Dealing with credit card debt is challenging, let alone facing a debt lawsuit. If the creditor wins the lawsuit, you may face serious financial repercussions.
Lawsuits also harm credit scores, and the stress from the legal process can exacerbate financial challenges. If you find yourself being sued by a debt collector, you may wonder how to get a credit card lawsuit dismissed.
Unfortunately, as consumer debt rises, lawsuits are becoming more and more common. An estimated 2.5 million debt collection lawsuits were filed in 2022 alone. This is why it is important to know your legal rights and how to mitigate the effects of being sued. By being proactive and understanding your rights and protections, you can reduce the long-term consequences of a credit card lawsuit.
Table of contents:
- Respond to the lawsuit
- Make the debt collector prove their case
- Ways to deescalate
- Consider defense Options
- File a motion to compel arbitration
Step 1: Respond to the Lawsuit
Although it may be tempting, do not ignore the “Summons and Complaint” document. Failing to respond can result in default judgment, allowing the creditor to take action by seizing your assets or withholding your wages.
The first step is submitting a written response to the court. In your response, you should address each claim in the complaint, which can mean denying the allegations, citing a lack of evidence, or asserting protections like the statute of limitations. Here’s how you should approach drafting and submitting your response:
- Review the complaint: Carefully review the complaint to understand the claims against you and note any deadlines for submitting a response.
- Consult a lawyer: If you are unsure how to draft your response or need help asserting defenses, consult a lawyer or a legal aid organization. Many provide free or low-cost assistance for debt-related cases.
- Format your response: Most courts require you to follow a particular format for your response, so be sure to write your document accordingly.
- Request for dismissal or relief: In your response, ask the court to dismiss the case or grant any appropriate relief.
- Sign and date: Sign the document and include the date. Make sure to include your contact information (address, phone number, and email).
- File your answer: Prepare multiple copies to hand over to the court, the plaintiff (or their attorney), and for your own records. File your response to the court clerk by the deadline and pay the filing fees. If you can’t afford the fee, inquire if you can get the cost waived.
- Keep records: Keep a copy of your response and proof of filing for your records and to refer to for future court dates.
Step 2: Make the Debt Collector Prove Their Case
When your credit card debt moves to debt collections and the collection sues you, the burden of proof becomes their responsibility instead of the original creditor’s. This is something you can take advantage of, as collectors commonly lack the proper documentation to prove that they own the debt.
The collector must provide proof that they own the debt, an accurate calculation of the debt amount, and documents linking the defendant to the debit, which is particularly important if the original creditor sells or transfers the debt.
By demanding evidence and challenging unsupported claims, you shift the burden onto the debt collector to prove their case. If they cannot provide adequate documentation, the court may dismiss the debt lawsuit.
Step 3: Explore De-escalation Methods
When facing a debt lawsuit, there are several options to de-escalate the situation and potentially avoid court. Many people prefer to avoid court proceedings because they can become costly and time-consuming.
Filing for Bankruptcy
One option is filing for bankruptcy, which can help to immediately stop collection actions, including the lawsuit itself, through an automatic stay. It dismisses unsecured debts such as credit card balances and can help resolve multiple financial burdens in one process.
Bankruptcy can provide a fresh start, providing relief from overwhelming debt and an opportunity to rebuild. Consulting a bankruptcy attorney can help you determine if it’s the right solution for your situation.
H3: Negotiate a Settlement
Another option is to discuss a settlement with the creditor or debt collector. Debt collectors are often open to settling credit card debt, as it spares them the time and expense of taking their claims to court. You can discuss the possibility of a lump sum or reduced payment plan to settle your debt.
Consider these strategies when trying to reach a settlement:
- Respond to the lawsuit before the deadline to prevent a default judgment, even if you plan to negotiate.
- Determine what you can afford to offer as a lump sum or structured payments. Be prepared to justify your offer, citing financial hardships or limited assets.
- Consider consulting a consumer rights attorney who can help negotiate on your behalf and ensure you’re not taken advantage of.
- Emphasize the benefits of settlement for both parties. It saves significant time and money compared to litigation.
- Get the terms of the settlement in writing before making any payments. Ensure the written agreement includes that the creditor will dismiss the lawsuit upon payment.
By being prepared and strategic, you can negotiate a settlement that works for both you and your creditor, avoiding further legal action or financial strain.
Step 4: Consider Defense Options
If debt collectors sue and you end up bringing your case to court, there are several defenses that can help you challenge or reduce your liability:
- Insufficient evidence: If the plaintiff cannot provide sufficient evidence of the debt or its ownership, you can request dismissal for lack of proof.
- Lack of standing: You can argue that the plaintiff does not have the legal right to sue you. They must prove they own the debt through a proper chain of assignment from the original creditor.
- Identity theft: If the debt is not yours, you can argue that it resulted from identity theft or fraud. Provide evidence, such as police reports or identity theft claims.
- Statute of limitations: If the debt is too old, it may be dismissed under your state’s statute of limitations laws. Usually, the clock starts ticking from the date of your last payment or when you first missed a payment. The time limit differs depending on the state and the type of debt. For example, open accounts like credit cards usually have a time limit of three to six years.
If you believe your debt has been time-barred, verify when the statute of limitations began and calculate whether the time limit has passed. Avoid actions like making a payment, promising to pay, or acknowledging the debt, as this can restart the statute of limitations in many states.
When filing a written answer to the court, raise the statute of limitations as an affirmative defense. Ask the creditor or debt collector to provide evidence of the debt, including payment history and dates, to confirm whether the debt is within the time limit.
Even if your debt is time-barred, it doesn’t just disappear. Creditors can still attempt to collect it, but they cannot legally threaten or sue for payment. The debts can also remain on your credit report for up to seven years from the date of default, even if the statute of limitations has passed.
Step 5: File a Motion to Compel Arbitration
Arbitration is an alternative to court where a neutral third party, known as an arbitrator, hears both sides of a dispute and helps reach a decision, which may be legally binding or advisory only. It’s often included as a clause in credit card and loan agreements.
Arbitration is often faster and less formal than court proceedings and can be less costly than a full court trial. Unlike court cases, arbitration proceedings are private, which can be appealing if you want to avoid public records. Settlement may be encouraged during the proceedings, depending on the arbitrator’s judgment. Debt collectors may also favor arbitration, as it saves them the cost and hassle of going to court.
Here are the steps to file a motion to compel arbitration:
- Review the arbitration clause: Check your contract (e.g., credit card agreement or loan document) to make sure it includes an arbitration clause, and make sure the clause applies to the current debt and lawsuit.
- File your answer to the lawsuit: You must file an answer to the lawsuit by the deadline and include a statement that the dispute is subject to arbitration due to the arbitration clause in the contract.
- Draft the motion to compel arbitration: The motion should include:
- Introduction briefly stating that you are requesting the court to compel arbitration
- Citation of the arbitration clause
- Legal argument that the dispute falls within the scope of the arbitration clause and that the court should enforce it
- Motion asking the court to pause the lawsuit and compel the creditor to go to arbitration
- Include supporting documents: Attach a copy of the agreement that contains the arbitration clause to your motion, as well as examples showing that the court has upheld similar arbitration agreements in past cases.
- File the motion with the court: Submit the motion to the court and pay filing fees. Serve a copy to the creditor’s attorney or the plaintiff.
- Prepare for a hearing: The court may schedule a hearing to review your motion. Be prepared to present your argument and show that the arbitration clause is valid and enforceable.
- Await the court’s decision: If the judge agrees with your motion, they will issue an order to compel arbitration to dismiss the lawsuit. If denied, you’ll need to proceed with the lawsuit in court, although you can file an appeal.
How’s Your Credit?
Given the potential negative outcomes, facing a pending debt collection case can be nerve-wracking. However, taking proactive steps and understanding your rights can help you mitigate the impact and even get the credit card lawsuit dismissed.
While a credit card lawsuit won’t appear on your credit report, related actions, like late payments, collections, or charge-offs, can negatively impact your score for up to seven years. Despite this, you can work to offset the impact of credit card debt by staying consistent on your payments and making smart financial decisions.
Additionally, you may have grounds to sue over ruined credit if collectors don’t comply with the Fair Debt Collections Practices Act. Get your free credit report card to understand your current financial standing and move towards financial freedom.
Credit Card Lawsuit Dismissal FAQ
Can A Credit Card Company Or A Debt Collector Sue You?
Yes, a credit card company or debt collector can sue you if you fail to repay your debt, typically as a last resort to recover the owed amount.
How Do I Defend Myself Against A Credit Card Lawsuit?
You should consider seeking legal advice before responding promptly to the complaint and challenging the creditor’s claims by asserting valid defenses, like the statute of limitations.
What Happens If A Credit Card Company Sues You And You Can’t Pay?
The court may issue a judgment against you, potentially leading to wage garnishment or asset seizure. You may want to consider filing for bankruptcy to stop collection actions.
What Percentage Will Credit Card Companies Settle For?
Credit card companies will typically settle for 30% to 60% of the debt owed, depending on factors like your financial situation and the age of the debt.
