While defaulting on credit card accounts will cause your credit score to drop, there are far more severe consequences from avoiding debt payments than a reduction of the mysterious three-digit FICO score. In some cases, if you've failed to make any form of payments, credit card companies are legally protected to file a lawsuit. While this may seem like a serious consequence, more and more credit card companies are turning to the courts to obtain owed money.
How Can I Be Sued?
The reason why a credit card company can legally sue debtors for unpaid balances is because of the contractual agreement established between company and consumer. When a consumer stops making payment on their balances, they are in breach of the contract agreements. Within the agreement you signed, it clearly states failure to make payments on outstanding balances gives the credit card company the right to file a lawsuit.
What About Collections?
Typically, when you've avoided payment on credit card balances, the creditor will sell your account to a collection agency. If this agency is unable to obtain payment, then your account is sold again. Eventually, after your account is sold several times, it will end up in an attorney's office for a collection agency. When this happens, the collection agencies attorney's office will likely file suit against you in your state courthouse.
Credit Card Lawsuit Process
When your account is given to an attorney's office, you're typically given an additional chance to establish a payment plan or settle the debt in-full. If these chances are unsuccessful, the attorney will then file a lawsuit. The lawsuit is always filed in the state where the credit card was opened. Within the complaint are details such as how much money you owe as well as who you owe the money to and why the credit card company believes you owe this debt (www.your650score.com)
Upon reviewing this information, you have two options: respond to the lawsuit or do nothing. In the answer you must either accept or deny the complaint. If you accept, then you'll be responsible for full repayment of the debt amount. If you deny, you must inform the courts why you wish to dispute this debt. Lastly, if you choose not to respond at all, you're basically telling the courts, "Yes, this information is correct." In doing so, you'll be fully responsible for full repayment of the entire debt amount. While you may not be able to dispute the complaint, always communicate with the court system if your debt reaches this level.
How Can I Be Sued?
The reason why a credit card company can legally sue debtors for unpaid balances is because of the contractual agreement established between company and consumer. When a consumer stops making payment on their balances, they are in breach of the contract agreements. Within the agreement you signed, it clearly states failure to make payments on outstanding balances gives the credit card company the right to file a lawsuit.
What About Collections?
Typically, when you've avoided payment on credit card balances, the creditor will sell your account to a collection agency. If this agency is unable to obtain payment, then your account is sold again. Eventually, after your account is sold several times, it will end up in an attorney's office for a collection agency. When this happens, the collection agencies attorney's office will likely file suit against you in your state courthouse.
Credit Card Lawsuit Process
When your account is given to an attorney's office, you're typically given an additional chance to establish a payment plan or settle the debt in-full. If these chances are unsuccessful, the attorney will then file a lawsuit. The lawsuit is always filed in the state where the credit card was opened. Within the complaint are details such as how much money you owe as well as who you owe the money to and why the credit card company believes you owe this debt (www.your650score.com)
Upon reviewing this information, you have two options: respond to the lawsuit or do nothing. In the answer you must either accept or deny the complaint. If you accept, then you'll be responsible for full repayment of the debt amount. If you deny, you must inform the courts why you wish to dispute this debt. Lastly, if you choose not to respond at all, you're basically telling the courts, "Yes, this information is correct." In doing so, you'll be fully responsible for full repayment of the entire debt amount. While you may not be able to dispute the complaint, always communicate with the court system if your debt reaches this level.