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Lawsuits & Litigation

How to Respond to a Credit Card Debt Lawsuit

— January 12, 2022

Being sued for a past due debt can be intimidating and stressful, but knowing what your options are and how to navigate the legal process will go a long way to alleviating some of that stress.

Almost everyone has had financial trouble at some point in their life. This often takes the form of taking out debt on a credit card. As of June 2021, U.S. households owed $410 billion in credit card debt. If you are having trouble getting out of your credit card debt, you are not alone! This is nothing to be ashamed of. True, you promised to repay the debt, but that does not mean unforeseen circumstances will never occur. You made a good faith promise to repay the money loaned to you, but you should not feel bad if forces out of your control have made keeping that promise difficult.

If you can’t make the payments on your credit card, you most likely were hounded by debt collectors with phone calls and letters. Once these debt collectors feel they will not be able to convince you to pay voluntarily, they will file a lawsuit against you. To make things worse, if you cannot pay your existing debts, you probably cannot afford to pay the exorbitant cost of hiring an attorney.

If you are being sued because of past due amounts you may owe on a credit card, do not be discouraged! Even if you cannot afford an attorney, there are several legal tactics you can use to eliminate or reduce the amount you owe. This article will go over the steps of how to respond to being sued for past due debt. Although the focus will be on credit card debt, the information in this article will also be useful for most other debt collection lawsuits.

Note the focus of this article is on how to respond in civil state courts of general jurisdiction, as opposed to small claims courts. If you have been sued for a debt in a small claims court, the basic principles of how to respond will be the same, but the actual procedures will be somewhat different. This article will still be useful, just be aware that the procedures in small claims courts may vary from what is described below.

The Summons and Complaint

All lawsuits begin with the defendant being served with a summons and complaint (known as a ‘citation’ and ‘petition’ in Texas). The summons is the legal document where the court is essentially ordering you to appear and answer the claims made by the plaintiff, which are detailed in the attached complaint. 

By the time a person is sued for owing money on a credit card, the entity suing you will likely be a third-party debt collector, rather than the bank you originally signed the credit card agreement with. There is an entire industry of debt-collection companies that will buy debt for a fraction of its value from banks and larger financial institutions that do not have the desire to pursue collection efforts (this has some advantages for the defendant, which will be discussed in more detail below).

Whoever is suing you, it is imperative that you do not ignore the summons and complaint! If you do, a default judgment will likely be entered against you and you will be forced to pay the entire amount claimed in the complaint, plus attorney fees and other costs incurred by the Plaintiff. Once you file an answer to the complaint, you will have several months before any final determination is made on your case, giving you lots of time to negotiate a settlement. 

Answering the Complaint

Even if 100% of the claims alleged against you are true, you should still answer the complaint. Of course, that does not mean you should lie. Plaintiffs and defendants can both get in trouble for making false representations to the court. On the other hand, if you admit every allegation in the complaint, the plaintiff will be able to file a motion requesting ‘judgment on the pleadings’, which means that since you admitted to all the allegations, the court should award the plaintiff their requested damages as there is no dispute in question.

Fortunately, it is easy to deny most of the substantive allegations in a credit card debt collection lawsuit without making false representations to the court. This primarily takes the form of telling the court and the plaintiff that you do not have sufficient personal knowledge to admit or deny the allegation, so you therefore deny it.

For example, if the complaint begins by stating you are a resident of County X (and you do, in fact, reside there), you should certainly admit that allegation. But if the complaint goes on to state an allegation such as: “In June of 2019, Plaintiff purchased the debt owed by Defendant from ABC Bank”, you can honestly state that you do not have sufficient personal knowledge to admit or deny that claim. This puts that fact at issue and will require the plaintiff to produce evidence showing that they did indeed purchase the debt from the original bank. 

Another good example is when the plaintiff alleges: “The current amount owed on this debt is $XXXX”. Assuming you have not made any payments recently and have not seen a current credit card statement, you can again state that you lack sufficient personal knowledge about this claim. Such denials usually take the following form: “Defendant lacks sufficient personal knowledge to either admit or deny the allegation in Paragraph 5 of the complaint, it is therefore denied”.

Once you have filed your answer, both sides will engage in discovery, where you will be allowed to request any documents from the plaintiff that are relevant to any claim or defense. Likewise, they will be able to request any relevant documents from you, such as bank and income records. Failure to comply with discovery requests can result in serious sanctions.


Fortunately, defendants in credit card debt lawsuits have a few good defenses, even when there is no dispute that they owe the debt in question:

Has The Statute of Limitations Expired?

The statute of limitations is the amount of time that a plaintiff has to bring a lawsuit. This time varies wildly between states. For credit card debt lawsuits, it can be anywhere between 3 and 10 years. In most states, the statute of limitations begins to run from the moment you last made your payment.

Black and white analog egg timer; image by Marcelo Leal, via
Image by Marcelo Leal, via

When you are first served with a debt collection lawsuit, you should immediately figure out whether or not the suit was properly filed within the statute of limitations period. If not, you will need to state that the case was filed outside the statutory period as an affirmative defense in your answer.

Who Owns the Debt?

As mentioned above, most debt collection lawsuits are brought by third-party companies who have bought the debt from the original bank or even a previous debt collection company. As the plaintiff, if a debt collection company alleges that they own this debt and have a right to collect it, they must prove as much in court. Such debts are often bought in bulk and are resold several times. This can sometimes make it difficult for the debt collection company to prove the proper chain of ownership. During discovery make sure you request all documents that show the plaintiff has the right to collect this debt against you. 

If you are lucky, the debt collection company suing you may not be able to prove that they own the right to collect on your debt and the case may get dismissed. This is especially true when the debt has been bought and sold several times, as the plaintiff should be required to present evidence of the entire chain of ownership, including the original agreement you signed with the bank when you first obtained the credit card.

Are You ‘Judgment Proof’?

The main reason someone doesn’t pay a debt they owe is because they simply do not have the money. This may be due to being unemployed, being on a fixed income, or just not having any valuable assets. In many of these instances, a defendant will be ‘judgment proof’. This doesn’t mean that you can’t have a judgment entered against you; rather, it means that the plaintiff will not be able to collect any money owed on that judgment.

The three primary ways to collect on a judgment are: garnishing wages, garnishing bank accounts, and seizing property.

Garnishing Wages

Every state has a limit on how much of a person’s wages can be garnished to collect on consumer debts (this limit is usually higher for government debts and child support). The most common limit is 25% of a person’s disposable income, meaning that only 25% of your wages above a certain minimum amount can be taken by a judgment creditor.

Therefore, if you are unemployed or make close to minimum wage, there is not much a judgment creditor can do to collect money from your wages.

Garnishing Bank Accounts

Bank accounts are also subject to certain rules limiting that amount that can be garnished. If you receive money from a pension or social security, those amounts are protected from garnishment (with some exceptions for government debts and child support).

Seizing Property

Unless you own valuable property (such as a house with a lot of equity or a fancy car that is paid off), most judgment debtors will not attempt to seize your property, as the cost of doing so often exceeds the value the property will receive at auction. That said, there is no guarantee that an overzealous debt collector won’t try and seize your personal property, even if it has marginal value.

Even if you own your own home and have substantial equity, each state has what is known as a ‘homestead exemption’ which allows owners to keep a certain amount of equity before any funds are given to creditors. In Oregon, for example, if your home is worth $400,000 and you currently ow $375,000 on your mortgage, you have $25,000 in equity. However, Oregon’s homestead exemption is $40,000, meaning that you would be allowed to keep $40,000 in equity before any amount is turned over to a judgment creditor.

Let’s say you only owe $300,000 on your home, meaning you have $100,000 in equity. In this case, a judgment creditor could potentially force the sale of your home. You would be allowed to keep at least $40,000 in equity and the judgment creditor would get up to $60,000. If they are owed less than that from the judgment, then they would only receive the amount of the judgment. If they are owed more than $60,000, then they can still proceed with other collection efforts against you.

Since most people facing debt collection lawsuits don’t have the money to pay off their debts in the first place, it is common for such defendants to have limited income and few (if any) valuable assets. In other words, they are ‘judgment proof’. This is an excellent bargaining chip to use in any debt collection lawsuit and your judgment proof status can often be used to negotiate a settlement before you even have to file an answer.

Negotiating A Settlement

The first thing you should do after being served with a summons and complaint is figure out how much money you can get together to offer as a lump sum payment. Most debt collection companies will accept half of what is actually owed, provided you can make a lump sum payment in the near future.

If you are judgment proof (or close to it), be sure to let the plaintiff know. If they are convinced that they will not be able to collect on any judgment, they will be likely to settle at a steep discount. If you are genuinely judgment proof, do not be afraid to show them proof of your income. If they ask where you are getting the money to pay the settlement, tell them you have been able to borrow some money from friends or family members (making sure to let them know that this is the absolute maximum amount of money you have for any settlement).

You should also let them know that you intend to file an answer and contest this case all the way through trial, but you may need to actually file an answer to show them that you are serious. If the plaintiff thinks they will have to expend more money on attorney fees and trial expenses, they may be more motivated to settle.

If you cannot get a lump sum payment together, many debt collection companies are willing to negotiate payment plans. However, they often will not give you as large of a discount on the total amount due and if you miss a payment, the deal will be off and you will still owe the total amount due, minus any payments you made. If you do negotiate a payment plan, make sure you get the terms in writing.

If you are convinced you do not owe the debt in question, but the plaintiff is still intent on pursuing their claims, you will need to respond to the lawsuit, engage in discovery, and ultimately present your case in front of a judge or jury.


Being sued for a past due debt can be intimidating and stressful, but knowing what your options are and how to navigate the legal process will go a long way to alleviating some of that stress. There are several ways a defendant in a debt collection lawsuit can defend themselves and/or negotiate a fair settlement, even in cases where there is no doubt the debt is owed. With a little bit of knowledge, you will likely be well-equipped to defend yourself.

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