A 42 year old caucasian business man is crushed under oversized credit card while opening up his credit card bills on the front walkway of his house. He is located halfway between mailbox and front steps with bills scattered about. Credit card prop is designed and built by the photographer
Credit cards can be useful tools, but if you aren’t careful, they can also cause you to end up with a bill you can’t pay. If you aren’t able to keep up with your minimum payments, interest charges and fees will continue to pile up, which only makes the problem worse. Eventually, the credit card issuer can sue you for the amount you owe, which will result in a dreaded court summons. If this has happened to you and you aren’t sure what to do, stay calm. Here’s what you need to know.

Consequences of Carrying Credit Card Debt

Unmanageable credit card debt is something that can sneak up on you. So you went a little overboard on your spending and maxed out your card. No big deal. It happens.

After some time, you get another credit card offer in the mail, and you take it. This time, you plan to use it just for emergencies. Then, your car breaks down and you have no emergency fund, so you charge the bill for repairs. Now you have a second card maxed out.

This can go on and on — and has for many Americans. The average American household with credit cards carries over $8,000 in credit card debt. Once you get that far, you’ll have hefty interest charges each month that make it harder to pay down the principal balances.

Carrying high balances on credit cards also hurts your credit scores. The credit bureaus like to see cardholders using a maximum of 30% of their available credit line, so anything above that will cause your credit scores to drop. It will also make it more difficult to get approved for further lines of credit.

Beyond the financial impacts, carrying a large amount of debt can begin to wear on the psyche, too. Just knowing you have this mountain of money to repay can feel like a heavy burden.

Dos and don’ts when you’re negotiating a settlement with credit card companies

If you have a large amount of credit card debt that you don’t think you can repay in full, you can contact the credit card issuer to attempt to negotiate a settlement. To understand why this may work, it’s important to put yourself in the shoes of the company.

They are out the money you have borrowed as well as the interest they should have earned on that amount. They can write it off as a bad debt, take costly legal action to try and force you to repay them or agree to a settlement offer from you. The company will get the least from the write-off, and while they may get the most from taking you to court, it will cost them time and money to do so. A settlement can be a good middle ground consolation.

However, they’ll likely only take a settlement offer if they believe it’s a fair amount and that you’re paying as much as you can. Be sure to look at your finances to see what you can afford — and be honest. The creditor will likely request proof of your income, existing debts and assets to ensure you’re paying what you can.

Responding to a lawsuit and court summons

If you are sued for your credit card debt, you should first try to contact the creditor listed on the documentation to see if there’s a way to reach a settlement outside of court. Before you make this call, prepare yourself with information regarding what you can realistically afford to pay. Often, creditors will be willing to work out a deal that sometimes includes a payment plan or a reduced lump sum of what you owe.

If you’re unable to reach a settlement with the debt collector outside of court, then you must file an answer to the summons within the stated time frame to avoid additional judgments against you.

In your response to the summons, you’ll need to either affirm or deny a lack of knowledge of the claim against you. You’ll also have the opportunity to admit if the claim is true and state a reason, if you have one, as to why you shouldn’t be responsible for the debt. This is called “admission with defense” and you’ll want to write it in a typed and printed letter, referring to yourself as the defendant.

If the allegation against you is false, deny the claim in your response. Keep in mind you should only do this if you are completely sure the claim is untrue and have proof. If you are unsure, it’s best to err on the side of caution and reply that you lack the knowledge to admit or deny the claim.

The most important thing is to read the notice, follow the directions carefully and respond according to any timelines you are given.

Tips to avoid unmanageable credit card debt

Credit card debt can get out of hand quickly, but there are a few preventative steps you can take.

The first thing you should do is work to build up a safety net of extra funds to be used in case of an emergency. Rather than use your credit card for these situations, you can use your savings.

It’s also important to only spend what you can realistically pay back. Resist the temptation to overuse your credit and spend more than what you can actually afford. If you need to make a large purchase with your credit card, have a realistic plan to pay that debt off in a certain timeframe.

And, lastly, figure out what 30% of your credit line is and imagine that is your maximum credit line.

Credit cards can be a great tool if you use them wisely and avoid falling into the trap of spending more than you can afford. If you are served with a court summons for credit card debt, it’s important that you respond quickly and in a way that properly represents your stance in the situation. If you aren’t sure or need help, contact a collection lawsuit defense lawyer for advice on how to best represent yourself on your court date.