What to Do When a Credit Card Company Sues You

It’s a situation no one wants to be in: a process server hands you a lawsuit from a credit card company. Suddenly, you’re facing a legal battle against a corporation with a team of lawyers. It’s easy to feel like the fight is over before it has even begun. But you have more power than you think. The law provides you with specific rights and protections, and the company suing you has to prove its case. This guide will walk you through the entire process, showing you what to do when being sued by a credit card company to level the playing field and defend yourself effectively.

Key Takeaways

• Ignoring the Lawsuit Guarantees a Loss: The single biggest mistake you can make is doing nothing. If you miss your response deadline, the court can rule against you by default, allowing the collector to garnish your wages or freeze your bank accounts without you ever getting a say.
• Make the Collector Prove Their Case: The burden of proof is on them, not you. You have the right to challenge the lawsuit by verifying that the company suing you legally owns the debt, that the debt isn't too old to be collected, and that the amount they claim is accurate.
• Filing an Answer Is Your Strongest First Move: Responding to the lawsuit isn't an admission of guilt; it's the official step that protects your right to defend yourself. Filing an Answer stops a default judgment and gives you the leverage to fight the claims, challenge the evidence, or negotiate a fair settlement.

First Steps: What to Do Right After You're Served

Getting served with a lawsuit is jarring, but the most important thing you can do is take a few simple, organized steps. Ignoring the papers won't make them go away—in fact, it can make things much worse. Taking calm, deliberate action is the best way to protect yourself and your finances. Think of this as your immediate action plan. By focusing on these three tasks, you can move from feeling overwhelmed to feeling in control. Let's walk through what you need to do in the first 24 to 48 hours.

Read Every Page of the Lawsuit

Legal documents can feel intimidating, but don't let the dense text stop you. Take a deep breath and read through everything you were given. You don't need to understand every single legal term right now. Your goal is to find a few key pieces of information: who is suing you (the "Plaintiff"), how much they claim you owe, and the basic reason for the lawsuit. Understanding these details is one of the most critical first steps you can take to prepare your response and get a handle on the situation.

Find and Mark Your Deadline

This is the most critical task on your list. Every lawsuit comes with a strict deadline to respond, and you absolutely cannot miss it. Look for a document called a "Summons," which is usually on top. The Summons will tell you exactly how many days you have to file a formal response with the court. This window is often short—typically between 14 and 30 days. Once you find that deadline, mark it everywhere: on your calendar, in your phone, on a sticky note on your fridge. The Consumer Financial Protection Bureau stresses the importance of responding on time to protect your rights.

Gather All Your Financial Documents

Now it’s time to start building your file. Create a folder—physical or digital—and begin collecting every document you can find related to the debt in question. This includes any original credit card agreements, account statements that show your payment history, and copies of letters, emails, or records of phone calls with the creditor or debt collector. Having all this information in one place will be incredibly helpful as you verify the details of the lawsuit and prepare your response. This simple act of organizing your records is a powerful step toward defending yourself effectively.

Why You Can't Ignore a Lawsuit

Getting sued is scary, and your first instinct might be to ignore the papers and hope the problem disappears. But burying your head in the sand is the worst thing you can do. Ignoring a lawsuit doesn't make it go away; it just takes away your power to fight back and can lead to serious financial consequences.

When a credit card company sues you, they are often counting on you not to respond. When you don’t show up to defend yourself, they can win automatically. Taking action is the only way to protect your rights and your finances. Let’s walk through exactly what’s at stake.

The Risk of a Default Judgment

If you don’t respond to the lawsuit within your state’s deadline, the court can rule in favor of the credit card company without ever hearing your side of the story. This is called a default judgment. Think of it as forfeiting the game before it even starts. The company suing you presents its case, and since you’re not there to challenge it, the judge assumes their claims are true. A default judgment gives the creditor a powerful legal tool to collect the money they claim you owe, whether the amount is accurate or not. It’s a critical misstep that can be easily avoided just by filing a formal response.

Facing Wage Garnishment and Frozen Accounts

Once a creditor has a default judgment against you, they can ask the court for permission to take money directly from your paycheck or bank account. This is a process known as wage garnishment or bank levy. Imagine checking your bank balance and finding it frozen, or seeing a large chunk of your hard-earned paycheck missing. According to the Federal Trade Commission, a judgment allows a collector to garnish your wages or seize funds from your accounts. This can make it incredibly difficult to pay for basic necessities like rent, groceries, and utilities, turning a manageable debt problem into a full-blown financial crisis.

How It Impacts Your Credit Score

A default judgment doesn't just affect your immediate cash flow; it also does long-term damage to your financial health. A judgment is a public record that will almost certainly appear on your credit report, where it can stay for up to seven years. This negative mark can significantly lower your credit score. A lower score makes it much harder and more expensive to get approved for future credit, like a car loan or a mortgage. It can even impact your ability to rent an apartment, get a new cell phone plan, or even be hired for certain jobs. Responding to the lawsuit is your chance to prevent this lasting damage.

How to Confirm the Debt is Yours

Before you panic or start planning payments, your first job is to play detective. Just because a company files a lawsuit doesn't automatically mean their claim is accurate or that they have the legal right to sue you. Debt collectors make mistakes, and sometimes the information they have is incomplete or just plain wrong. It’s their responsibility to prove the debt is yours and that they have the standing to collect it. Taking the time to verify every detail is one of the most powerful first steps you can take to protect yourself.

Ask for Proof of the Debt

The company suing you has the burden of proof. It’s up to them to show that you owe the money, not up to you to prove you don’t. You have the right to ask for documentation that validates their claim. This includes things like the original signed credit agreement, a complete history of account statements showing how they calculated the total amount, and any other records connecting you to the debt. A formal request forces them to produce their evidence. You can use a debt validation letter to officially ask the collector to provide this proof. If they can’t produce these documents, their case against you gets a lot weaker.

Check Who Owns the Debt Now

It’s very common for original creditors, like credit card companies, to sell old debts to third-party debt buyers for pennies on the dollar. If you’re being sued by a company you don’t recognize, this is likely what happened. The problem for them is that they must prove they legally own your specific debt. This requires a clear paper trail, often called a "chain of assignment," showing every time the debt was sold, from the original creditor all the way to the company that is suing you. If there are any gaps in this chain, they may not have the legal right, or standing, to sue you for the money.

Review Your Account History

Now it’s time to look at your own records and the specific claims in the lawsuit. Compare the amount they say you owe with any statements or records you have. Do the numbers match up? Are there fees or charges you don’t recognize? You should also check if the debt is too old to be collected. Every state has a law called the statute of limitations, which sets a time limit on how long someone can sue you for a debt. This clock usually starts after your last payment. If the statute of limitations has expired, the debt is considered "time-barred," and they can no longer win a lawsuit against you for it.

What Are Your Options for Responding?

Once you’ve been served with a lawsuit, it’s easy to feel like you’re out of options. But that’s not the case. You have several paths you can take, and choosing the right one depends on your specific situation. The most important thing is to choose a path and take action before your deadline passes. Ignoring the lawsuit is the one thing you can’t do.

Generally, you have three main choices: you can formally fight the lawsuit in court, you can try to negotiate a deal with the credit card company, or you can explore other legal resolutions that might apply to your case. Let’s break down what each of these options looks like so you can figure out your best next step.

Option 1: File a Formal Answer

Your first and most powerful option is to respond directly to the lawsuit. You do this by filing a formal document with the court called an “Answer.” This is your official opportunity to tell your side of the story. In the Answer, you go through each claim the credit card company made in their complaint and state whether you agree, disagree, or don’t have enough information to say. This is also where you can raise any legal defenses you might have. Filing an Answer is a critical step to protect your rights and prevent the court from issuing a default judgment against you simply because you didn’t show up.

Option 2: Negotiate a Settlement

Just because a lawsuit has been filed doesn’t mean the conversation has to stop. You can still reach out to the creditor or their attorney to negotiate a settlement. Many companies would rather settle for a smaller amount or set up a payment plan than spend more time and money on a court case. If you choose this route, the most important rule is to get everything in writing. A verbal agreement isn’t enough. Make sure the written settlement agreement clearly states the amount you’ll pay and confirms that the company will dismiss the lawsuit once the terms are met. This protects you from them coming back for more money later.

Option 3: Look into Other Resolutions

Sometimes, the best path forward isn’t about fighting or settling this specific debt but looking at the bigger picture. For example, if you’re dealing with overwhelming debt from multiple sources, filing for bankruptcy might be a consideration. Bankruptcy triggers an "automatic stay," which immediately stops all collection activities, including the lawsuit. In other cases, the lawsuit itself might not be valid. You have the right to demand the debt collector prove they own the debt and that the amount is accurate. If they can’t provide this proof, they may be forced to dismiss the lawsuit altogether.

How to Prepare and File Your Answer

Once you’ve confirmed the lawsuit is legitimate and decided to fight it, your next move is to file a formal response with the court. This document is typically called an "Answer." Filing an Answer is how you officially tell the court and the credit card company that you are defending yourself. It prevents them from winning automatically through a default judgment. This might sound intimidating, but it’s a structured process. You’ll need to address the claims made against you, raise your own defenses, and file the paperwork correctly and on time.

Services like LawLaw exist to make this step much simpler. Our platform helps you generate a customized legal Answer, making sure you include the right information and defenses for your specific situation. We even handle filing the documents with the court for you. Our goal is to help you protect your rights without the high cost of an attorney.

What Are Affirmative Defenses?

When you respond to a lawsuit, you don’t just deny the claims; you can also present "affirmative defenses." Think of an affirmative defense as a legal reason why the person suing you shouldn't win, even if their claims are true. For example, one common defense is the statute of limitations. Every state has a time limit for how long a creditor can wait to sue you over a debt. If they file the lawsuit after that deadline has passed, you can ask the court to dismiss the case. This is a powerful tool, but you have to raise it in your Answer, or you lose the right to use it.

What to Include in Your Formal Answer

Your written Answer is a point-by-point response to the allegations listed in the complaint you received. For each numbered paragraph in the complaint, you must state whether you admit the allegation, deny it, or don't have enough information to admit or deny it. According to the Consumer Financial Protection Bureau, this formal response is crucial. Your Answer is also where you will list any affirmative defenses you plan to use. It needs to be formatted correctly and clearly state your position on every single claim.

How to Gather Supporting Evidence

Before you finalize your Answer, gather any documents related to the debt. This includes the original credit agreement, account statements, and any letters or emails you’ve exchanged with the creditor. It’s also important to make sure the company suing you can prove it has the right to do so. You can ask them to provide proof that they own the debt, especially if it was sold by your original credit card company. If they can’t produce this documentation, it can become a key part of your defense. Keep everything organized, as you may need it later.

How to File Your Documents With the Court

After preparing your Answer, you must file it with the court clerk and send a copy to the lawyer who sued you (the plaintiff's attorney). This step is non-negotiable and has a strict deadline. Simply writing the Answer isn’t enough; the court has to receive it. Filing your response tells the court you’re actively participating in the case and stops the clock on a default judgment. LawLaw’s service includes filing your Answer for you, ensuring it gets to the right place on time. Our Standard Plan covers the entire process of preparing and filing your response, all backed by our 100% money-back guarantee.

Common Legal Defenses You Can Use

When you're sued, the burden of proof is on the company that filed the lawsuit—not you. They have to prove to the court that you owe the debt, that they have the legal right to collect it, and that they followed all the rules along the way. This is where affirmative defenses come in. An affirmative defense is a reason why the plaintiff shouldn't win, even if their claims are true. Raising these defenses in your official Answer forces the debt collector to prove their case and can sometimes lead to the lawsuit being dismissed entirely.

Is the Debt Too Old? (Statute of Limitations)

Every state has a law called the statute of limitations, which sets a time limit for how long someone can sue you over a debt. This clock usually starts ticking from the date of your last payment. The time limit varies by state but is typically between three and six years for credit card debt. If the debt collector files a lawsuit after this period has expired, the debt is considered "time-barred," and you can ask the court to dismiss the case. Be careful, though—making even a small payment on an old debt can sometimes restart the clock, so it's important to know your rights before you act.

Do They Have the Right to Sue? (Standing)

The company suing you must prove it has the legal right, or "standing," to do so. This is especially important when your debt has been sold from your original creditor to a third-party debt collection agency. The new owner must provide a clear paper trail showing every time the debt was sold, proving they are the current, rightful owner. If they can't produce this chain of assignment, they don't have the standing to sue you. You have the right to demand this proof, and without it, their case is on shaky ground.

Is Their Proof Missing? (Insufficient Evidence)

To win a lawsuit, the debt collector needs more than just their word; they need solid evidence. This includes documents like a copy of the original credit card agreement you signed and a complete history of your monthly statements showing how they calculated the amount you supposedly owe. Often, when debts are bought and sold, this paperwork gets lost or is incomplete. If the plaintiff can't produce this essential documentation or if the documents they provide contain clear errors, you can argue that they have insufficient evidence to prove their case.

Did They Follow the Rules? (Improper Service)

The legal system has very specific rules for how a lawsuit must be initiated. This includes "serving" you with the lawsuit papers in a legally correct way. If the papers were just left in your mailbox or given to a neighbor, it might be considered improper service, which could be grounds for dismissal. Furthermore, debt collectors must comply with federal laws like the Fair Debt Collection Practices Act (FDCPA), which protects you from abusive or unfair practices. If a collector has violated your rights, you can use that as part of your defense.

Should You Try to Settle the Debt?

Even after filing an Answer to the lawsuit, the door to negotiation isn't closed. In fact, showing that you're ready to defend yourself in court can sometimes make the creditor more willing to talk. Settling the debt means you agree to pay a portion of what you owe, and in return, the creditor drops the lawsuit. It’s a common outcome that can save both sides the time, stress, and expense of a court battle. If you know the debt is yours and you have the means to pay something, exploring a settlement is often a very practical next step.

When a Settlement Makes Sense

A settlement is often a good move if your main goal is to resolve the lawsuit quickly and move on. Creditors and debt collectors are businesses, and litigation is expensive. They often prefer a guaranteed partial payment now over the uncertainty and cost of a trial later. This gives you leverage to negotiate. If you’ve reviewed the lawsuit, confirmed you owe the money, and don't have a strong legal defense (like the debt being past the statute of limitations), settling can be your best path forward. It allows you to take control of the situation and resolve the debt on your own terms, rather than leaving it up to a judge.

How to Structure a Payment Plan

When you negotiate, you can typically aim to settle for 30% to 60% of the total amount owed. The most effective way to settle is with a single, lump-sum payment. Creditors love getting their money all at once, so they’re more likely to accept a lower amount if you can pay it immediately. If a lump sum isn't possible, you can propose a payment plan. Be careful with this option, though. If you miss a payment, the agreement could be voided, and some agreements are structured to "reset" the clock on the debt, putting you right back where you started. For help with this process, LawLaw's Premium Plan includes a strategy call with a legal specialist and a settlement offer letter template to guide your negotiations.

Why You Must Get the Agreement in Writing

This is the most important rule of settling a debt: do not send any money until you have a signed, written agreement. A verbal promise over the phone is not enough to protect you. The written settlement agreement should clearly state the total amount you’ve agreed to pay, the date it’s due, and how you will pay it. Most importantly, it must include a clause stating that the creditor agrees to dismiss the lawsuit "with prejudice" once you’ve paid. "With prejudice" is a legal term that means they can never sue you for this specific debt again. Review the document carefully before you sign it or make a payment.

Where to Find Legal Help and Resources

Facing a lawsuit can feel isolating, but you don’t have to handle it alone. Hiring a lawyer isn't always financially possible, and figuring out the court system by yourself is tough. The good news is that there are several resources available to help you protect your rights, from free legal clinics to affordable online tools. Finding the right support depends on your budget and the complexity of your case. Exploring these options can give you the confidence and the tools you need to move forward.

Find Free Legal Aid in Your Area

If you have a low income, you may qualify for free legal assistance. Organizations across the country are dedicated to helping people who can't afford a lawyer. The Legal Services Corporation is the largest funder of civil legal aid for low-income Americans, and you can use their website to find a local office. Another great resource is the American Bar Association's pro bono directory, which lists programs that connect volunteer lawyers with people in need. These services can provide direct legal advice and sometimes even represent you in court, ensuring you have a fair chance to present your case.

Contact Consumer Protection Agencies

If you believe a debt collector has violated your rights, you should report them. Government agencies are tasked with enforcing the laws that protect you, like the Fair Debt Collection Practices Act (FDCPA). While they won't represent you in your specific lawsuit, filing a complaint creates a record of the collector's behavior and contributes to broader enforcement actions. You can file a complaint with the Consumer Financial Protection Bureau (CFPB) or report the issue to the Federal Trade Commission (FTC) and your state attorney general’s office. This holds collectors accountable and helps protect other consumers from similar misconduct.

Use a Professional Document Preparation Service

For many people, a document preparation service offers a practical and affordable middle ground. These platforms use technology to help you create and file the necessary court documents without the high cost of an attorney. Instead of starting from scratch, you can use a guided process to prepare your official Answer to the lawsuit, ensuring it includes the right information and defenses for your situation. LawLaw was created to make this process simple and accessible, helping you meet your deadline and respond to the lawsuit correctly. It’s a way to stand up for your rights with confidence.

Common Mistakes to Avoid

When you’re facing a lawsuit, it’s easy to feel overwhelmed and unsure of what to do next. The stress can lead to common missteps that make a difficult situation even worse. By understanding these pitfalls ahead of time, you can approach your case with more confidence and protect your rights. Let’s walk through the three biggest mistakes people make and how you can steer clear of them.

Mistake #1: Ignoring the Lawsuit

The single worst thing you can do is pretend the lawsuit doesn't exist. While the urge to ignore the scary legal documents is understandable, it gives the credit card company an automatic win. If you don't respond by your deadline, the court can issue a default judgment against you without ever hearing your side of the story. This isn't just a mark on your record; a default judgment gives the creditor powerful tools to collect the money, like garnishing your wages or freezing the funds in your bank account. Facing the lawsuit head-on is your only way to defend yourself.

Mistake #2: Believing a Response Admits Guilt

Many people worry that filing a response with the court is the same as admitting they owe the debt. This is simply not true. Responding to a lawsuit is your legal right to participate in the process. It’s your opportunity to tell your side of the story and, more importantly, to make the debt collector prove their case. The Federal Trade Commission explains that by responding, you force the collector to prove that you owe the debt, that the amount is correct, and that they even have the legal right to sue you in the first place. Filing an Answer is a neutral step that preserves your options.

Mistake #3: Not Knowing Your Consumer Rights

As a consumer, you are not powerless in this situation. Federal and state laws provide you with specific protections against unfair debt collection practices. For example, debt collectors can't harass you, lie about the amount you owe, or threaten you with actions they can't legally take. Understanding your rights when dealing with debt collectors is one of your strongest assets. It allows you to identify if the collector has broken the law, which can be a powerful defense in your case. Taking a little time to learn about these protections can completely change how you handle the lawsuit.

How to Protect Yourself Moving Forward

Dealing with a lawsuit is incredibly stressful, but it’s also an opportunity to take control of your financial situation. Once you’ve responded to the immediate legal challenge, you can start building a foundation to prevent future issues. This means getting the right support, creating a solid financial plan, and understanding your rights so you can handle any future debt collection attempts with confidence. Think of this as the next chapter, where you move from reacting to the lawsuit to proactively managing your finances and protecting your future. It’s about making sure you’re never in this position again.

Get the Right Kind of Help

You don’t have to figure this all out on your own. The legal system is complicated, and talking to a qualified professional can make a huge difference. A lawyer can review the details of your case and help you understand your rights under both federal and state laws. If you’re worried about the cost, know that there are resources available. Many organizations offer free or low-cost legal assistance to those who qualify. You can find local help through the Legal Service Corporation or the American Bar Association’s pro bono programs. Getting expert advice ensures you’re making informed decisions every step of the way.

Create a Financial Recovery Plan

A lawsuit often highlights the need for a clear financial plan. If the debt is valid but you can’t afford to pay it all at once, you still have options. Many creditors are willing to negotiate a settlement for a lower amount because going to court is expensive and time-consuming for them, too. You might also be able to arrange a payment plan that fits your budget. For broader support, consider reaching out to a nonprofit credit counseling agency. A certified counselor can help you create a realistic budget, explore debt management options, and give you the tools to build a stronger financial future.

How to Prevent Future Lawsuits

The best way to avoid another lawsuit is to address collection issues before they escalate. If you know you’re going to have trouble paying a bill, contact the creditor as soon as possible to discuss your options. It’s also crucial to know your rights under the Fair Debt Collection Practices Act (FDCPA), which protects you from abusive and unfair collection tactics. If a debt collector contacts you about an account you don’t recognize, you can use a debt validation letter to make them prove the debt is yours. This simple step can stop a wrongful collection in its tracks and is a key part of protecting yourself.

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Frequently Asked Questions

What is the absolute first thing I should do after being sued? Before you do anything else, find the document called the "Summons." This paper is your key to understanding your deadline. It will tell you exactly how many days you have to formally respond to the court. Find that date and mark it on your calendar immediately. Missing this deadline is the most critical mistake you can make, so confirming your response window is always the most important first step.

What happens if I just ignore the lawsuit papers? Ignoring the lawsuit is the fastest way to lose. If you don't file a response on time, the credit card company can ask the court for a default judgment against you. This means they win automatically because you didn't show up to defend yourself. A default judgment gives them the legal power to take money directly from your paycheck or freeze your bank accounts, all without you ever getting to tell your side of the story.

Do I have to hire an expensive lawyer to respond? While hiring a lawyer is one option, it's not your only choice, especially if you're worried about the cost. You have the right to represent yourself in court. The most important part is filing a formal "Answer" document on time. Services like LawLaw were created to help you prepare and file these specific court documents correctly and affordably, giving you a way to protect your rights without the high price tag of traditional legal help.

If I respond to the lawsuit, am I admitting that I owe the debt? No, absolutely not. Filing an Answer is simply your way of officially participating in the legal process. It is not an admission of guilt. Think of it as raising your hand and saying, "I'm here, and you need to prove your case against me." Responding is a neutral act that preserves your right to challenge the lawsuit, question the amount owed, and present any defenses you might have.

What if I know I owe the money? Is there still a point in responding? Yes, you should still respond. Even if you believe the debt is yours, filing an Answer is crucial. It prevents an automatic default judgment and keeps your options open. Responding forces the creditor to prove they have the legal right to sue you and that their calculations are correct. This step preserves your leverage to negotiate a more favorable settlement or payment plan, and it ensures the case is resolved on fair terms rather than by default.