What Will Happen if My Credit Card Account Is Referred to an Attorney?

Your credit card provider can forward your unpaid balance to an attorney.

Stop paying your credit card and delinquency notices from your credit card company will begin to arrive regularly in the mail. Depending on the amount you owe and your credit card provider, your delinquency notices may eventually give way to collection letters from an attorney. Both credit card companies and collection agencies who purchase defaulted credit card accounts hire attorneys to assist in the debt recovery process.

Additional Collection Activity

As a rule, consumers take notices from attorneys more seriously than payment requests from creditors. Because of this, credit card companies and collection agencies alike often keep attorneys on staff to write dunning letters to debtors.

In these cases, the letter appears to have come from an outside attorney's office but, in reality, is merely another collection letter from the creditor. This practice is most common with collection agencies.

Attorney Communication

All debt collection attorney's policies differ. In general, however, a debt collection attorney sends a letter to the debtor informing him of the amount he owes, the original creditor and the company's intent to sue. The attorney then provides the person with a certain amount of time in which to contact her and make immediate payment arrangements. Should the debtor fail to do so, the attorney may then file a lawsuit on behalf of the original creditor.

Your odds of a lawsuit increase with your debt. Although all creditors' policies vary, you suffer the greatest risk of the creditor's attorney filing a lawsuit against you if your debt exceeds $1,000.

Debt Collection Lawsuits

If the creditor's attorney files a lawsuit against you and you do not answer the summons you receive or defend yourself in court, the attorney's job is complete. The court issues a default judgment based on the complaint. Should you respond to the summons, the attorney must arrive in court prepared to present a case against you. The burden of proof lies with the creditor and its attorney to demonstrate that you owe the debt.

FDCPA Applicability

The Fair Debt Collection Practices Act (FDCPA) regulates the third-party debt collection industry. A third-party debt collector is any company or individual who collects debt on behalf of the original creditor or purchases the a debt from another creditor with the intention to collect.

The FDCPA prohibits certain activities, such as harassment, empty threats or using language specifically constructed to frighten or upset a debtor. While original creditors are not bound by the restrictions listed in the FDCPA, debt collection attorneys, as third-party entities, are. Therefore, if an attorney that a credit card company or collection agency hires violates your rights under the FDCPA, you have the right to file a lawsuit against the attorney.

References

• Neighborhood Economic Development Advocacy Project: Debt Collection Basics
• Cornell University Law School: Federal Rules of Civil Procedure -- Default Judgment
• Federal Trade Commission: The Fair Debt Collection Practices Act (Section 806/p.7)
• Neighborhood Economic Development Advocacy Project: The Basics of Defending Creditor Lawsuits

Resources

• U.S. Department of the Treasury: Answers About Credit Card Payments and Late Payments
• Bankrate.com: Debt, Collection Agencies and Your Rights
• CNN Money: Credit Card Debt Reduction Planner