Can a Credit Card Company Sue You for Non-Payment?

Key Takeaways

• Yes, credit card companies can and do sue for unpaid debt — but according to a landmark CFPB survey, roughly 15% of consumers contacted about a debt in collection reported being sued in the prior year. Lawsuits typically follow 180+ days of missed payments and are most common on balances exceeding $3,000 to $5,000. The overwhelming majority of these lawsuits result in default judgments because the consumer simply never responds. If you do respond, you have real options — from challenging the debt's validity to raising statute of limitations defenses to negotiating a settlement, often for significantly less than the full balance. This article explains the full timeline of when and why creditors sue, what happens if they do, how to protect yourself, and how to resolve the situation before it ever reaches a courtroom.

If you're behind on your credit cards and dreading the possibility of a lawsuit, you're not alone in that fear — and you're smart to take it seriously. Receiving a letter from a credit card company about missed payments is stressful enough; the possibility of being sued adds an entirely different layer of anxiety. At The Debt Relief Company, we've helped clients at every stage of the delinquency process, including those who've already been served with a summons. The one thing we can say with certainty is that consumers who understand the process and engage with it proactively almost always get better outcomes than those who ignore it.

Credit card companies can indeed take legal action for non-payment, and it happens more frequently than most people realize. The Consumer Financial Protection Bureau conducted the first national survey of consumer experiences with debt collection and found that about one-in-seven consumers (15%) contacted about a debt in collection reported being sued by a creditor or debt collector within the prior year. According to an analysis of credit card lawsuit data, the average balance on a litigated credit card account ranges from roughly $2,700 to $12,300 depending on the issuer and whether the original creditor or a debt buyer is pursuing the claim. That means the overwhelming majority of delinquent accounts are never sued — but "unlikely" and "impossible" are very different things, and the consequences of a lawsuit you ignore can follow you for years.

Understanding Credit Card Debt and Legal Implications

Non-payment on a credit card isn't just about missing a single payment. It's when you consistently fail to pay the minimum amount due over several billing cycles. Generally, if you miss payments for 90 to 180 days, your account may be considered in default and creditors will seek more aggressive modes of collection. During this period, your creditor will likely attempt to contact you multiple times to resolve the issue and get you to make up missed payments or at the very least make "any payment." This is their most common form of the credit card debt collection process. Missing one or two payments might lead to late fees and increased interest rates, but continued non-payment can result in your account being charged off and eventually transferred to a law firm or collection agency where legal action becomes a real possibility.

When you default, creditors face a binary choice: sell the debt to a third-party buyer for pennies on the dollar, or pursue legal action to try to recover a larger portion of the balance. The decision depends on several factors we see play out in practice every day. The size of the balance matters most — creditors are far more likely to sue over a $15,000 balance than a $2,000 one, because the potential recovery has to justify the cost of litigation. Understanding what a loan position is and how it affects your debt portfolio can help you predict which creditors are most likely to escalate. Some creditors are simply more aggressive than others and have adopted litigation as a core collection strategy.

Your financial profile also factors in. Creditors can check your credit report during the collection process, and if they see that you're current on other obligations (mortgage, car payment, other credit cards), they may conclude that you have the means to pay and simply aren't prioritizing their account. That makes them more inclined to sue. Conversely, if your entire credit profile shows distress across the board, the creditor may calculate that even a court judgment wouldn't produce meaningful recovery and opt to sell the debt instead.

Finally, your responsiveness matters more than most people realize. Consumers who communicate with their creditors — even to say "I can't pay right now but I want to resolve this" — are less likely to be sued than those who go completely silent. When you stop answering calls and ignore letters entirely, a lawsuit may become the creditor's only remaining channel to force a response. We've written at length about why creditors sue for unpaid debt, and in nearly every case the pattern is the same: silence invites escalation. Staying in communication doesn't obligate you to pay anything, but it keeps the door open for negotiation and signals that you're not simply trying to walk away.

Timeline of a Credit Card Debt Lawsuit

Credit card companies don't file lawsuits the moment you miss a payment. Litigation is expensive, time-consuming, and uncertain — even for large issuers with in-house legal teams. The typical timeline follows a predictable pattern. In the first 30 to 60 days, the creditor contacts you through calls or letters to remind you of the missed payment. Late fees are applied and your interest rate may increase. Between 60 and 90 days, collection efforts intensify with more frequent phone calls, letters, and possibly offers to set up a payment plan.

By the time you reach 90 to 180 days of non-payment, your account is likely to be charged off — an accounting term that means the creditor writes off the balance as a loss. This does not mean the debt is forgiven or that collection stops. At charge-off, the creditor either assigns the account to a law firm for potential litigation, or sells it to a debt buyer who acquires the right to collect (and sue) on the account. Once your debt is in the hands of a collection agency or debt buyer, they might decide to file a lawsuit against you. You will receive a summons and complaint, which officially notifies you of the lawsuit. We've covered this entire progression in detail in our article on what happens if you stop paying your credit cards.

What Actually Happens When You're Sued

If a credit card company or debt collector decides to sue you, the process starts with a civil complaint filed in your local court (usually a state court in the county where you live). You'll be served with two documents: a summons and a complaint. The summons tells you that you're being sued and gives you a deadline to respond to a credit card lawsuit, typically 20 to 30 days. The complaint describes the debt, the amount claimed, and the legal basis for the lawsuit. This is a civil matter, not a criminal one. You cannot be arrested or sent to jail for credit card debt, period. If any collector tells you otherwise, they are violating federal law under the Fair Debt Collection Practices Act.

Here is the single most important thing to understand about being sued for credit card debt: you must respond to the lawsuit within the deadline stated in the summons. If you don't respond, the court will enter a default judgment against you — meaning the creditor wins automatically, without having to prove anything, simply because you didn't show up. The CFPB's national survey found that only 26% of consumers who were sued for debt actually attended the court hearing, which means nearly three out of four consumers being sued simply didn't show up and lost by default. This is exactly why creditors pursue lawsuits in the first place — it's a reliable strategy because most consumers become hesitant to respond out of fear, and it ends up costing them far more in the long run.

A default judgment gives the creditor powerful collection tools. Depending on your state, they can garnish your wages, levy your bank account (freeze and seize funds), and place a lien on your property. When accounts receive a default judgment, the debtor will often have to pay the balance in full plus all associated attorney fees and court costs. What could have been settled for 40 to 60 cents on the dollar before the lawsuit now becomes a full-balance obligation with legal costs stacked on top.

How to Respond If You've Been Served

If you receive a summons, the worst thing you can do is nothing. The second worst thing you can do is panic. Here's what you should actually do.

First, read the summons and complaint carefully and note the deadline for your response. Mark it on your calendar. Missing this deadline is how default judgments happen, and a default judgment eliminates almost all of your options.

Second, verify the debt. Under the Fair Debt Collection Practices Act, you have the right to request written verification of the debt, especially if you're being sued by a debt buyer or collection agency rather than the original creditor. Debts get sold and resold, and errors in balance calculations, account ownership, and documentation are more common than you might think. A CFPB enforcement action against the nation's two largest debt buyers revealed that these companies filed lawsuits without adequate documentation to prove many of the debts, winning the vast majority of cases simply because consumers never showed up. Challenge them to prove they own the debt and that the amount is accurate. If they can't produce the original contract and a clear chain of ownership, the case may be dismissed.

Third, check the statute of limitations (we cover this in detail in the next section). If the debt is time-barred, you have an affirmative defense that should result in dismissal.

Fourth, file a written response (called an "answer") with the court before your deadline. In your answer, you can deny the allegations, raise defenses, and challenge the creditor's documentation. You do not need a lawyer to file an answer, though consulting one is advisable if the amount is significant. Many courts have self-help resources, and in New York, ClaroNYCprovides free legal assistance for consumers facing debt collection lawsuits. Most states have similar resources — check with your local county clerk's office. For New York residents specifically, we've compiled additional resources in our ultimate guide to New York debt relief for residents.

Fifth, and this is the part many people overlook: use the lawsuit as a negotiation lever. Even after a lawsuit has been filed, settlement is very much on the table. In fact, creditors are often more willing to settle once a case is pending, because litigation is expensive and unpredictable for them too. The CFPB survey data paints a clear picture of why: with nearly three-quarters of sued consumers never responding to debt collection lawsuits, creditors who actually face a consumer willing to fight know the cost-benefit equation changes dramatically. Industry data consistently shows that even when creditors win a judgment, collecting on consumer debt judgments is far more difficult than most people realize — recovery rates average roughly 20% or less. Creditors know these numbers. They'd often rather accept a settlement for 40 to 60 cents on the dollar today than chase a judgment for years and collect a fraction.

The Statute of Limitations: Your Most Powerful Defense

Every state has a statute of limitations on credit card debt — a legal time limit on how long a creditor can sue you for an unpaid balance. It's measured from the date of your last payment (or in some states, the date of last activity on the account). Once the statute expires, the debt becomes "time-barred," meaning the creditor has no legal right to sue. States like Alabama, Kentucky, and Louisiana set the limit at 3 years. Most states — including Arizona, California, Colorado, Georgia, Michigan, Texas, and many others — fall in the 4 to 6-year range. New York's statute of limitations is 6 years. A handful of states like Rhode Island and Iowa extend to 10 years. The specifics vary, so knowing your state's law is essential. Nolo maintains a comprehensive guide to statutes of limitations on debt collection by state that's worth reviewing.

This is an affirmative defense, meaning you have to raise it yourself in court — the judge won't raise it for you. If the debt is time-barred and you assert the defense in your answer, the case should be dismissed.

And here's the trap that catches many consumers: making a payment on a time-barred debt, even a small one, can restart the statute of limitations in many states. A collector who pressures you into making a $50 "good faith" payment on a $10,000 debt that's been dormant for five years may be deliberately trying to reset the clock so they can sue you. Even acknowledging the debt in writing can reset the clock in some jurisdictions. This is exactly the kind of situation where professional guidance from a debt relief program can protect you from a very costly mistake. If the statute of limitations has expired, that actually gives you significant leverage in negotiations — at that point the debt is worth the least it will ever be, since creditors have lost their most powerful collection tool.

Wage Garnishment: What They Can and Can't Take

One of the most common fears consumers have about credit card lawsuits is wage garnishment — the idea that a creditor can take money directly from your paycheck. This fear is legitimate, but the reality is more limited than most people think.

A creditor cannot garnish your wages without first winning a court judgment. That means they have to sue you, win the case (or get a default judgment because you didn't respond), and then file a separate request with the court for a garnishment order. Only then can they instruct your employer to withhold a portion of your pay. Under federal law, the maximum garnishment for consumer debt is 25% of your disposable earnings (after taxes and mandatory deductions) or the amount by which your weekly earnings exceed 30 times the federal minimum wage, whichever is less.

Several states offer even stronger protections. Texas, North Carolina, South Carolina, and Pennsylvania generally prohibit wage garnishment for credit card debt entirely (though federal debts and child support are different). Other states limit garnishment to lower percentages than the federal maximum. Additionally, income from Social Security, disability (SSDI and SSI), veterans' benefits, unemployment, and retirement accounts is generally exempt from garnishment regardless of what state you live in.

Understanding whether you're "judgment-proof" — meaning a creditor couldn't meaningfully collect even if they won a judgment — is an important part of deciding how to respond to a lawsuit or a threat of legal action. If your income is below garnishment thresholds, you don't own significant non-exempt assets, and your income comes primarily from protected sources, the practical leverage of a lawsuit is limited. That doesn't mean you should ignore it (default judgments can follow you for years and create problems when your financial situation improves), but it does factor into how aggressively you need to respond.

The Role of Debt Collection Agencies

When you fail to pay your credit card debt, it often gets transferred to a debt collection agency, typically after 180 days of non-payment. Credit card companies frequently prefer to sell the debt to these agencies rather than pursuing legal action themselves. The agency becomes the new owner of your debt and will attempt to collect the full balance, even though they typically purchased it for pennies on the dollar. The CFPB's enforcement action against Encore Capital Group and Portfolio Recovery Associates — the two largest debt buyers in the country — revealed that these companies purchased debts they knew were potentially inaccurate, then filed lawsuits against consumers using robo-signed court documents, winning the vast majority of cases by default when consumers failed to defend themselves.

Debt collection agencies do have the legal right to sue you for the unpaid debt. However, they must adhere to the Fair Debt Collection Practices Act (FDCPA), which prohibits abusive practices, limits contact to seven attempts or one conversation per week per debt, and requires them to provide a validation notice within five days of contacting you. They must also wait at least 14 days before reporting the debt to credit bureaus. If you notice any violations of these rules, you may have grounds for a countersuit or at minimum additional leverage in negotiations. Even after a collection agency contacts you, it's not too late to negotiate — settlement remains possible and is often the most practical resolution for both sides.

How to Prevent a Lawsuit in the First Place

The best way to avoid a credit card lawsuit is to address the debt proactively before it reaches that stage. Every tool available to you is more effective, less stressful, and less expensive when used early in the delinquency timeline rather than after a lawsuit has been filed.

If you're still in the first 30 to 90 days of missed payments, contact your creditor and ask about hardship options. Most major issuers offer temporary interest rate reductions, fee waivers, and modified payment plans for consumers experiencing genuine financial difficulties. We've written a complete guide on how to handle financial hardship that covers your options, and a step-by-step walkthrough on how to write hardship letters to credit card companies explaining what to include and how to frame your request for the best chance of approval. These programs can buy you time and prevent the account from progressing further into delinquency.

If you're further along — 60 to 180 days delinquent, carrying substantial debt across multiple cards, and unable to realistically service the balances even with hardship modifications — debt settlement as a resolution strategy becomes the most practical option for many consumers. Through our debt relief program, clients typically settle their debts for 40 to 60 cents on the dollar and resolve their entire debt portfolio within 2 to 4 years. Settlement proactively resolves the debt before any lawsuit is filed, which eliminates the legal risk entirely. There are side effects of doing a debt relief program to consider — a temporary impact on your credit during the program, potential tax consequences on forgiven debt — but for consumers facing the possibility of lawsuits on significant balances, the calculus overwhelmingly favors settling before being sued rather than dealing with the fallout of a judgment. We've also detailed the timeline for rebuilding credit after debt settlement so you can see the full recovery picture from start to finish.

Even if you've already been sued, settlement remains possible (and often preferable for both sides). Many of our clients come to us after receiving a summons, and we've successfully negotiated settlements on accounts with pending litigation. The lawsuit doesn't eliminate your ability to negotiate — in many cases it accelerates the creditor's willingness to settle, because they know from experience that even winning a judgment doesn't guarantee they'll actually collect the money.

Impact on Your Financial Life

Getting sued by a credit card company can have lasting effects on your financial life beyond just the debt itself. A judgment can remain on your record for years (the length varies by state), and the underlying delinquent account will appear on your credit report for up to seven years from the original date of delinquency. Your credit score could drop significantly depending on where you started. The combination of a charge-off, collection account, and potential judgment creates a compounding effect that makes it harder to obtain new credit, qualify for favorable interest rates, or even pass employment background checks that include credit reviews.

But the damage is not permanent, and it's important to maintain perspective. If you settle the debt (whether before or after a lawsuit), the account shows a zero balance, and your credit begins recovering from that point forward. Most clients see meaningful improvement within 12 to 24 months of completing their program — we've written extensively about how long it takes to boost your credit after debt settlement if you want the detailed timeline. The temporary credit impact of settling is far less damaging than a decade of minimum payments, charge-offs, and potential judgments that come from leaving the debt unresolved.

Frequently Asked Questions

Can a credit card company sue you without prior notice?

Technically yes, though it's rare. Credit card companies typically send multiple warnings and make numerous attempts to collect the debt before filing a lawsuit. You should receive a summons and complaint that officially notifies you of the legal action, and you'll have 20 to 30 days to respond. A creditor cannot garnish your wages or levy your bank account without first winning a judgment in court.

What is the statute of limitations for credit card debt lawsuits?

The statute of limitations varies by state, ranging from 3 to 10 years. Once this period expires, the creditor can no longer legally sue you for the debt. However, making a payment on a time-barred debt can restart the clock in many states, so it's crucial to know your state's laws before taking any action. Nolo provides a thorough guide to time-barred debts and when collectors can no longer sue that covers the specifics for each state. If the statute has expired, you actually have significant negotiation leverage — the debt is at its lowest value since the creditor has lost the ability to pursue legal collection. Use this to your advantage in any settlement discussions.

Can I file for bankruptcy to stop a lawsuit?

Filing for bankruptcy to stop debt collection lawsuits is possible through what's called an "automatic stay," which halts all collection activities. However, bankruptcy has serious long-term consequences for your credit and financial life. Before considering bankruptcy, it's worth exploring other options like settling your credit card debt or consolidating your debts into a single payment that may resolve the situation with fewer lasting effects. We've compared all of these approaches in our article on bankruptcy vs. debt relief: which is right for you.

What should I do if I receive a summons?

Don't ignore it. Read it carefully, note the deadline for your response, and consider contacting a lawyer. You can file an answer to dispute the debt, raise defenses like the statute of limitations, or negotiate a settlement. In New York, Claro NYC’s free legal assistance program helps consumers facing debt collection lawsuits. Check with your local county clerk's office for similar resources in your state. If you'd like to explore whether settling the debt through a professional program makes sense, contact us for a free consultation.

The Bottom Line

Credit card companies can and do sue for unpaid debt, but it's a last resort that happens in a minority of cases. When it does happen, the consumers who get the worst outcomes are overwhelmingly those who don't respond — who ignore the summons, don't file an answer, and end up with a default judgment that follows them for years. The consumers who get the best outcomes are those who understand the process, respond within the deadline, verify the debt, raise appropriate defenses, and negotiate from a position of knowledge rather than fear.

The even better outcome is resolving the debt before a lawsuit is ever filed. Whether that means requesting a hardship program, enrolling in a debt relief program to settle your debts for less, or evaluating other options, the key is taking action while you still have the most choices available. The longer you wait, the fewer options you have and the more expensive each remaining option becomes.

If you're worried about being sued for credit card debt — or if you've already been served — we're here to help. You can book a free consultation or call us at 1-888-344-0214. We'll walk through your situation, evaluate your options honestly, and help you figure out the smartest path forward. No judgment, no pressure — just a straightforward conversation about where you stand and what makes sense.