What Happens When a Credit Card Company Sues Someone?
Credit cards are revolving lines of credit for those with various levels of credit-worthiness. People with very poor credit histories can get a secured credit card. This means a certain amount of cash must be deposited with the credit card company before a matching credit line is allowed. People with better credit can get unsecured credit cards with credit lines from a few hundred to thousands of dollars. When borrowers default on these credit lines, the credit card company may sue to recover the debt.
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Why Sue?
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By the very nature of an unsecured credit line, the credit card company issued the card on nothing more than the history and name of the borrower. Going to court in order to secure a judgment against a borrower transforms an unsecured debt into a secured one. The court action can enable the credit card company to seize assets belonging to the borrower or future earnings to satisfy the debt amount.
Strength in Numbers
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Nationwide banks and other lenders, such as retail stores and oil companies, issue credit cards. Although retail creditors rarely resort to court action to recover debts, it has happened on occasion if the debt is large enough. What all these creditors will do is first retain a local attorney to represent their interests in the same county or city where the borrower lives. This puts the case in a local jurisdiction.
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Notice Served
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The local attorney will then draft a suit alleging the borrower defaulted on the credit lines and is obligated to pay the full amount plus the costs to collect the debt. This draft will be filed with the local civil claims court. The court will then retain a process server to give notice to the borrower of the impending legal action.
Response
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The borrower is given a certain time frame (usually 30 days) to respond to the civil action filed by the attorney. The borrower can contest the amount, the debt itself or ignore the notice and allow the proceedings to continue.
Hearing
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A hearing will be scheduled in civil court to hear the arguments from both sides. The attorney for the creditor will argue that the borrower owes the money and must provide total satisfaction for the debt. The borrower, however, may put forth the argument that the debt was unsecured and the creditor made a poor choice providing the credit line. In other words, unsecured means unsecured, and the court should not allow the terms to be changed after the arrangement is in default.
Findings
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The hearing will lead to one of two results: the judge will find for the plaintiff (the creditor) and allow the debt to be satisfied by seizing and liquidating assets, or the judge will find for the defendant, the borrower. It's impossible to predict how such cases will conclude because of the different laws in jurisdictions across the country.
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References
- Photo Credit credit card and hand image by Warren Millar from Fotolia.com
