Credit Card Debt: Risk Factors For A Debt Collection Lawsuit
When times are tough, credit card payments take a backseat to necessities such as rent
, groceries and gas. Leave your credit card debt unpaid for long enough, however, and the credit card company will turn the account over to a collection agency. Collection agencies utilize a variety of methods for procuring payments from consumers. One such method is a lawsuit. While not everyone with a defaulted credit card debt will ultimately face a lawsuit, certain risk factors can increase your odds of facing legal recourse from your credit card company or the collection agency it hires.
High Debts
Filing a lawsuit and pursuing litigation against a debtor costs the creditor money. Credit card companies and collection agencies are in the business of making a profit. It does not benefit your creditor to put forth the money and effort required to sue you unless a lawsuit will allow it to recover significantly more than it spent. Because of this, debtors who owe the highest balances also face the greatest chance of being sued. While there is no magic number that dictates whether or not your creditor will sue you, credit card companies and collection agencies are most likely to file lawsuits against consumers whose debts exceed $1000.
Steady Employment
Winning a lawsuit against a debtor does not do a creditor any good if it cannot collect on its court judgment. State laws vary regarding how creditors can enforce judgments, but the most common judgment enforcement techniques are wage garnishment and bank account garnishment.
A credit card company or collection agency will often conduct research on your employment status before filing a lawsuit. If you have a steady source of income and that income is not exempt from garnishment, you are a better candidate for a lawsuit than a debtor who is unemployed or who receives exempt income, such as Social Security, that a creditor cannot legally seize.
Age of Debt
Lawsuits are not most creditors' first course of action. Your credit card company will attempt to collect the defaulted account balance from you via collection calls and letters before turning the account over to a collection agency. The collection agency will also put considerable effort into procuring voluntary payments from you before filing a lawsuit. Thus, the longer you ignore an unpaid credit card debt, the higher your risk of a debt collection lawsuit.
Statute of Limitations
Although creditors are more likely to sue consumers over older debts, each state places limitations on the amount of time commercial creditors, such as collection agencies, have to seek legal recourse. Once this statute of limitations for debt collection passes, your creditor can no longer legally sue you.
If the statute of limitations on your defaulted credit card debt has expired, you are less likely to face a lawsuit. Unfortunately, an expired statute of limitations isn't a guarantee that a lawsuit will not occur. Some unethical collection agencies file illegal lawsuits against debtors for debts beyond the statute of limitations in the debtor's state. If you receive a court summons for a time-barred debt and you do not respond and provide the court with evidence demonstrating that the statute of limitations has expired, the collection agency may win its case and use its court judgment to force you to pay off your old credit card balance.
Debtor Cooperation
A creditor's goal is to collect the delinquent balance you owe. If you do not respond to the company's attempts to elicit payment from you, a lawsuit may be necessary for the creditor to achieve this goal. Cooperating with the credit card company or collection agency and making voluntary payments toward your delinquent credit card debt significantly reduces the odds that the creditor will sue you. Being uncooperative, however, and ignoring the company's attempts to negotiate a settlement or work out a payment plan increases the odds that the creditor will seek legal recourse against you.
For debtors with an account in collections, avoiding a lawsuit prevents a bad financial situation from worsening. A creditor that wins a lawsuit also wins the right to seize a portion of your income, attach a lien to your home or car and sometimes even seize your personal property. Because all credit card companies' and collection agencies' policies regarding debt collection lawsuits differ, the only way to prevent a lawsuit altogether is to pay off your delinquent credit card balance.
by: Laura Ginn
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