If a credit card company or collections agency sues you and you’re served with a complaint, you’ll want to respond. If you don’t, the credit card company, otherwise known as the plaintiff, will likely automatically win.
If that happens, they may be able to garnish your wages, put a lien on your home, or levy your bank account for the money they’re owed. None of those are desirable options for you, the defendant.
Fortunately, if you respond to the complaint – especially if you haven’t received an official complaint or court summons yet – you have options for responding in ways that can lead to a better outcome.
If you haven’t been sued yet, negotiate with your creditor
If you’ve yet to receive an official notification of a lawsuit, you can negotiate with the credit card company. After all, they would probably like to avoid the expense of bringing you to court. Contact their customer service and ask what payment assistance plans they have available for those going through financial hardship.
Depending on the card issuer’s policies, you may be able to reduce your minimum monthly payment amount, lower your interest rate, or settle the debt with a lump sum payment, even if that payment is lower than the debt total.
A credit counselor may be able to help you with this step if you’re uncomfortable going it alone. That said, be aware that some debt settlement agencies charge high prices for negotiations you could have done yourself.
If you’ve received a complaint, make sure it’s legit
If it’s already official and you have a complaint and court summons in your hands, look at the accusations against you and ensure they’re legitimate.
The plaintiff – the credit card company or collections agency – must prove that the debt belongs to you and that you owe the money. (Credit card issuers can usually prove this easily, but a collections agency may not have all the necessary documentation.)
Finally, you should also check to make sure the complaint is within the statute of limitations for debt. The statutes of limitation vary by state and type of debt but are sometimes as low as three or four years – which means that if that amount of time has elapsed, the creditor is no longer legally allowed to sue you.
Although it can be expensive to hire one, a lawyer may help you with this step (or the others below) and may improve your chances of a positive outcome.
Opt for a settlement
If the complaint is legitimate, settling with the plaintiff may be the most affordable and least damaging option for your credit history. The settlement will involve negotiation and likely conclude with you paying some amount of the debt owed, if not the whole amount.
Settling can help you avoid going to court. Getting a lawyer’s professional assistance to ensure the settlement is as beneficial to you as possible can be helpful.
Go to court
If you are sure the credit card company or debt collector’s accusations against you are invalid or illegitimate, going to court is the best opportunity to clear your name. Of course, a favorable outcome is not guaranteed.
If you go to court, you’ll walk through each clause of the complaint and explain your defense in detail, ideally with a lawyer close at hand. (Professional help can greatly increase your chances of winning a credit card lawsuit.) The judge may dismiss the case if you successfully demonstrate that the debt is invalid.
File for bankruptcy
If you’re experiencing financial hardship and cannot pay for legal counsel or a settlement, your best bet may be to file for bankruptcy.
When you file for bankruptcy, creditors can’t continue to harass you for repayment, even if a lawsuit is already underway. Although filing for bankruptcy can hurt your credit history, it can also give you the opportunity to have the debt wiped away and start with a fresh slate.
