When do credit card companies sue for non-payment?

When you miss a few credit card payments in a row, the consequences tend to escalate gradually — typically starting with late fees before the collection calls, credit score damage and account closures become a reality. But while those repercussions can have a big impact on your finances, for many, the most intimidating prospect of missing credit card payments is facing a lawsuit from their credit card company. This legal action represents a significant escalation that can lead to wage garnishment, bank account levies and several years of financial repercussions.

The good news is that credit card issuers view litigation as a last resort. After all, suing over unpaid debt is expensive and time-consuming, so they typically try to exhaust the other types of collection tools available to them, from persistent calls and letters about the debt to utilizing third-party debt collection agencies to try and recoup what's owed. 

The decision to sue isn't arbitrary, either. Given the costs and hassle, not all credit card debt is worth suing over, and card issuers follow specific patterns and calculations when determining whether litigation is worth pursuing. Knowing these triggers can provide valuable insight if you're struggling with credit card debt and want to minimize the likelihood of a lawsuit.

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When do credit card companies sue for non-payment?

Credit card companies typically don't rush to the courthouse. Most legal proceedings begin only after an account has been delinquent for 180 days or longer. At this point, the issuer has usually charged off the debt, meaning they've written it off as a loss for accounting purposes — but this doesn't mean they've forgiven the debt or given up on collecting it.

The size of the debt also plays a crucial role in the decision to sue. Generally, credit card companies are unlikely to pursue legal action for small amounts, as litigation costs can quickly outweigh potential recovery. While there's no universal threshold, debt-related lawsuits are generally more common when debts exceed $1,000, with the likelihood of a lawsuit increasing substantially for debts over several thousand dollars.

Your payment history and communication with the creditor also factor into their decision. If you've made partial payments or attempted to negotiate, the credit card company might be less inclined to sue immediately. Conversely, if you've completely ceased communication or returned to delinquency after a payment arrangement, litigation becomes more likely.

Statutes of limitations are another critical consideration. These state laws limit how long creditors have to sue for unpaid debts and typically range from three to six years, though some states allow up to 10 years for lawsuits to be filed over delinquent credit card debt. Credit card companies are well aware of these timeframes and often accelerate their collection efforts as the deadline approaches.

Some credit card issuers are simply more litigation-prone than others, too. Major banks and financial institutions often have established legal departments or relationships with law firms that specialize in debt collection, making the lawsuit process more cost-effective for them compared to smaller creditors.

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What to do if your credit card company is suing you for non-payment

If you receive a summons for a credit card lawsuit, your first step should be to respond within the specified timeframe — typically 20 to 30 days. Ignoring a summons virtually guarantees a default judgment against you, giving the creditor nearly all the legal remedies they seek without your input.

You should also verify the lawsuit's legitimacy and accuracy. Request validation of the debt and review all documentation carefully. Check whether the statute of limitations has expired, determine whether the company suing you owns your debt and check whether the amount claimed matches your records. Errors in these areas could provide grounds for dismissal.

You may also want to consider seeking legal representation. Many consumer attorneys offer free initial consultations and may identify defenses you wouldn't recognize. If hiring a lawyer isn't financially feasible, you can also look into legal aid societies, law school clinics or self-help resources at your local courthouse.

And, negotiating a settlement remains an option even after being served with a lawsuit. The creditor may be more willing to accept a lump-sum settlement for less than the full amount once they've incurred legal costs. 

If negotiation isn't possible, prepare to present your case in court by gathering all relevant financial records, correspondence with the creditor and any evidence supporting your position. Even if you acknowledge the debt, you may have valid defenses regarding the amount, applicable interest or collection practices.

The bottom line

Credit card companies can technically sue over any amount of debt at nearly any point in the delinquency process. However, they typically sue only when the potential recovery justifies the expense — usually for larger balances after extended delinquency periods. If you're struggling with credit card payments, proactive communication with your creditors is usually your best defense against being sued. 

Should you find yourself facing a lawsuit, though, it's important to remember that you still have options. Responding promptly, validating the debt, exploring settlement possibilities and seeking legal advice can help mitigate the consequences. While a credit card lawsuit represents a serious escalation in the collection process, it's not necessarily the financial death sentence many fear it to be.