Can Credit Card Companies Sue You for Debt?

Yes. Credit card companies can sue you for debt and, depending on the circumstances and amount owed, it’s likely they, or a collection company that buys your debt, will eventually. However, lawsuits are expensive and time-consuming, so suing is almost always a last resort.

Here's when credit card companies are likely to sue you for failure to pay, how to prevent that outcome in the lead-up, and what to do if the bank takes you to court.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

Key Takeaways

• Lawsuits typically follow default. Most suits come after about 180 days of nonpayment, when the account is charged off and may be sold to a collection agency that inherits the right to sue.

• Never ignore a summons. If you don't respond within the stated window (often 20 to 30 days), the court can enter a default judgment, opening the door to wage garnishment or bank levies.

• Judgments left credit reports in 2017. Civil judgments no longer appear on the big three credit reports, but the missed payments and charge-off behind them still hurt your score.

Summary generated by AI, verified by MoneyLion editors

When Does a Credit Card Company Sue for Missed Payments?

Credit card companies have the right to sue for any amount at any time after your account becomes delinquent. However, the balance owed must justify the expense of pursuing legal action. Lawsuits are usually reserved for balances of $1,000 or more, and the typical timeline is as follows:

• First 30 days: If you miss your due date, don’t panic. While the card issuer might charge you a late fee, it won’t report a missed payment to the credit bureaus until 30 days pass without hearing from you, and your score won’t be impacted if you pay by then.

• 30 to 90 days past due: Your account is officially considered delinquent, a status that is hard to miss. Your credit score will fall, typically by 60 to 110 points for good-credit borrowers, and you should expect a bombardment of calls and notices from the bank’s internal collections department.

• 120 days past due: Your account is now severely delinquent. Your score continues to plummet and the collection efforts intensify. 

• 180 days past due: After six months, your account is officially in default, and you’ve reached the critical breaking point. This is when the card issuer is likely to charge off your account, or write off the debt as a loss, although some pull the trigger at 120 days — but that does not mean the debt is forgiven. At this point, the credit card company is likely to sue you or sell your debt to a third-party collection company that buys your debt — and the right to sue.

What Should You Do if a Credit Card Company Sues You?

Follow these steps if a credit card company or collection agency sues you to mitigate the damage and take back control of your financial life. 

• Respond immediately: The threat of legal action can feel intimidating and overwhelming, but hiding from it always makes it worse. If you don’t respond within the timeframe stated in the summons — usually 20 to 30 days — the lawsuit proceeds without you. Since the court has only one side of the story, it will typically enter a default judgment against you, giving the bank enhanced power to collect, including the right to garnish wages and levy bank accounts.

• Verify the debt: Request a written summary of the debt.

• Challenge inaccuracies: If you notice any errors or believe any of the charges were fraudulent, contest them in writing.

• Ensure the statute of limitations hasn’t passed: Lenders must proceed in a timely fashion, with statutes of limitations varying by state. Check that the plaintiff has legal standing to sue.

• Document everything: Create and maintain records of all correspondence, payments and legal notices.

• Consider seeking legal help: Consult an attorney or legal aid organization if the debt justifies the expense and potential consequences, and ask the court if mediation is available as an alternative. 

Can Credit Card Lawsuits Hurt Your Credit Score?

As of 2017, civil judgments no longer show up on your credit report, but they don’t have to for your score to suffer serious and lasting damage from being sued for outstanding credit card bills.

Payment history is the most important factor in your credit profile, accounting for 35% of your FICO score, and it can drop by 60 to 110 points due to a single missed payment in the initial 30-day period if you started with strong credit. A hit of 30 points or more is likely for those with fair credit or less — and bad gets worse every month. 

By the time the bank sues you, you’ve already passed delinquency, graduated to severe delinquency, and, eventually, defaulted on the loan. With the exception of bankruptcy, few things do greater lasting harm to your credit profile.

When the bank charges off the account, your score can plummet by 150 points or more.

How To Avoid Lawsuits from Credit Card Companies

An ounce of prevention is worth a pound of cure — especially when it comes to credit card debt. 

• Use lines of credit responsibly: Don’t charge more than you have the cash to cover in a given month, don’t use credit cards as an emergency fund, pay your statement balance in full each billing cycle and schedule your payments for automatic withdrawals. 

• Communicate: The moment you miss your first payment deadline, card issuers make every effort to contact you — this is a crucial window of opportunity. The golden rule is never to ignore a debt. Communicate with your lender, establish hardship, if applicable, and ask about a revised payment plan or another mutually satisfactory course of action.

• Know your rights: According to the Consumer Financial Protection Bureau (CFPB), federal statutes like the Fair Debt Collection Practices Act and Fair Credit Reporting Act, as well as many state laws, govern how, when and under what circumstances lenders can pursue borrowers and take them to court. For example, they are not allowed to threaten lawsuits they don’t intend to file, and they must pursue the debt in a timely fashion.

FAQ

The answers to these common questions about credit card lawsuits can help you avoid being sued and show you how to respond if you face legal action.

Can a credit card company sue me for any amount of debt?

Yes, lenders have the legal right to sue for any amount once an account is delinquent. However, because lawsuits are expensive and time-consuming, they are usually a last resort. Creditors typically only take legal action if the balance owed is $1,000 or more.

When is a credit card company most likely to file a lawsuit?

While a lawsuit can occur sooner, it usually follows 180 days of non-payment. At the six-month mark, your account goes into default and is "charged off." The bank might then either sue you directly or sell the debt to a collection agency that inherits the right to sue.

What happens if I ignore a credit card lawsuit summons?

The number one rule of debt is never to ignore collection attempts, especially legal notices. If you do not respond within the typical 20 to 30-day window, the court will likely enter a default judgment against you, which gives the bank even greater power to collect.

How does being sued by a credit card company affect my credit score?

While civil judgments no longer appear on credit reports, the months of missed payments leading up to the lawsuit will devastate your score. Delinquencies and a final account charge-off can cause your score to drop by 150 points or more.

What is the best way to prevent a credit card company from suing me?

Proactive communication is the key to avoiding a lawsuit. Never ignore a debt — contact your lender as soon as you miss a payment. Banks prefer to avoid court and will often work with you to establish financial hardship, lower your interest rate, or create a revised, manageable payment plan.

Photo Credit: AsiaVision/ iStock.com

Key Terms

• Delinquency: A payment past its due date; accounts are typically reported delinquent at 30 days and grow more serious over time.

• Charge-off: When a creditor writes the debt off as a loss, usually around 180 days past due — but you still owe the balance.

• Default judgment: A ruling entered against you when you don't respond to a lawsuit, giving the creditor expanded collection powers.

• Wage garnishment: A court-ordered deduction from your paycheck to repay a debt, available to creditors with a judgment in many states.

• Statute of limitations: The limited window — typically three to six years, varying by state — during which a creditor can sue to collect.

• Fair Debt Collection Practices Act (FDCPA): The federal law limiting how third-party collectors can contact and pursue you.

• Debt buyer: A company that purchases charged-off debt, often for pennies on the dollar, and may sue to collect it.

• Civil judgment: A court ruling that you owe a debt; since 2017 these no longer appear on the big three credit reports but remain public records.

Sources

• CFPB — What laws limit what debt collectors can say or do?

  — FDCPA and FCRA protections.

• CFPB — What should I do when a debt collector contacts me?

  — responding to collection and disputing a debt.

• myFICO — What's in my FICO Scores?

  — payment history as the top scoring factor.

Summary generated by AI, verified by MoneyLion editors