If you have not been paying monthly on your credit card debt, the lenders may be filing a lawsuit against you as a last attempt to collect the amount owed.
Most large lenders have their own collection departments while others send accounts that are overdue to companies who focus on collecting debt.
What Happens if you are Unable to Pay Credit Card Debt
In the current economy, card companies are aggressively trying to collect debt due to them from users who find themselves unable to pay. They will call you repeatedly – several times a day – with demands for payment.
Companies that provide collection services for businesses are especially aggressive in trying to collect from consumers. They may call you repeatedly at work or call your family members.
There are laws to regular collection agencies yet the laws are frequently violated. Eventually, you may be served with a notice of a lawsuit.
Collecting Overdue Debt
Your lender or the collection agency may offer to break the debt into two payments. At times, card lenders may choose to cancel the debt if you pay a reduced amount. In this case, if you owe $2000 and are unemployed, the lender might offer to settle your debt for $1000 immediate payment.
Debt settlement is often used for young adults who have run up debt as a student with a credit card or for those with good payment records in the past who have lost their job and thus their ability to pay.
If your account is turned over to a collection agency and you pay the debt you will make the payment to the collection agency. The agency then keeps a percentage of the payment made and sends the remainder to the original lender.
Why Does the Lender File a Lawsuit?
A lawsuit is a last attempt to force a consumer to pay his credit card debt. Why would a lender bother to do this if you don’t have the resources to pay the debt?
Your lender does not want to go to court to solve the problem. His goal is to obtain a default judgment against you. For a default judgment the lender files a lawsuit against you and hopes you won’t file an answer to the lawsuit in the prescribed time period for your state.
If you do not file an answer to the lawsuit, the course will assume the lender’s claim is factually correct and will award a default judgment to the lender. That judgment will appear in your credit file and can keep you from obtaining any other loans or credit until it’s paid and dismissed.
How to Answer a Lawsuit
It is crucial that you do answer the lawsuit within the time limit prescribed by your state law. You will be wise to use the services of an attorney to answer a lawsuit as the small fee you will pay could save you loads of money in the end.
Your answer to the lawsuit is your argument for why you should not have to pay the debt. Some common defenses used are statute of limitations, statute of fraud, estoppel, waiver, wrong plaintiff, wrong defendant, invalid debt transfer, or bankruptcy not correctly discharged.
Claiming violation of the terms of the Fair Debt Collection Practices Act is often used as a defense in answering a lawsuit. The defense that might be effective for you personally is difficult to determine without that advice of a qualified attorney.
Summary
Consumers stretched to the limit with loss of income have caused the default rate on debt to rise significantly. Lenders have become more aggressive in attempts to collect debt and you must be ready to defend yourself.
If you are served with a lawsuit, you must file an answer quickly with the reasons you should not or cannot pay the amount asked for by the lender.
You may win in court – or lose. If you fail to answer the lawsuit it is the same as admitting guilt and you will be ordered by the court to pay the full amount as well as legal fees incurred.
At the least, by answering a lawsuit and appearing in court you have a good chance the court will award less than the full amount to the lender or provide an extended period of time for you to pay off the debt.
