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How Often Do Credit Card Companies Sue for Nonpayment?

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Jessica Merritt
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Jessica Merritt

Editor & Content Contributor

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A long-time points and miles student, Jessica is the former Personal Finance Managing Editor at U.S. News and World Report and is passionate about helping consumers fund their travels for as little ca...
Edited by: Michael Y. Park
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Michael Y. Park

Editor

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Michael Y. Park is a journalist living in New York City. He’s traveled through Afghanistan disguised as a Hazara Shi’ite, slept with polar bears on the Canadian tundra, picnicked with the king and que...
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Keri Stooksbury

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With years of experience in corporate marketing and as the Executive Director of the American Chamber of Commerce in Qatar, Keri is now Editor-in-Chief at UP, overseeing daily content operations and r...

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Many people are struggling with credit card payments as credit card delinquencies tick upward.¹ Get far enough behind on credit card payments and you could face legal trouble. You can be sued for debt if you default on your credit card account and can’t work it out with the issuer. 

But how often do credit card companies actually sue for nonpayment on charged-off accounts? About 13.5% of the time, according to the Consumer Financial Protection Bureau.² A lawsuit is a last resort for credit card companies, but they can and sometimes will take you to court.

Though debtors’ prisons no longer exist, you can get trapped in a cycle of court-ordered payments if a creditor sues you and gets a favorable judgment. That can include wage garnishment and liens on your assets. 

A credit card debt lawsuit is a serious situation you shouldn’t ignore. Learn why credit card companies sue cardholders, how long it takes to get through a credit card debt lawsuit, how to avoid one, and what to do if you’re sued for credit card debt.

Why Credit Card Companies Sue Cardholders

Credit card companies sue cardholders to collect unpaid debt. Every time you make a purchase with your credit card, you’re promising to pay back what you owe, along with applicable fees and interest. When you don’t pay your credit card bills, your credit card company can take action to collect. That can include calling, emailing, texting, mailing, and hiring a third-party debt collector. The ultimate move is taking you to court.

Credit card companies prefer not to sue you. Lawsuits are expensive and time-consuming, and it’s much easier for credit card companies to try everything else first. But if you’ve let due dates and collection actions sail past without payments, the company may choose to escalate collections to a lawsuit. 

Bottom Line:

When you ignore collection attempts, the credit card company doesn’t have any reason to believe you’ll pay your debt and may turn to the courts.

What Happens if You Don’t Pay Credit Cards

woman discovers a late credit card payment
Don’t be surprised by a late credit card bill. Learn what happens when you miss credit card payments and when late payments can turn into a lawsuit. Image Credit: Kittiphan on Adobe Stock

If you miss a payment due date by a few days or even a month, don’t panic. Court papers aren’t coming to your door just yet. But if you do let your account become severely delinquent, they might.

You shouldn’t expect to be sued for past-due credit card bills right away. It’s not cost-effective for credit card companies to sue you when your debt isn’t deeply past due. 

Before your credit card debt gets to a lawsuit, credit card companies will likely use other debt recovery methods, including:

  • Penalties such as late fees and higher interest rates
  • Nonpayment notifications
  • Negative credit history reporting
  • Loss of benefits, including credit card rewards
  • Limited use of your account or account closure
  • Third-party debt collection
  • Charged-off accounts
  • Hardship payment plans
  • Settlement offers

A credit card company is likely to give you multiple opportunities to pay your credit card debt before it files a lawsuit, whether it’s regular payments, via a payment plan, or settlement negotiation. 

If you ignore payment offers, especially settlement offers, the chances of a lawsuit increase.

How long do you have before a debt collection lawsuit? Generally, about 6 months. Of course, that can vary, as credit card companies may sue you once your account is in default, or they may not sue you if they decide your debt isn’t worth pursuing in the courts.

Your credit card account is at a greater risk of lawsuit once it’s charged off, as less than half of issuers seek litigation before a charge-off, according to the Consumer Financial Protection Bureau’s Consumer Credit Card Market report

Hot Tip:

Understand what it means to have a charged-off account. Read our guide explaining charged-off accounts and how to avoid one.

Each creditor has its own policies, but you can expect past-due credit card debt to follow a fairly predictable timeline before it gets to a lawsuit.

Let’s look at what happens to late credit card payments over time:

When Your Credit Card Payment Is 5 Days Late

If your payment is less than a week late, your credit card company will likely charge a late fee. If your balance was in an interest-free grace period before it was late, expect interest charges to apply. And if you had a 0% introductory APR offer, it may be gone after you miss your payment — instead, the company will start charging the regular APR and accruing interest. 

While a late payment, even just a few days late, is never ideal, this is the best time to make good on a payment. At this point, your late payment is still just between you and the credit card company, as late payments aren’t reported on your credit history until they’re at least 30 days past due. No one is knocking on your door to collect payment, and you’ll have just a month’s worth of penalties tacked on to your payment. Now is the time to fix a late payment before it gets worse.

What To Do: Get your account current ASAP. If you can pay the full balance, you should so you can avoid further interest charges. But if you have a late credit card bill, your focus should be on making your minimum payment plus applicable late and penalty fees so your account is no longer past due. If you can get current right away, you’ll avoid further collection activities, and it won’t even show up on your credit report. And if you get in touch with your credit card company about your late payment, they may give you a break on the late fee or interest charges.

When Your Credit Card Payment Is 30 Days Late

After you’ve missed paying your credit card for a full billing cycle, the situation becomes more serious. You still face late fees and loss of promotional APRs. And you’ve probably experienced collection activity, including phone calls, texts, and emails reminding you your payment is past due.

At this point, your credit card company will report your payment as past due to the credit bureaus. The late payment will hurt your credit score, but it’s not too late to get back on track and bounce back quickly.

What To Do: Contact the credit card company. Failing to respond to collection attempts will not make the situation better. If you talk to your creditor and explain what’s keeping you from making payments, you may be eligible for a hardship program. These programs, which usually involve a payment plan, can help you reduce fees and interest, so it’s easier to make your payments and stay on track instead of letting your account go further past due.

When Your Credit Card Payment Is 60 Days Late

At 60 days late, your past-due credit card bill comes with more consequences. You get another late payment note on your credit history, which can further erode your credit score. At this point, your credit card issuer may impose a penalty APR, which is usually around 29.99%.

A penalty APR generally stays with your account for at least 6 months and continues as long as your account is past due. This APR is in addition to late and returned payment fees that may apply when your account is past due. That can further complicate your ability to pay back what you owe, adding to your balance and increasing the minimum payment you have to make to get your account current.

In addition to the worsening credit reports and punitive fees and interest, you’ll see the collection attempts increase.

What To Do: Consider 60 days past due your best chance to make things right before your credit card account really goes south. If you haven’t yet worked out a payment plan with your credit card company’s hardship program, your opportunities to do so may be dwindling. Though you might get a payment plan after this point, the terms may be less favorable than the hardship plans previously offered by the credit card company, as you may have to negotiate with a collection agency that will be less lenient.

When Your Credit Card Payment Is 90 Days Late

Once your credit card payment is 90 days past due, the credit card company may close your account. Working with the credit card company before your account is closed permanently may be your last chance to work with the issuer and set up a payment plan to get current on your account. The debt may be declared uncollectible, charged off, and sold to a collection agency. 

Once your account is sold to a collection agency, it’s no longer a matter of making up the last few payments and fees — the agency will want a commitment from you to pay your entire balance, whether it’s in full, with a payment plan, or in a settlement agreement. A closed account that’s been charged off is another negative entry on your credit report that can hurt your credit score for years.

What To Do: If your account is still open, work with the credit card company to get current or settle your account. You may need to negotiate with a collection agency if your account has been charged off and sold, but it’s still worth working out a payment plan in collections to avoid a lawsuit.

When Your Credit Card Payment Is 120 to 180 Days Late

At 120 days late, your credit card account hasn’t been current in 4 months. The credit card company has likely closed your account, charged it off, and sold it to a collection agency. The collection agency will continue collection attempts. You might face legal action at this point, but most likely, you’ll receive communications with serious warnings and attempts to negotiate a settlement.

What To Do: While you’ll face greater fees and penalties than if you’d paid before your account became seriously delinquent, 120 days still isn’t too late to make good on your credit card bill. If you’ve received a settlement offer, you should seriously consider it. Debt settlement can seriously stain your credit history and may have tax implications, but it’s less problematic than letting your account get to the point of a lawsuit.

When Your Credit Card Payment Is 180 Days Late or More

Once you haven’t made a payment in 6 months, it’s clear to the credit card issuer and collection agency that you’re probably not going to pay without more serious action. It’s at this point that you’re much more likely to face a lawsuit for the debt. 

Even when an account is charged off, you’re still responsible for it. The debt is not forgiven, and attempts to collect will be more intense — which may include a debt collection lawsuit. Your credit history will reflect a major delinquency.

What To Do: Debt collection agencies may offer a payment plan or settlement before filing a lawsuit, which you should consider. They might consider your debt not worth filing a lawsuit over and simply continue collection actions. If you receive notice of a lawsuit, don’t ignore it. 

Hot Tip:

Debt collection activities can be stressful, but you don’t have to put up with abuse or harassment. Check out these resources from the Consumer Financial Protection Bureau to learn about debt collection rules, including how debt collectors are allowed to communicate with you. Debt collectors must follow fair debt collection practices, and you can get help with harassment.

You Can Be Sued for Credit Card Debt

Upset man holding credit card
It’s possible your credit card company will sue you for unpaid credit card debt, but there are ways to avoid it. Image Credit: Drobot Dean via Adobe Stock

Most credit card accounts don’t end with a lawsuit, but credit card companies can and do sue for credit card debt.

According to the Consumer Financial Protection Bureau’s Consumer Credit Card Market report, an average of 13.5% of post-charge-off balances were sent to litigation in 2021 and 2022. But about half of post-charge-off balances in that period couldn’t be collected even after a lawsuit. 

Many balances — 28.4% on average — were considered warehoused, which are balances issuers don’t actively seek to collect because they are uncollectible or unlikely to be repaid. Another 24.9% of balances were time-barred, which means the debt was past the applicable statute of limitations. Other balances were still in collections or probate but could eventually reach litigation.

You’re more likely to face a lawsuit if you have a large unpaid balance, as the average of post-charged-off litigated account balances in the CFPB report was $4,587 to $10,980.

When your credit card debt is low, a credit card company may decide it’s not worth pursuing legal action, as court costs and lawyer fees may exceed what the company stands to collect from you with a judgment.

Warning Signs of a Credit Card Debt Lawsuit

Will you really be sued by a credit card company? It depends on how much you owe, whether the issuer thinks you’ll pay without a lawsuit, and how late your account has become.

You have a pretty good chance of getting sued for credit card nonpayment if the following factors apply to you:

  • Your account is seriously delinquent — usually at least 180 days — but it’s not past your state’s statute of limitations for using legal action to collect a debt
  • You haven’t made payments despite collection activity and offers of payment plans or settlements
  • You’re not judgment-proof, which means you have income or assets a creditor can use to collect payments if it wins a lawsuit against you
  • Your balance is large enough to make a lawsuit worth it

How Long Does a Credit Card Company Have To Sue You?

Many states have statutes of limitations that limit how long companies have to file a suit to collect a debt. In most states, the statute of limitations is between 3 and 6 years. After the statute of limitations has passed, it’s what’s known as a time-barred debt. You’re still responsible for the debt, but a creditor can’t get a judgment for court-ordered payments.

What Happens When a Credit Card Company Sues You

When you’re sued in a debt collection lawsuit, you usually receive a summons with information about the plaintiff who is suing you, any co-defendants on the suit (such as a cosigner), the amount the plaintiff seeks to collect from you, the date of the hearing, and how you can file a response. 

You can’t go to jail over an unpaid debt, and it’s a violation of the Fair Debt Collection Practices Act — federal law — if a debt collector says you’ll be arrested if you don’t pay a debt. But if you’ve been court-ordered to appear or provide information in a debt collection lawsuit, a judge may issue an arrest warrant if you don’t comply.

What To Do if a Credit Card Company Sues You

Plan A is not to get sued by a credit card company by working on a payment plan, taking a settlement offer, or otherwise paying your debt before it gets to the point of litigation.

But if you’re facing a lawsuit over credit card debt, you still have options for Plan B:

  • Get a consumer lawyer
  • Make sure the debt is accurate
  • Determine how to handle the lawsuit
  • Respond to the court

The first step is to find a consumer lawyer. A lawyer familiar with debt collection lawsuits can advise you on your options for handling the lawsuit. They can help you respond to the lawsuit, verify the accuracy of the debt, and may be able to negotiate a settlement agreement before your lawsuit goes to court. If you want to challenge the debt, a lawyer can argue for you in court.

Before you respond to the lawsuit, look at the validity of the debt. You can get a debt collection lawsuit dismissed if the debt is invalid. For example, the lawsuit might be for an erroneous or fraudulent account that’s not your responsibility, you may have already paid the debt, or the debt may be too old to collect. 

If you genuinely owe the debt, a lawyer will likely try to work with the creditor to get a settlement and set up a payment plan so you can pay it off. Generally, the goal is to avoid a default judgment that awards the creditor the ability to get court-ordered payments from you.

You may consider bankruptcy as a last resort.

The most important thing you should do if a credit card company sues you is respond to the summons through the court

A lawsuit will not go away if you ignore it, and if you don’t respond, the credit card company will likely get a default judgment. In other words, if you don’t defend yourself, they’d win. With a judgment, your creditor can get court-ordered payments from you, which can include garnishing your wages and placing liens on your assets.

Bottom Line:

Whatever you do, don’t ignore a debt collection lawsuit. You can’t win if you don’t respond, and the creditor can and will get a default judgment if you don’t present any defense against the lawsuit.

How To Avoid a Credit Card Lawsuit

It takes just a few months of missed payments for your credit card account to get out of control and put you at risk of a debt collection lawsuit. You might be willing to take the risk that a credit card company won’t sue you for your debt, but that’s a pretty big bet to make. And you’ll face extensive damage to your credit history with severe credit card delinquency whether you’re hit with a lawsuit or not.

The best way to avoid a credit card lawsuit is not to let your credit card account get severely delinquent. That may be easier said than done, but you have options for managing credit card debt.

These are some of the ways you can avoid the kind of credit card delinquency that can lead to a lawsuit:

  • Use a budget and only charge what you can afford to pay off each month
  • Make more than the minimum payment on your credit card, ideally paying your balance in full every month
  • Set up autopay so you don’t miss payments
  • Contact your credit card issuer if you’re falling behind and ask for a payment plan to get caught up
  • Pursue debt consolidation, including balance transfer cards, debt consolidation loans, and accelerated debt repayment
  • If your account is delinquent, try to make at least a minimum payment to stop your account from becoming further delinquent
  • Get help from a nonprofit credit counselor who can help you set up a debt management plan

Final Thoughts

Credit card companies don’t always sue for nonpayment, but it’s possible if your account is seriously delinquent and other collection attempts have failed. It usually takes several months to get to the point of a credit card debt lawsuit, but it’s a tough situation to get out once you’re there. Your credit history takes a huge hit from all the late payments and collection activity, and if you can’t fight the lawsuit, the credit card company could get court-ordered payments from you.

Do whatever you can to avoid a credit card debt lawsuit, including making payment plans, using debt consolidation, and getting credit counseling.

Frequently Asked Questions

Can you get sued for not paying a credit card?

It’s not common, but you can face a lawsuit for delinquent credit card debt. Credit card issuers typically exhaust collection attempts before resorting to legal action.

How long before credit cards go to collections?

Your credit card account could go to collections around 120 days late, though policies vary among credit card issuers and may depend on other factors such as your account balance, credit history, and ability to pay.

Can a credit card company sue you for unsecured debt?

Yes, a credit card company can sue you for unpaid debt, including unsecured debts such as credit cards. As an unsecured debt, a creditor must get a judgment from a lawsuit to get court-ordered payments from you.

Can a credit card company sue you after 7 years?

Most states have statutes of limitations of 3 to 6 years on debt collection lawsuits. After the statute of limitations period has expired, the debt is still your responsibility, but you can’t be sued for it.

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About Jessica Merritt

A long-time points and miles student, Jessica is the former Personal Finance Managing Editor at U.S. News and World Report and is passionate about helping consumers fund their travels for as little cash as possible.

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