How severe does the debt have to be for a credit card lawsuit to be filed?
Some debt buyers will file suit for as little as $800
Credit card companies often sell delinquent accounts for pennies on the dollar to other companies (known as “debt buyers”), which file lawsuits to collect. But some credit card companies don’t sell their accounts. Lawsuits by these companies are called “original issuer” lawsuits.
Can a credit card company sue a debtor rather than just sell the debt?
Yes, they can, and some do. In Chicago and Cook County, American Express, Discover, and Capital One sue in their own name and will do so for as little as $800. As soon as you miss a payment, a credit card company could file a lawsuit against you, but most credit card companies will try to collect for months or years before filing a lawsuit.
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Is there any way to defend myself against a lawsuit from a credit card company?
There are procedures that the attorney general and Supreme Court have set up for filing affidavits, which put a duty on the credit card company to investigate the debt. If identify theft or an unauthorized individual used your credit card, then you could have a good defense to the lawsuit. With that said, claims that a significant other or cohabitating partner used the card without your knowledge probably wouldn’t be a strong defense.
Another way to defend against a lawsuit is to question the credit card company’s computer records at a trial. If the witness for the credit card company is unable to establish the foundation for the computer records upon which he or she is relying, then that could help your case. But this is not an easy argument to win. Because the witness is an employee of the original issuer (unlike in debt buyer cases where the witness knows nothing about the records of the credit card company), judges tend to assume that the witness is knowledgeable about the computer records regardless of whether that is actually so.
Can proving financial hardship be of any help?
From the perspective of the creditor, everyone is broke. In other words, almost every debtor will explain why they have financial hardship and why they cannot make the payments. It’s also common for debtors to threaten bankruptcy, so creditors will usually ask for a copy of the petition from the bankruptcy court. However, proving hardship can be helpful for the purposes of reaching a good settlement with the creditor. I call this the “turnip defense” because you can’t get blood out of a turnip.
There’s a way to present your financial picture to credit card companies in a way that convincingly shows them that you are not very collectible. In general, this is done by showing hard evidence of other bills and collection letters, and/or proof that you are on unemployment and/or have significant medical or student loan expenses. If you can prove that you truly do not have very much money, then the creditors might be willing to cut you a decent settlement.
Can you settle credit card debt with the credit card company after they file a lawsuit?
The most common way to settle credit card debt with the credit card company after a lawsuit has been filed is by proving financial hardship. After a lawsuit has been filed, an appearance should be filed with the court to prevent a judgment from being entered. (Having an appearance on file also makes sure that the debtor gets notice of anything the creditor is trying to do in court.) Then, examine possible defenses and your ability to pay. Also, gather the pertinent information in an organized way for presentation to the judge.
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