Defending Yourself in a Credit Card Lawsuit

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Nothing on this web site should be viewed as creating an attorney-client relationship between you and our law firm, or any of our attorneys. The information here is general in nature and should not be viewed as applying to your specific circumstances. Only a qualified consumer rights attorney can advise you about your specific situation. Hyde & Swigart are California consumer rights attorneys. State laws, and the interpretation and rulings on federal laws, are different in each jurisdiction. If you feel you need consumer rights legal advice, contact Hyde & Swigart at (619) 233-7770 for a free consultation.


What was once almost unheard of has now become common practice: individuals being sued over credit card debt. Increasingly, credit card companies and third party debt collectors are filing lawsuits against consumers in small claims and county courts. Public records searches reveal some parties suing in hundreds of cases each month in San Diego County alone. Is it all bad news or is there some light at the end of the tunnel for consumers defending themselves on defaulted debts? From the perspective of the newly-served consumer, it is all a nightmare. From the vantage point of consumer attorneys, a lawsuit is just another tactic used by debt collectors, oftentimes one that can be defended against and possibly disposed of.

Lawsuits are last ditch efforts by creditors or third party debt collectors to get the consumers to pay their debt. Some suits are brought by original creditors and some are brought by third party debt collectors who purchase the debt at a discount. Original creditors might include the banking institution that extended credit, for example Citibank or Chase, or a retailer, like Macy’s or a furniture store. Third party collectors suing consumers over credit card debt have purchased the debt from the original creditor or from previous debt collectors as holders of the account.

The value of the debt decreases over time as its “collect-ability” declines over time. While the dollar amount of debt in default will continue to grow because of interest and penalties, its value drops. Debt collectors buy a portfolio of defaulted credit card accounts at a discount for much less than the amount of the initial debt. Since they purchase the debt at a discount, they can still make a profit even if the consumer pays less than the full amount of the debt.

When an original creditors or third party collectors determine that their collection efforts are not garnering the desired settlement of the account, they sue the consumer. Consumers in default on their credit card debts are not the deadbeats collectors might have you believe. Research indicates that most consumers in debt have gotten to that point because of unemployment, divorce or mounting medical bills. Being sued for a debt only adds insult to injury for a battered consumer.

Lawsuits have strict answer deadlines. If a consumer fails to meet an answer deadline, the debt collector may seek a default judgment. If consumers finds themselves the subject of a lawsuit, the first course of action should be to consult with an attorney as quickly as possible as to avoid missing the answer date. Next, check your credit report to determine who has collected on the particular account in the past and when the account went into default. That information, plus any other letters or other material related to the account, should be reviewed by an attorney to determine if there are defenses available. One example of a good defense on a credit card debt would be the tolling of the statute of limitations. In Texas, the statute of limitations for suing over a credit card is four years. If more than four years have passed since the last payment was made, the lawsuit is time-barred.

Finally, many debt collectors, especially third party debt collectors, may have difficulty proving details regarding a debt. Defense strategy is the key in such cases. An experienced attorney, familiar with various debt collectors and their practices, will be able to assess the possibility of settling the debt out of court for less than the original amount as well as the possibility of getting a case dismissed altogether. Consumers may want to settle a credit card lawsuit because of the potential liability to their credit report and credit scores. This is particularly significant for consumers interested in making a big purchase, such as a house or a car.

As lawsuits over debt become more common, you should keep in mind you may have valid defenses to the suit. An experienced attorney may be able to find defenses you did not know existed.