Q: Can you be sued for credit card debt? What can I expect after I stop paying my bills?
A: Well, let me first start off by saying I am not a lawyer. Nothing that follows is legal advice.
What can you expect in the near term?
First bill is not paid
For the first bill that is not paid, a late fee will be applied which will probably be $35, depending on the balance and card issuer. Any payment that is between 1 and 30 days late is a “30 day late payment” so that is where you will be at after the due date passes. That being said, many banks don’t bother reporting 30 day late payments (so you can probably still pay and avoid a late payment being reported). The late fee and newly accrued interest will rollover to the next bill.
Second bill is not paid
Once the due date passes on the second bill, that’s a 60 day late payment. At this point, your APR will almost certainly go up to the default/penalty rate (which is usually around 30%). This rate increase after a 60 day late payment is permitted under the credit card reform laws, regardless of whether or not you’ve had your account open less than one year. That higher rate and another late fee will be reflected on the following statement.
Third bill is not paid
Now the credit card account is 90 days late. The debt will be growing even faster right now, because you have the late fees that have been added onto the balance and interest is probably now accruing at close to 30%.
Fourth bill is not paid
At 120 days late, it’s quite obvious you won’t be paying the bill and the account will likely be charged off. Even while the debt is in collections, the interest will continue piling up.
Can credit card companies sue you at this point? Yes, they can take whatever actions they wish under the Fair Debt Collection Practices Act and suing you is one of the options. But how often do credit card companies sue for not paying debt? Well, the likelihood depends on a number of factors including the amount owed and the creditor (some are more aggressive than others). However more often than not, instead of the credit card company suing you directly, they sell the debt off to a third-party collection agency.
What happens if you are sued for credit card debt?
Assuming the credit card company is still holding onto the debt, you can be sued anytime within the statue of limitations (which vary state by state). That means it may be possible for them to sue now or years from now, up to whenever the statue of limitations is.
If a lawsuit is filed and you get sued, then the judgment is typically for the full amount of the debt, plus interest and fees, as well as court costs and attorney fees. How that judgment can be enforced will depend on the state you live. In some states it might be possible for a creditor to request seizure of bank account balances or to place a lien on your house (but don’t worry, it’s highly unlikely that a credit card company can take your house). To the best of my knowledge, I believe all states allow wage garnishment by creditors except for Texas, Pennsylvania, North Carolina, and South Carolina (these are states where it still might be possible under certain conditions – i.e. if it’s the only way to fulfill a judgment), though Texas has a homestead law that shields a person’s primary residence from judgments.
Ultimately, this is something you need to consult an attorney for – to both find out how you should handle it and what a creditor can and cannot do to enforce a judgment in your state. I understand that if you’re in this circumstance, you’re probably saying “I can’t afford an attorney!” Well I have good news for you – cities and counties provide free legal aid sources where qualifying individuals can go get help without paying a dime. LawHelp.org provides free legal aid referral information for all 50 states.
Can a credit card company sue you for debt? Yes. I wouldn’t say it’s extremely likely but it is possible and the amount of debt, the credit card company, and the state you live in will probably all be factors in whether or not it actually happens.
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Last edited in January 2016