penalties, ask for detailed explanations of the charges and the provisions of your credit card agreement that permit them. This may cause the credit card company to remove those amounts from any lawsuit.
Contact the credit card company and find out what your options are. Even if you can’t pay the entire balance right away, the issuer may allow you to set up a payment plan or accept a portion of the debt as a settlement. You also may be able to enter a consumer credit counseling program that lowers your monthly payments. Any of those options may cause the credit card issuer to table a lawsuit on grounds that you're showing a good-faith effort to pay your debt.
If you can’t pay the debt and the issuer is unwilling to work with you, you may consider filing for bankruptcy. This would prevent further collection activities and likely result in the debt being discharged unless you obtained the account through fraudulent means, such as by falsifying financial information on your application. However, given bankruptcy’s negative effects on your credit report, this should be a last resort. Consult a legal expert on personal bankruptcies before choosing this option.
- Better Business Bureau: Fake Debt Collectors Threaten Victims With Lawsuits and Arrests
- ABC News: What to Do If You're Sued By Your Credit Card Company
- Fox Business: Can Creditors Sue You?
- Experian. "What is the Statute of Limitations." Accessed March 31, 2020.
- Federal Trade Commission. "Disputing Errors on Credit Reports." Accessed March 30, 2020.
- Consumer Financial Protection Bureau. "Complaint." Accessed March 30, 2020.