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Can You Get Sued For Credit Card Debt?

 

Sued for credit card debt | National Debt Relief
Sued for credit card debt | National Debt Relief

 

Despite the best intentions, it can be easy to fall deeply into a hole of debt. Life circumstances like a job loss or a medical emergency, for example, can leave you desperate for cash, and unable to pay credit card bills.

When such hardship strikes, your credit card debts don’t just disappear. Your creditor still expects you to pay each bill on time, every time. If you don’t, trouble will soon follow.

Initially, your lender may simply charge you penalty fees, but the situation can quickly become more damaging. Is it possible that your credit card company or someone else could turn up the heat by suing you for nonpayment?

Unfortunately, the answer is yes.

Why do credit card companies and others sue for nonpayment?

These companies are in business to make money. When you use a credit card to rack up debt, the lender expects to be paid back. If you miss a single payment, chances are good that you’ll initially be shown some patience. You may just be charged a late fee and be expected to make good on your payment.

If you continue to fail to pay your bill, the debt may be reported to a credit-reporting agency, causing your credit score to take a hit. In addition, your interest rate will likely be raised. But even after a couple of months without paying, you probably won’t end up on the wrong end of a lawsuit.

Things might turn more aggressive if you fail to pay your bill for several months. At that point, the lender may throw in the towel and label your debt a “charge-off”. If they haven’t previously reported your lack of payment to a credit-reporting agency, they will do so now. Your credit score will plummet.

It’s also possible you’ll be sued for the debt at this point. It’s just as likely, though, that the lender will turn to a debt collector in hopes of getting payment from you.

The debt collector has one job: To get you to pay your debts. If you fail to respond to the debt collector’s demands, a lawsuit may very well be at hand.

 

How should you respond when you’re sued for credit card debt?

If you’re sued for not paying, the Federal Trade Commission urges you to respond to the lawsuit. This is true even if you don’t believe you owe money or you feel that you’re being treated unfairly.

By responding, you put whoever sued you on notice that they will have to prove you owe the debt, as well as the amount they claim you owe. Debt collectors will even have to prove they have a legal right to sue you.

In many cases, your formal response to a lawsuit will need to be in writing. You may also be required to appear in court on a certain day to state your side of the case. 

Responding formally to the lawsuit can put you in a more powerful position. The FTC says the simple act of showing up in court can force the lender or the collection agency to recognize that it might have a long process on its hands. That might motivate them to settle with you.

 

What happens when you ignore credit card debt lawsuits

Don’t ignore the lawsuit and hope it will go away. The case will simply proceed without you. As the FTC notes, you may then lose the case by default. If you lose, you’ll be ordered to pay the debt, and your wages or bank account could be garnished. It is even possible that a lien will be placed on your home.

You may also be ordered to pay the plaintiff’s collection costs, interest costs and attorney’s fees. In the end, it is possible that you could end up owing more than the original debt.

So, be sure to respond. It can be a good idea to hire a lawyer to make sure you’re putting your best foot forward in the case. Nolo notes that studies have found that people who are being sued by debt collectors tend to fare much better if they hire an attorney to help them with the process of responding to a lawsuit. 

Can’t afford a lawyer? If your income is low, find a legal aid organization in your community that will take up the case on your behalf.

  

What can you do to avoid being sued by your credit card company?

The best way to avoid a lawsuit is to pay any overdue credit card bills as soon as you can. If that’s not possible, don’t simply ignore your obligation to pay. Instead, be proactive.

Look for other options that can at least buy you more time to come up with the money to pay your debts. For example, you may be able to transfer the debt to a new credit card offering a 0% balance-transfer option. Or perhaps you can use a home equity line of credit to pay down the credit card debt.

If those options aren’t available, talk to your lender or the debt collector and see if you can work something out. Most prefer to avoid litigation, which can be expensive and time-consuming. So, try to work out a debt repayment plan, or negotiate some type of settlement.

In many cases, creditors are more willing to work with you if they see documented evidence that you are in the midst of a financial hardship that makes it difficult for you to pay debts.

If possible, try to pay the debt in full, even if you can’t meet your original payment date. One way to do this is to arrange conditions that give you more breathing room to pay. For example, your lender might agree to lower the interest rate on the debt, so you have a better chance of paying it down. Or maybe they’ll allow you to skip a few payments while you organize a payment plan.

 

Dealing with debt collectors on your own

However, in some cases, negotiating a reduction in the debt you owe might be the only way for you to pay off your obligation. Typically, there’s a limit to how much the lender or debt collector will agree to reduce your debt. Some experts say you should expect to pay at least half of the money you owe.

If they agree to reduce the amount you owe, it’s likely to damage your credit score, but that’s better than being sued and ending up in court.

While it’s possible to negotiate new debt repayment terms on your own, it’s not always easy, especially if you have little or no expertise in doing so. It has potential pitfalls that can result in serious repercussions for you. Nolo points out that saying the wrong thing — such as acknowledging the validity of a debt — can restart the clock on the statute of limitations that applies to the debt.

For that reason, many people feel more comfortable hiring an attorney or using a debt settlement company to negotiate on their behalf.

While it is possible that you’ll be sued for debt collection, a lawsuit is something everybody usually wants to avoid. If you are drowning in debt, facing up to reality and actively working toward a solution will almost always yield better results, and keep you out of the courtroom.

 

At National Debt Relief, we take pride in empowering people to regain their financial stability through our proven debt relief program. Contact us and talk to a financial expert who will work with you to find the best option to settle your debt and help you achieve financial independence.

 

The post Can You Get Sued For Credit Card Debt? appeared first on National Debt Relief.

When Am I Responsible For Spouse’s Credit Card Debts?

When Am I responsible for spouse’s credit card debts?

When two people pledge, “until death do us part,” they typically agree to share all the joys and sorrows of married life. Does that include your spouse’s credit card debts?

The question is important because, from the first day of their union, married couples in the United States carry a lot of debt. For example:

  1. Almost 75% of couples go into debt to pay for their wedding, according to a Student Loan Hero survey.
  2. Couples who are married carry more than double the amount of debt that single people do, says credit-reporting agency Experian.
  3. Credit card debt averages $6,881 for married couples, according to Experian.

Therefore, when it comes to “for better or for worse,” debt typically falls squarely in the latter category. Are you responsible for paying off your spouse’s share of those obligations?

The answer largely depends upon whether you live in a community property state or a common law state, says family law expert Kaiponanea Matsumura, a professor at the Sandra Day O’Connor College of Law at Arizona State University.

Community Property States

If you’re in a community property state, both income and debts acquired during the marriage are presumptively community property, Matsumura says.

In these states, debts accumulated by either spouse during the marriage are considered shared by the “community;” in this case, the spouses. That is true even if just one of the spouses signed the paperwork that led to the debt in question.

Thus, if your spouse rings up charges but doesn’t pay them off, you’re on the hook for helping to pay down the debt. “A spouse’s debt acquired during the marriage would be marital debt,” Matsumura says.

Just a handful of states meet this law definition. They include:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Alaska is also a type of community property state in that the spouses sign a special agreement.

It’s important to note that in these states, spouses don’t share the responsibility for debts accumulated before the marriage. For example, if your beloved racked up tens of thousands of dollars in student loans during his early 20s, you typically aren’t obligated to pay off those debts.

However, if you sign on to become a joint account holder for the debt after your nuptials, you’re then responsible for the debt.

If you separate or accumulate divorce debt, this becomes the sole responsibility of the person who incurred the obligation.

However, some debts will remain the responsibility of both spouses. These include obligations classified as:

  • Family necessities
  • Jointly owned assets, such as a home repair
  • From a joint account the couple held during the marriage

It’s important to note that the precise rules surrounding these laws vary from state to state.

In addition, although most people think of community property laws as affecting marriages, these laws can affect who’s responsible for debts in other situations. For example, in California, Nevada, and Washington, couples registered as domestic partners typically must follow these laws.

Common Law States

By contrast, in common law states, spouses share some debts, but not others. Most U.S. states are governed under this law.

In these states, spouses hold many types of property and debts in their name. For example, if you take out a car loan in your name, the debt generally is yours alone. That is also true for things such as business loans and credit card debts.

“Spouses are less likely to be liable for their spouse’s credit card debt provided the card is not in their name,” Matsumura says.

However, if the debt was incurred to pay for “necessaries,” meaning things that benefit the marriage, then most states will obligate one spouse to pay for those types of debts if the other spouse cannot, Matsumura says.

“Under both community property and common law regimes, it is more likely that you will be obligated to pay for necessary expenses like groceries, rent, basic clothing items,” he says.

Additionally, each spouse is responsible for any debt that the couple entered into together. For example, if both spouses signed a loan agreement, they each are responsible for the debt. If both names are on a home title, each spouse must pay down debts.

Are You Responsible for Your Deceased Spouse‘s Debts?

After losing a spouse, the last thing you want to worry about is paying off his or her debts.

Fortunately, in most cases, you’re not obligated to do so. However, there can be exceptions, depending upon the nature of the debt as well as where you live.

For example, if you cosigned a loan, you’re responsible for paying off the debt, even if the person has died. This is also true if you’re the joint holder of a credit card account.

In addition, some states may have laws that require you to pay specific debts of a spouse who has passed away. In some states, the executor or administrator of an estate may be required to pay an outstanding bill using property jointly owned by the surviving and deceased spouse.

In community property states, a surviving spouse may be obligated to pay some debts of a deceased spouse.

How to Avoid Being Responsible for a Spouse’s Debts

Money woes are one of the chief sources of conflict between spouses. A 2018 Harris Poll survey found that 36% of wedded couples and people in relationships cited money as the greatest source of stress in their union, making it the top choice among all couples.

Having to pay a spouse’s debt will likely only add fuel to the fire. Once again, the type of state you live in determines how easy it is to avoid having to pay your spouse’s debts.

If you live in a a state that has common law, the task of avoiding responsibility for a spouse’s debts is relatively simple. Keeping your finances separate is crucial to making sure you’re not on the hook for debts you didn’t incur.

“In common law states, you’re less likely to be responsible for your spouse’s debts if their credit cards and accounts are in their own names,” Matsumura says.

In community property states, it’s more difficult to avoid responsibility for many of the debts that occur during your marriage, regardless of who incurred them.

As in a common law state, you’ll be responsible for any debts that are in your name, as well as those for which you co-signed. However, you’ll likely also be legally bound to pay most debts incurred by either spouse during the marriage.

One way to avoid responsibility for a spouse’s debts in both common law and community property states is to enter into a prenuptial agreement specifying that the spouses are keeping their finances and property separate.

If you choose this route, though, make sure you live to the letter of the law.

“It is important that the spouses actually behave in accordance with the terms of the agreement by maintaining separate accounts and not commingling their finances,” Matsumura says.

Finally, in extreme cases, filing for bankruptcy can help eliminate your responsibility for paying a spouse’s debt. In community property states, if one spouse successfully files for Chapter 7 bankruptcy protection, it discharges all debts the couple holds in common.

In states with common law, the spouse filing for bankruptcy will have his or her debts discharged. The other spouse won’t receive the same protection without filing for bankruptcy separately.

At National Debt Relief, we take pride in empowering people to regain their financial stability through our proven debt relief program. Contact us and talk to a financial expert who will work with you to find the best option to settle your debt and help you achieve financial independence.

The post When Am I Responsible For Spouse’s Credit Card Debts? appeared first on National Debt Relief.

Con Edison To Webcast Environmental, Social, And Governance Presentation On Aug. 19
NEW YORK , Aug. 9, 2021 /PRNewswire/ — Consolidated Edison’s corporate leadership will make an Environmental, Social, and Governance presentation on Thursday, Aug. 19 at 9 a.m., Eastern Time . The presentation will be followed by a question and answer session.