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Help! I’ve Been Sued By My Credit Card Company!

July 27, 2012

A credit card balance is like snow at the top of a mountain. A good amount of snow is pretty and fun to ski. Likewise, a credit card balance often means that you purchased items that you could not presently afford – often “fun” expenses. However, too much snow can cause an avalanche. Too much credit is equally as dangerous as just one missed payment can damage your credit. Wait too long to pay and the credit card company can close your account, declare the debt defaulted, and raise your interest rate (often to 28% or more!). If you are still unable to pay your credit card debt, you can look forward to harassing telephone calls, third party collectors, and finally a lawsuit.

When you receive a summons to appear in court you have four options: (1) do nothing; (2) defend the law suit; (3) negotiate a settlement; or (4) file a bankruptcy. Doing nothing is obviously a bad choice. When you fail to appear in court the judge will enter a judgment against you for the full amount of the debt, plus interest, plus fees. Your wages are then subject to garnishment and the money in your bank account may be seized. A judgment is a public record that will remain on your credit report for at least seven (7) years.

Hiring an attorney to defend a credit card lawsuit is usually not cost-effective because it may cost several thousand dollars in legal fees to contest a debt of just a few thousand dollars. Additionally, if you actually owe the money, there is a good chance you will lose the lawsuit.

Even if you are represented by an attorney, it is very difficult to negotiate a settlement once a lawsuit is filed. That is because the work for the creditor is already done and money is already spent to obtain a judgment. A judgment is a legal hammer that will force you to pay your debt. Why would the creditor stop the lawsuit for less than full payment?

The final option, bankruptcy, is a legal shield. Bankruptcy immediately stops the lawsuit and prevents the entry of a judgment. Once the individual’s obligation to pay the debt is discharged by the bankruptcy court, the lawsuit must be dismissed and cannot be refilled. Filing bankruptcy prevents almost all future lawsuits from being filed and can discharge the obligation to pay most court judgments.

If you have been sued by a credit card company, discuss your situation with an experienced bankruptcy attorney. There are many options for dealing with your financial difficulty, and a bankruptcy attorney can help you select the best course of action for you and your family.


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