Is It Worth It to Defend a Credit Card Lawsuit?

Showing a little moxie often pays off when dealing with creditors

A man cutting up credit cards

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You thought that old credit card balance had dried up. Perhaps you hadn't heard from any debt collectors about it for some time. Then—BAM!—in the mail comes a summons and a copy of a lawsuit filed by some company you've never heard of, alleging that you owe an inflated amount on an account you almost forgot you had.

It can be hard to know what to do, but you do have options. Let's look at what you can do to take care of this old debt, or maybe even make it go away. 

Ignore It 

If you know you owe the money, why not just let the collector get a judgment against you? After all, you figured you probably hadn't seen the end of that debt. 

Frankly, this may be true, but it's likely not the best idea. A judgment is a court order that decides the final result of a lawsuit. If you ignore the lawsuit entirely, a judgment is likely to be awarded to the debt collector. This official order can give your creditors more forceful ammunition to collect the debt from you, perhaps using tactics such as garnishing your wages or bank accounts.

And, don't think you could save money by avoiding the lawsuit; you might even be held responsible for the debt collector's legal fees or collection costs if you don't show up.

Offer to Settle

Not a bad choice. Almost always, the collector will indicate a willingness to knock something off the balance in return for a quick settlement and withdrawal of the suit. Before you negotiate a settlement, consider speaking with a lawyer to make sure the debt collector truly has a case and could legally act on the defaulted debt.

If you decide the collector can pursue action against you, think about how much you can afford to pay and approach the debt collectors with your proposed repayment plan. If you reach an agreement, make sure to get everything in writing before making any payments.

The Consumer Financial Protection Bureau has detailed instructions to negotiate a settlement with debt collectors, including sample letters you can use when communicating with creditors.

Represent Yourself in the Lawsuit 

Depending on the size of the account, credit card lawsuits are often filed in small claims or justice of the peace courts. These courts understand that many individuals can't or won't hire a lawyer, and they work hard to simplify the process by easing paperwork and procedural requirements.

But remember, the creditor suing you is likely being represented by someone who does this professionally. Collection agency lawyers and representatives can be aggressive; they do this every day and know all the tricks. You might win if you can prove that you are obviously in the right, but if you're trying to argue your way out of a legitimate debt, you might be better served with professional representation.

Hire an Attorney to Represent You

Isn't it expensive to hire a lawyer? It depends. Lawyers who defend lawsuits for consumers usually charge either a flat fee or an hourly fee. Unless the lawyer is willing to take the case for less than you would likely pay in a settlement with the creditor, it may not make economic sense. But if the lawyer could make the lawsuit go away for a nominal amount, it could be worth it. 

Lawsuits filed by bill collectors can often be defended based on two fundamental facts: 

  1. The debt is too old to get a judgment. In every state, there is a law or set of laws called the statute of limitations. These rules say that if someone files a suit against you to collect on a debt, they can't get a judgment against you if the debt is deemed too old (usually three to six years, depending on the state and type of loan).
    The trick is that you have to bring that to the court's attention. It's possible that a judge may notice independently that the debt is too old, but often the lawsuit papers don't set out how old the debt is, so the judge won't know unless you, the defendant, make it clear. You normally do that by filing an answer, or a response to the suit, and setting out your defenses in the answer.
  2. The debt collector can't prove that you owe the money. Accounts are frequently sold by debt collectors to other debt collectors. Many times, the paperwork that forms the basis of the lawsuit—your cardholder agreement, your application, your payment history—isn't forwarded with the account or is lost in the shuffle. If you don't defend your suit, a bill collector often doesn't have to prove anything. The judge will take the allegations contained in the lawsuit as fact and will enter a "default judgment." 
    If you defend the suit, the bill collector will have to prove that you actually agreed to certain terms, that you borrowed the money, and what your balance is. It may be difficult for the debt collector to access that paperwork, and without the proper evidence, they won't be able to prove all the elements of its suit against you.

If you're not sure how to find a lawyer to defend you in a debt collection suit, the Consumer Financial Protection Bureau has a detailed guide. You may even be eligible for free legal aid.

The Bottom Line

If you defend the suit, there's a pretty fair chance the bill collector can't win it, will withdraw it, or will negotiate a far lower settlement. Since many debt defense lawyers offer an initial consultation at no charge, you may have nothing to lose by making an appointment to visit with one. 

Here are three good places to find a lawyer who will help you defend a consumer debt: