Yes, a credit card company can sue you for an unpaid balance, and so can a debt buyer that purchased your account after the original issuer wrote it off. Every card account is backed by a contract — a signed agreement or digital acceptance of terms — that obligates you to repay what you borrowed plus interest and fees. When payments stop, the issuer or its assignee can take you to court, win a judgment, and use that judgment to garnish wages or seize funds from your bank account.
A lawsuit is not the first step, though, and it is not automatic. Understanding when it becomes likely, how much time the creditor has, and what you can do at each stage changes the outcome significantly.
When a Lawsuit Actually Becomes Likely
Missing one payment rarely leads to court. Creditors start with letters and phone calls. If the account stays delinquent for roughly 180 days, federal banking guidance generally requires the issuer to charge the debt off, meaning it comes off the books as an asset.1Office of the Comptroller of the Currency (OCC). OCC Bulletin 2000-20 – Uniform Retail Credit Classification and Account Management Policy A charge-off is an accounting move. You still owe the money.
After charge-off, the original creditor often sells the debt to a third-party debt buyer for pennies on the dollar. Whether anyone sues you depends on the balance, the quality of the documentation, and the cost of filing suit. Smaller balances usually get worked through calls and letters rather than court. High-volume collection firms, however, use standardized filings that make even moderate balances worth pursuing.
How Long Does a Credit Card Company Have to Sue You
Every state sets a deadline — a statute of limitations — for filing suit on unpaid credit card debt. Once it passes, the debt is time-barred, and federal debt collection rules bar collectors from suing or threatening to sue on it.2Consumer Financial Protection Bureau. Debt Collection Rule – Regulation F The debt itself doesn’t vanish, and collectors can still contact you about it, but the courtroom door closes.
For credit card accounts, most states set the limit between three and six years. A few states allow longer, depending on whether the card agreement is treated as an open account or a written contract. The clock usually runs from the date of your last payment or last account activity.
Watch out for restarting the clock. In many states, a small partial payment or a written acknowledgment that you owe the debt resets the statute of limitations entirely, giving the creditor a fresh window to sue. In some states it only pauses the clock. Before paying anything on an old debt, or making promises over the phone, check the rules in your state. An unintentional reset can revive a lawsuit that would otherwise never have been possible.
What Being Sued Looks Like
A lawsuit officially starts when you are served with two documents: a Summons and a Complaint. The Complaint lays out the claim, including the amount, the original account number, and the original creditor. The Summons tells you how long you have to respond in writing. Depending on your state and how you were served, that deadline is typically 20 to 30 days.
Filing your Answer on time is the single most important thing you can do. Miss the deadline and the creditor can ask the court for a default judgment — a ruling in their favor without a hearing. Default judgments are common in debt collection cases, and they carry the same enforcement power as a judgment won at trial.
Your Answer should respond to each allegation. Deny what you know is wrong. For anything you cannot verify, say you lack sufficient information. Raise defenses that fit your situation: the statute of limitations has run, the plaintiff cannot produce proper documentation, the balance is incorrect. Filing the Answer usually requires a fee, but most courts offer a fee waiver for people who cannot afford it. The clerk can point you to the application, sometimes labeled an “in forma pauperis” request.
If You Already Missed the Deadline
If a default judgment was entered because you never responded, you may be able to file a motion to vacate it. A judge can set the default aside in several situations, including that you never received the Summons and Complaint, that you had a valid reason for missing the deadline, or that you did not understand a response was required. Vacating the default doesn’t mean you win — it rewinds the case so you can file an Answer and defend. Deadlines and paperwork vary by court, and judges are more receptive when you act quickly after learning about the judgment.
Make Them Prove the Debt
When a third-party debt collector first contacts you, federal law requires them to send a written notice within five days stating the amount owed, the creditor’s name, and your right to dispute the debt.3Office of the Law Revision Counsel. 15 USC 1692g – Validation of Debts You have 30 days from that notice to dispute in writing. Once you do, the collector must stop collecting until they mail you verification, such as a copy of the original account agreement or a judgment.
If you don’t dispute within 30 days, the collector may treat the debt as valid, but not disputing is not an admission and does not waive defenses if you’re later sued.3Office of the Law Revision Counsel. 15 USC 1692g – Validation of Debts One boundary matters: these validation rights under the Fair Debt Collection Practices Act apply to third-party collectors, not to the original credit card issuer collecting its own account. Many states have separate laws extending similar protections to original creditors.
Collectors also cannot make false or misleading claims about the amount, the legal status of the debt, or actions they cannot legally take, including threatening a lawsuit on a time-barred debt.4Office of the Law Revision Counsel. 15 USC 1692e – False or Misleading Representations
Once a lawsuit is filed and you’ve answered, the case enters discovery. You can demand the original signed card agreement, a full payment history, and an itemized breakdown of the balance. If a debt buyer is suing, ask for documentation showing the entire chain of ownership from the original creditor through every sale of the account. Debt buyers frequently cannot produce this paperwork, and gaps in the chain of title are a strong defense. Many credit card lawsuits end in dismissal or favorable settlement because the plaintiff cannot produce the original contract or a reliable accounting.
Settling Before or During the Case
You can negotiate a settlement at almost any stage: before suit is filed, after you receive the Complaint, even after a judgment is entered. Debt buyers paid a fraction of the original balance and often accept significantly less than the full amount to avoid the cost and uncertainty of trial. Original creditors tend to hold out for higher percentages.
Get any settlement in writing before you pay a cent. The written agreement should state the exact amount you will pay, confirm the payment resolves the debt in full, and specify that the creditor will dismiss the lawsuit or satisfy the judgment if one already exists. A verbal promise is not protection.
One tax note: if a creditor settles for less than the full balance or writes off the remainder, the forgiven amount of $600 or more must be reported to the IRS on Form 1099-C, and it may count as taxable income.5Internal Revenue Service. About Form 1099-C, Cancellation of Debt If you were insolvent at the time — total debts exceeding the fair market value of everything you own — you can exclude the canceled amount up to the amount of your insolvency, using IRS Form 982.6Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness Debt discharged in bankruptcy is also excluded. Even without a 1099-C, canceled debt is still considered taxable by the IRS.7Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments
What Happens If the Creditor Wins
A judgment — whether from trial or by default — gives the creditor real teeth. The three most common enforcement tools are wage garnishment, bank account levies, and property liens.
Wage Garnishment
Federal law caps garnishment at the lesser of two figures: 25 percent of your weekly disposable earnings, or the amount by which your weekly disposable earnings exceed $217.50 (thirty times the current $7.25 federal minimum wage).8Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment Disposable earnings means what’s left after legally required deductions like taxes and Social Security. If your weekly disposable earnings are $400, the creditor could take the lesser of $100 (25 percent) or $182.50 ($400 minus $217.50), so garnishment would be capped at $100. Some states impose stricter limits, and a few prohibit wage garnishment for consumer debt altogether.
Bank Account Levies
A judgment creditor can also obtain a court order, often called a writ of execution, directing a sheriff or marshal to seize funds directly from your bank account. The bank freezes the account when it receives the order, and the money is held until the debt is paid or you successfully claim a legal exemption. This can happen without advance warning, which makes it one of the most disruptive collection tools.
Property Liens
Creditors frequently record a judgment in local land records, which creates a lien against any real estate you own. A judgment lien blocks you from selling or refinancing without first paying the debt from the proceeds. Liens can sit in place for years, and the unpaid judgment continues to accrue post-judgment interest at a rate set by the court that issued it.
What Judgments Do to Your Credit
Since 2017, Equifax, Experian, and TransUnion have excluded civil judgments from consumer credit reports.9Consumer Financial Protection Bureau. Removal of Public Records Has Little Effect on Consumers Credit Scores The underlying delinquent account and charge-off still appear, though, and can significantly damage your score. A judgment also remains a public court record, and lenders who check public records during underwriting may find it even if it doesn’t hit your credit file.
Income and Property That Cannot Be Touched
Not everything is fair game. Federal law shields certain income from garnishment and bank levies, including Social Security, Supplemental Security Income, Veterans Affairs benefits, federal railroad retirement, and civil service retirement payments.10Department of the Treasury. Federal Benefit Payments Protected Under 31 CFR Part 212 When these benefits arrive by electronic deposit, your bank is required to review the account for protected funds before freezing the balance in response to a garnishment order.
State laws add more. Every state has some form of homestead exemption that shields a portion of home equity from judgment creditors, with amounts ranging from a few thousand dollars to unlimited protection in some states (subject to acreage caps). Many states also protect a share of wages beyond the federal floor, retirement accounts, personal property, and basic necessities. These exemptions usually don’t apply automatically. You typically need to file a claim of exemption with the court after a levy or garnishment starts to assert your rights.
Bankruptcy as a Last Resort
Filing for bankruptcy triggers an automatic stay the moment the petition is filed, halting nearly all collection activity, including active lawsuits, wage garnishment, bank levies, and lien attempts.11Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The creditor does not need to be notified for the stay to take effect.
In a Chapter 7 case, most unsecured credit card debt can be discharged, eliminating both the lawsuit and the underlying obligation. In a Chapter 13, the debt is typically rolled into a court-approved repayment plan lasting three to five years, with any remaining balance discharged at the end. Bankruptcy has serious long-term consequences for your credit and financial life, but for someone facing an active lawsuit or judgment on credit card debt, it is the strongest legal protection available.