Can a Credit Card Company Sue You? Know Your Rights in Texas

As a debt defense attorney here in Texas, I’ve seen clients suddenly realize that a credit card company can sue them if they miss their payments. Laura didn’t know this could happen until she learned that a credit card company was suing her friend. Worried about her own debt, Laura wondered if a credit card company could sue her the same way. That’s when she called me.

“Chris, I’ve been dealing with credit card debt going all the way back to college when they offered me a card but didn’t explain how to use it. I wish I could sue them for taking advantage of young people like that,” Laura joked.

“Yes, they hook you early Laura, I understand. So what’s going on with your debt these days?” I asked her.

“It’s getting bigger, just like it is for many of my friends. I mean we depend on these cards, even those of us with decent jobs. But the struggle to keep up with repayment is real. And now one of my friends told me she got sued by her credit card company,” Laura said. “So I wondered, can that happen to me too?”

“Sorry to report, it can happen to you too Laura. Are you missing your scheduled payments?” I asked.

“No, well, not often,” she replied. “I am usually able to make at least my minimum payments on time. If I miss one, I make sure to pay it the next time. I play the game. I have a strategy. But inflation and the constant threat of losing my job made me wonder, what if a credit card company sues me like my friend?”

“Laura, I’m glad you are thinking ahead. Please allow me to give you a general overview about if and when a credit card company can sue borrowers like you in Texas and what you can do about it. Understanding the court rules for such cases is essential, as it helps you navigate the legal process effectively. Once you are aware, you will be able to manage the situation if it should arise. Plus, you might learn something that could help out your friend,” I told her.

“Great, thanks Chris, I’m all ears,” she said, listening attentively.

Drowning in credit card debt is scary. Many people like Laura wonder, can a credit card company sue you? The answer is yes. This article explores how it can happen in Texas and what you can do about it.

Key Takeaways

• Credit Card Companies Can Sue: If you’re over six months behind on payments, creditors can file a lawsuit. In Texas, they generally have up to four years from accrual (often your account default date) under CPRC § 16.004 before the statute of limitations prevents legal action.
• Responding to Lawsuits is Critical: Ignoring a lawsuit can lead to a default judgment, allowing creditors to garnish bank accounts or place liens on property. Act quickly—seek legal help and prepare your defense or negotiate a settlement.
• Debt Buyers and Your Rights: Debt buyers often sue after purchasing old debts. You can challenge these lawsuits by requesting validation of the debt, proof of ownership, verifying the debt amount, or arguing that the statute of limitations has expired. If you believe the debt collection practices are unfair, you can file a complaint with the CFPB (Consumer Financial Protection Bureau) for further investigation.

When Does a Credit Card Company Typically Sue?

Creditors don’t usually file lawsuits right away after a missed credit card payment. Taking legal action is often considered a last resort because it’s both expensive and time-consuming. Instead, they prefer to resolve the situation amicably through monthly payments. Usually, a credit card company sues after several months of missed payments, typically after 180 days (six months). But this is an average, not a rule.

Many suits involve relatively modest balances. While these lawsuits are common, you have options to address your financial situation.

Understanding the Timeline

Your first missed payment triggers late fees. Once you miss a payment, expect increased collection phone calls and emails.

Ignoring these will intensify collection efforts on your credit card account. Around 120 days late, your account might go to collections, hurting your credit score.

Your original lender may charge-off your balance after about six months. This means the debt buyer purchases the account at a discount, which impacts your credit report. You still owe the debt, even after the charge-off.

What Happens After the Charge-Off

When debt changes hands to a debt collection agency like Midland Funding, sometimes the facts of the original credit change too. These debt buyers might threaten to sue you for the debt, or move forward with filing a lawsuit.

Debt collection lawsuits are widespread. Their revenue demonstrates the success of this business model, often focusing on individuals struggling with a specific type of debt, such as credit card balances or personal loans.

How to Prevent a Debt Lawsuit

Be proactive about handling your credit card debt. Contact your creditors immediately when financial trouble starts. Explain your situation and discuss potential solutions, such as debt management or hardship programs.

Explore debt relief options before a lawsuit starts. Consider debt consolidation, which combines multiple high-interest balances into a single loan, possibly with a lower interest rate. Discuss debt forgiveness, late fees, and how they impact your debt management plan.

Nonprofit credit counseling agencies offer guidance and debt management plans. Debt settlement can potentially reduce the amount you repay. Exercise caution with for-profit companies and conduct thorough research.

Can a Credit Card Company Sue You: What to Do When It Happens

If you’re sued, don’t panic. Here’s what to do if you’re facing a debt collection lawsuit in Texas. Understand the proper procedures and follow these steps to protect your financial future.

Step 1: Understand the Lawsuit

• Identify the Creditor: Determine whether it’s the original creditor or a debt buyer like Midland Funding or Portfolio Recovery Associates. Pinpointing the debt owner is fundamental to determining a clear plan of action.
• Confirm the Debt: Check the amount claimed, compare it with your records, and look for discrepancies. Slip-ups can point to mistaken identity or wrong account balances.
• Review Deadlines: Lawsuits come with strict timelines. Missing them can lead to a default judgment, so pay close attention to any response deadlines.
• Consult Professionals: Seek guidance from an attorney or reputable credit counselor. Your legal advocate will guide you through the court process, identify potential legal loopholes, and explain your rights.

Step 2: Respond Promptly

• Never Ignore a Lawsuit: Ignoring legal action can lead to a default judgment. Instead, gather documentation related to your debts.
• File an Answer: Submit a written response to the court denying or clarifying each claim. Failing to do so risks a default judgment. Learn more about what courts handle debt cases in Texas.
• Keep Evidence Handy: Collect statements, payment records, or correspondence showing payments or errors. When organized correctly, these pieces form a powerful defense.
• Stay Engaged: Answer calls, open mail, and document every communication. This paper trail can be critical to your defense.
• Ask for Guidance: If you’re unsure about formatting or deadlines, seek legal advice. Responding promptly demonstrates your commitment to resolving the issue.

Step 3: Explore Your Options

Defend the Lawsuit

1. File an official “answer” with the court to avoid a default judgment.
2. Work with an attorney to check for common defenses that improve your chances of winning (e.g., wrong balance, mistaken identity, or statute of limitations).

Negotiate a Settlement

1. Offer a lump sum payment or reduced-payment plan to settle for less than the full amount.
2. Ask about hardship programs that may waive late fees or lower interest rates.

Consider Bankruptcy

1. Can eliminate or restructure debt but affects your credit long-term.
2. Discuss with an attorney to see if Chapter 7 or Chapter 13 is best for your situation.

Avoid Ignoring the Lawsuit

1. Doing nothing risks default judgments, which can lead to frozen bank accounts or liens on property.

Step 4: Consider Statute of Limitations

Creditors may still try to recover time-barred debts, even though they can’t sue. You could be harassed or coerced into making payments on debts you no longer legally owe. If this happens to you, seek legal counsel to validate whether the debt is time-barred.

Respond promptly to the suit if you don’t owe the debt or if the statute of limitations has expired. This information is critical to the case’s result. Responding proactively is important because legal matters involving debt collectors can include complex financial considerations.

Understanding Debt Buyers

Often, the company suing you is a debt buyer. They purchase old debts at discounted rates, including from collection agencies, hoping to recover a portion. They frequently target time-barred debts. Note in your lawsuit response if debts are time-barred under Texas law.

These lawsuits become lucrative when consumers ignore summons, leading to default judgments. Wage garnishment procedures affected millions in the past due to aggressive debt buyers and debt collection lawsuits, especially for original credit debts. This highlights the importance of responding to legal notices.

Large public companies, like Midland Funding and Portfolio Recovery Associates, acquire distressed consumer debt. Smaller debt firms often emulate their model, buying credit accounts and focusing on recovery.

Frequently Asked Questions

Lawsuits and Legal Consequences

▶ ▼ What happens if a credit card company sues you and you can’t pay?

If you lose and can’t pay, the creditor can obtain a judgment. In Texas, wage garnishment for consumer credit card debts is not allowed. However, creditors can pursue post-judgment bank account garnishment under CPRC ch. 63 (freezing funds in your account) or place liens on non-exempt property. Your primary residence is typically protected by the Texas homestead exemption under Property Code § 41.001. Millions have faced these consequences. Explore settlement or bankruptcy before reaching this stage.

▶ ▼ How likely is a credit card company to sue?

Lawsuits aren’t their first choice, but several factors influence their decision to sue. A credit card company or a debt collector might not sue for small balances, but they’ll definitely do it for larger ones. If you ignore their calls, your chances of getting sued increase. They may take legal action if they think you have money. Even amounts as low as $3,000 can lead to a lawsuit if you don’t communicate. They check your finances through account balances and credit reports. Debt buyers often pursue even old debts they bought cheaply. Many people unknowingly pay on debts that are no longer collectible because they’re outside the 4-year statute of limitations (CPRC § 16.004). Before a lawsuit, it’s wise to see an attorney to confirm you actually owe the debt.

▶ ▼ How long does it take for credit card companies to sue you?

Lawsuits typically occur 3-6 months after the first missed payment. However, several factors play a role, such as how old your debts are. Your location and the amount owed can impact their decision to sue. Larger, overdue debts increase the likelihood that legal action is taken after all other collection efforts fail. Remember, the 4-year statute of limitations (CPRC § 16.004) governs your debts in Texas, so verify how old the debt is.

▶ ▼ Can a credit card company sue me twice for the same debt?

In most cases, you cannot be sued twice for the same debt. The legal principle, res judicata, which means “a matter judged,” stops a creditor from duplicate lawsuits if the first case ended in a final judgment. However, if the first lawsuit was dismissed “without prejudice” or involved different parties than the second lawsuit, it may be allowed.

▶ ▼ Can a person go to jail for not paying credit card debt?

No. Credit card debt is a civil matter, not a criminal one. However, if you ignore a court order related to the debt, you could face jail time. This includes not responding to a summons or missing a court date. In such cases, you might be held in contempt of court. This punishment is for ignoring the court, not for the debt itself.

Credit Agreements and Notices

▶ ▼ Where is it stated in the credit agreement that I can be sued?

Credit card agreements typically include a clause about legal action under “Default” or “Governing Law” sections. These clauses explain that if you fail to meet payment obligations, the creditor may pursue legal remedies, including lawsuits, as allowed under Texas law.

▶ ▼ Where should I look for summons or legal notices from a credit card company?

Usually, a process server or certified mail deliver summons, court papers, or legal notices in person. In Texas, these documents are often sent to your last known address. Check court records if you suspect a lawsuit but haven’t received notice.

▶ ▼ Where can a credit card company file a lawsuit against me in Texas?

In Texas, credit card companies can file lawsuits in the county where you reside or where you signed the agreement. They typically file in a Justice of the Peace (JP) Court for smaller claims, or County/District Court for larger amounts. Your answer deadline depends on which court handles your case—see our guide to Texas debt collection courts.

Defenses and Debt Status

▶ ▼ What defenses can you use in a credit card lawsuit?

Defenses include lack of evidence of debt ownership, expired statute of limitations (CPRC § 16.004 gives creditors 4 years from accrual), identity theft, improper service of summons, or errors in the amount claimed. You may also argue that the creditor lacks standing to sue if they cannot prove ownership of the debt.

▶ ▼ What is a credit card charge-off, and do I still owe the debt?

A credit card charge-off occurs when a creditor deems a debt uncollectible after about 180 days of non-payment and writes off your unpaid balance as a bad debt. However, a charge-off does not mean you no longer owe the debt—you are still legally obligated to pay it.

▶ ▼ What happens after a charge-off, and can I be sued for the debt?

After a charge-off, the debt may be sold to a collection agency or debt buyer, who can continue collection efforts. Both the original creditor and the collection agency have the right to sue you for the unpaid debt, but this must occur within the 4-year statute of limitations (CPRC § 16.004) in Texas.

Collection and Asset Protection

▶ ▼ Can my wages be garnished in Texas if I lose a credit card lawsuit?

No. In Texas, wage garnishment for consumer credit card debts is not allowed. State law permits wage garnishment only for child support, spousal support, certain taxes, and federal student loans. If you lose a credit card lawsuit, your wages typically won’t be garnished. However, creditors can take other actions: they can place liens on non-exempt property or pursue post-judgment bank account garnishment under CPRC ch. 63 (freezing funds) after obtaining a court judgment.

▶ ▼ Does the Texas Homestead Exemption Protect My House from Debt Judgments?

Yes. Under Texas Property Code § 41.001, the homestead exemption generally prevents creditors from forcing the sale of your primary residence for consumer debts. However, exceptions apply to mortgages, property taxes, and child support. Even if a creditor obtains a judgment, they usually cannot seize your home if it qualifies as a homestead.

▶ ▼ What is bank account garnishment and how does it work in Texas?

Bank account garnishment allows a creditor with a judgment to freeze and seize funds in your bank account. In Texas, this is governed by CPRC ch. 63. After obtaining a judgment, the creditor can request a writ of garnishment from the court. Your bank must freeze the funds, and you’ll receive notice with instructions on how to contest the garnishment if you believe the funds are exempt (such as Social Security benefits or certain pension funds). Learn more about what to do when a creditor freezes your bank account.

Conclusion

Credit card companies can sue, but understanding your rights in Texas is crucial. The key is to be proactive and informed when facing a potential lawsuit. If credit card debt overwhelms you, seek guidance from credit counselors immediately to set up a monthly payment and debt management plan that resolves past debts before legal action is taken against you.

What Is Laura’s New Understanding?

After learning that creditors can indeed sue individuals for payments, Laura said, ‘I’m amazed I don’t know more people being sued by credit card companies.”

“You might Laura, people don’t usually talk about it,” I replied and then asked, “So do you understand the consequences of missing your payments?”

“I do, I always took it seriously, but never imagined a big company would sue a regular person for a few thousand dollars,” she said. “I thought they would just call you, harass you, and threaten debt collection. But a lawsuit? I didn’t think it would be worth their while especially when they are suing people with no money.”

“But now I hope you understand that you were mistaken. Credit card companies can sue you, but you also have legal defenses,” I told her. “The first goal is to prevent a lawsuit. However, if you can’t prevent it and do get sued, you should call an attorney like me and prepare a defense.”

How Laura Is Preparing for the Possibility of a Lawsuit

“Yes, I understand this now Chris. I’m going to tell my friend she better not ignore her lawsuit. There could be a default judgment against her if she ignores it, right?” she asked.

“Indeed, that’s a strong possibility,” I told her. “But let’s focus on you now Laura. I want to make sure you manage your debt carefully, and feel prepared in case you do get sued.”

“Chris, I am going to continue to make sure I make my payments as often as possible. I won’t allow enough time to pass for them to start counting the days since I haven’t made a payment,” she said.

“Being responsible about your payments is a good start Laura. But if times get harder, and you can’t make your payments, please do call me,” I told her. “We’ll assess who owns the debt and perhaps negotiate a settlement. You will have options if it comes to it.”

“Thanks Chris, I now have a whole new understanding of what creditors can do to get their money. While I don’t think it’ll happen to me, I understand a credit card company can sue me if I miss my payments. I’ll do my best to avoid that, but if it happens, I feel more prepared to deal with it. Knowing I can call you makes me feel much better.”

“I’m glad, Laura, and please, let me know if I can help your friend,” I said. “Maybe you can share your new understanding with her, and let her know there are professionals out there who can help her.”

Schedule a Consultation with our Dallas Law Firm to Find out if a Credit Card Company can Sue You In Texas

When struggling with overwhelming credit card debt, wondering if a credit card company can sue you can be stressful and challenging, but you do not have to face it alone. Our team of experienced Dallas debt defense attorneys is ready to provide you with the guidance, support, and legal advocacy you need during these challenging times.

Wondering if a credit card company can sue you, we will help you every step of the way. We welcome you to schedule a consultation to discuss your situation and case objectives. We can answer your legal questions and discuss how we can help you move forward. Call our law office at (888) 584-9614 or contact us online to schedule your consultation.