What Happens When You Are Sued Over Old Credit Card Debt?
Have you received a summons for breach of contract on an old credit card debt? Or, do you have collectors calling you daily and threatening to bring legal action? For many “junk debt collectors” bringing about lawsuits over old credit card debt (that has likely been charged off, leading you to believe that you are “untouchable”) has become big business.
If you are like the majority of American’s out there who are being hounded by creditors you likely ignore their calls and letters thinking they will eventually go away. Wrong. The new breed of junk debt buyers will SERVE YOU WITH A COMPLAINT SUMMONS!
What’s a junk debt buyer?
There are many, many of these companies and they all go by different names and aliases. Companies can buy charged off debt from your original lender for pennies on the dollar. It’s not uncommon for these debts to be bought & sold over, and over, and over again.
What does this mean?
Well, say you had an old credit card from 1999 that you defaulted on and eventually stopped paying. The original creditor (OC) charges off the debt, closes their books and sells YOUR debt to a third-party junk debt buyer (JDB). The JDB pays pennies on the dollar for your debt.
If you agree to settle for even half of the debt (if you are going to pay a collector, always negotiate down the debt, they’ll often settle for 70% of the original amount because they are still making HUGE profits!) the JDB is still making an obscene profit off of YOU.
However…there is GOOD NEWS if you have one or more of these JDB’s after you. They are banking on the fact that the majority (some estimate it to be as high as 97%) of Americans who are sued over old credit card debt do not show up for their hearing date and do not try to fight the lawsuit in any way. Even if you do owe the debt, this is the worse thing you can do!
Here’s the scoop….
If a creditor has determined that you are a good prospect for paying on your debt and you have failed to respond to their demands for payment you will then be moved to their “legal department”.
Many of these junk debt buyers or collection agencies have retained law firms that are basically collection agencies masquerading as law firms. They usually have one legitimate lawyer working for them and the rest of the employees are just plain old collection agents. All these JDB’s have to do is file a Complaint (typically for Breach of Contract) with the civil or district court in the county where you reside. They will pay a nominal fee and a process server to deliver the Summons to you in person.
YOU CAN BE SERVED AT YOUR WORKPLACE OR HOME!
You generally only have (20) days to respond to the Summons with an Answer, which is a document that must be filed in person at the courthouse by YOU and a copy sent Certified Mail, Return Receipt to the attorney representing the creditor.
If you DO NOT RESPOND WITH AN ANSWER WITHIN 20 DAYS (OF THE DATE YOU WERE SERVED) a DEFAULT JUDGEMENT is entered against you AND this gives the collector the GREEN LIGHT to FREEZE YOUR BANK ACCOUNT AND GARNISH YOUR WAGES!
Note: Often the “collection attorneys” are junk debt buyers themselves and actually own the debt.
Most Breach of Contract lawsuits are filed in civil court, NOT small claims. The creditors are smart and know that in the civil courts YOU must be represented by a lawyer or you can represent yourself buy must follow standard rules and procedures of the court. This is called being a “Pro Se” litigant.
A “Pro Se” litigant must file proper legal pleadings and represent themselves just as a lawyer would. It’s really quite simple but you can understand why this scares off so many litigants and why civil judges often spend one or two afternoons a week going through complaints and granting default judgements because VERY FEW defendants know how to/nor have the time to figure out how to respond within the (20) day time-frame.
If a DEFAULT JUDGEMENT is entered (which happens over 90% in these cases because people don’t have the time and knowledge to fight back!) your creditor AUTOMATICALLY WINS THE LAWSUIT!
The creditor doesn’t even have to show up to court and OFTEN DO NOT! YOUR FAILURE TO RESPOND WITH AN ANSWER AUTOMATICALLY GRANTS THE JUDGEMENT TO THE PLAINTIFF (THE CREDITOR)!
Over 90% of credit card debt lawsuits end in default judgement because the defendant does not appear and/or does not respond with an Answer. This is a GOLDMINE for the creditors!
They expect you NOT TO FIGHT BACK and are literally banking on the fact that over 90% of debtors roll over and accept the judgement. Oftentimes the amounts these companies are suing over have been ridiculously inflated and they have NO RECORDS to back up their claims, additionally they are NOTORIOUS for violating the Fair Debt Collection Practices Act and for trying to collect on out-of-statute debts. The statute-of-limitations on debt collection can range from 3 years to 10 dependant on your state’s regulations. You can easily Google the SOL for your state.
If you respond with an proper “ANSWER” within the required time-frame (generally 20 days) your chances of their DROPPING THE LAWSUIT are VERY GOOD! They don’t want to actually fight you in court, that costs them time & money. AND, they OFTEN don’t have any kind of records to substantiate their claims.
When the JDB’s purchase debts they receive minimal information. In many cases, the actual credit card contract you signed (and statements) is unavailable as the original creditors closed the books on your account years ago. Additionally, YOU never signed any kind of contract with the collection agency…..this is another defense that you can raise.
If you’re still hesitant to fight back, consider this:
They’ll be monitoring your credit report electronically….any purchases or even requests for credit will raise a red flag. They will know if you’ve bought a new car, house, boat, or anything of value that they can put a lien against.
YOU NEED TO AVOID A DEFAULT JUDGMENT AT ALL COSTS! IT WILL RUIN YOUR CREDIT FOR A MINIMUM OF 7-10 YEARS!
The Good News -
I was served with a summons for breach of contract in May of 2007. I immediately began RESEARCHING….AND RESEARCHING……AND RESEARCHING.
I’m a middle-class person who ran up some debt in my early twenties. I made sporadic payments not realizing the detrimental effect that it was having on my credit report. All told I believe I actually charged about $1,000 on a VISA card. My account was turned over to various collectors where I would make one or two large payments and then I wouldn’t hear anything….and then another one of these collectors would crop up. I eventually stopped paying. The sporadic payments I was making weren’t even making a dent as they just kept adding charges onto my balance.
With all the late fees, over limit fees, and interest charges I felt like I had probably paid them well over what I originally owed and at the time I just couldn’t keep up. They pretty much dropped off the face of the earth for many years and I forgot about it. I got married, bought a house (with a terribly high interest rate), car, had kids, etc……and then last May some beater car pulls up to my house and delivers me a Summons while I’m outside watching my daughter ride her bike. It was very unsettling. I was being sued for $5,000 plus legal fees and I had 20 days to respond with an ANSWER. The wording was such that I could tell the “collection attorney” expected me to just accept the judgment.
So, I began my RESEARCHING, it’s not easy, but SO worth it. I began researching at the law library, poring over legal message boards, NOLO law books, and credit repair blogs and websites. I spoke with an extremely helpful court clerk who gave me the real dirt on how these companies operate and I was fortunate enough to consult with a consumer affairs lawyer.
All of my work paid off and my creditor dropped their lawsuit.
Regardless of your exact situation, the first step is to FILE AN ANSWER. Your creditor will either drop the lawsuit or you will be granted a court date. In all likelyhood, the creditor won’t show up for the court-date (granting you automatic dismissal) and if they do, you’ll be in a better position to negotiate a settlement or payment plan with them.
Utilize the internet, there are many, many folks in the same boat as yourself. There are many helpful message boards which are a good place to start.
Try to remember that even though the debt is yours, you have every right to have their claims against you substantiated. These companies are making a tremendous profit off of hard working Americans and you owe it to yourself and your financial future to face the music and fight your lawsuit as best you can.