Can a Person Be Sued Over an Unsecured Credit Card?
An unsecured credit card is the kind most people have (with a secured credit card, the cardholder deposits money with the financial institution that issues the card; this money is collateral for any bills generated by using the card). A credit card agreement is a binding contract between you and the credit card company. When you fail to make payments as planned, this breach of contract can cause serious legal repercussions. While not all credit card companies will sue you over the debt, if the amount you owe is significant, you may be targeted for a lawsuit. Additionally, collection agencies that purchase old debt may file a lawsuit against you to obtain payment.
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Considerations
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There are many factors that determine whether or not you may be sued over an unsecured credit card. In general, if you've defaulted on your credit card, whether it's secured or unsecured, you can be sued for the amount that you owe the creditor. The main exception to this is if you have filed for bankruptcy and the credit card debt is discharged under the bankruptcy; in this case, you cannot be sued over a past due balance, no matter how large it may have been.
Time Frame
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Your creditors have a specific deadline by which they must file a lawsuit. Debts that are past the statute of limitations are referred to as "time-barred" debt. Because the statute of limitations varies from state to state, you will need to read your credit card agreement carefully. Some credit card agreements stipulate that the statute of limitations will be calculated in the state where the company is located. For others, the statute of limitations is calculated in the state in which you reside. If you've recently moved out of state, however, the statute of limitations may actually be calculated using the laws of your former residence.
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Time-Barred Debt and the Date of Default
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In order to understand whether or not your credit card debt may put you at risk of a lawsuit, you must know the original date of default. This is the date that the account first went past due. If you make a subsequent payment, this resets the clock, so even if you've missed one or two payments in years past, only the most recent date of default applies. Once you have this date, you can calculate whether or not the debt is time barred or not.
Misconceptions
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A common misconception when it comes to lawsuits involving credit card debt is the idea that if a debt is still noted on your credit report, you may be sued over it. The statute of limitations on the debt may be shorter than the time that the bureaus are allowed to report it. This means that while charge-offs may be reported for up to seven years on your credit report, the statute of limitations on suing you over that debt may be as little as four years. The reason for this misconception is twofold: Some individuals confuse the statute of limitations with the limitation on the number of years that derogatory credit remains on your report. Also, some collection agencies will still bring a lawsuit after the statute of limitations has passed; if you do not challenge the lawsuit, they could win by default.
Prevention/Solution
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The easiest way to prevent a lawsuit over an unsecured credit card is to remain current and adhere to the credit card agreement. If you are already past due on your accounts, however, negotiating new payment arrangements can help to prevent a lawsuit in the future. If you are already being sued, it's important to show up for the court date; if your creditor is attempting to sue after the statute of limitations has passed, you can successfully defend the lawsuit. Even if they are within the statute of limitations, if they cannot provide proof that you owe the debt, the case can be thrown out. Consult with a legal professional to get the best advice in your specific case.
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