Can You Still Be Sued by a Credit Card Company if You Are Unemployed?
People often use credit cards to manipulate their cash flow, paying the credit card company each billing cycle with money brought in during the month. Usually, the majority of this money is wages from employment. Loss of a job thus quickly can make it easy to get behind on payments. If this happens, the credit card company might try to sue you for the payments, even if you are no longer employed.
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General Guide and Primary Rationale
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Credit card agreements are legally binding contracts. If you default on the contract in any way, including nonpayment of the debt, the credit card company has a right to enforce the terms of the agreement and try to collect what you owe via the courts. Even though laws such as the Fair Debt Collection Practices Act protect consumers somewhat from shady debt collection tactics, courts are obligated to uphold contracts that do not violate local, state or federal laws.
Secondary Rationale
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Employment is not the only way to get money or convertible assets. Therefore, a credit card company is not especially concerned with your employment status. It is more concerned with whether you can pay what you owe. If this were not the case, retirees and disabled individuals would be unable to hold credit card accounts. The credit card company can sue if it feels you have assets to cover the debt, regardless of your employment status.
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Complicating Factors
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Whether a credit card company sues, regardless of your employment status, is not a black and white matter. The company might not sue you while you are unemployed if it can go to a co-signer for payment, for example. In some instances, employment might encourage a lawsuit because the credit card company assumes there is money to collect through wage garnishment. Nine states also are community property states as of 2011, so if you're married, unemployed and live in one of these states, the credit card company might look to your spouse for payment instead of suing. The amount of the debt also matters -- companies are more likely to sue if you owe a significant amount. Even your age is a consideration, because younger individuals are more likely to start work again and have income to put toward a judgment.
Bottom Line
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Credit card companies can and do sue unemployed people. This is a significant blow that might create a catch-22 situation, because judgments from lawsuits appear on your credit report, which many employers review during the hiring process. For this reason, it usually is a good idea to stop using the card as soon as possible and try to negotiate with the company. If the company won't negotiate and the debt claim is legitimate, liquidating assets can be advantageous because you might be able to make payments without another hit to your credit report -- you'd likely need to liquidate the assets eventually to satisfy a judgment anyway. Exercising your rights under FDCPA and similar local, state and federal regulations becomes more critical when you are unemployed and don't necessarily have the income to go through a costly legal battle.
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References
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