Facing a Credit Card Lawsuit? A Law Professor’s Guide to the Process

Alexander Hernandez 6 min read

If a creditor is unable to settle a debt through standard collection efforts, their next move is often legal action. For many consumers, receiving a summons is the first time they realize how serious the situation has become.

In this article, I will break down the process from missed payments to a judgment, and most importantly, how to protect your rights along the way.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on January 5, 2026.

Listen: The Professor’s Audio Briefing.

Key Points:

Once served with a lawsuit, make sure you know the date a response is due to the complaint or petition.
Failing to respond to a lawsuit will make things worse.
Writing a letter to the judge is not a proper legal response to a complaint or lawsuit filed by a creditor.
Even with a lawsuit filed, you can still try to settle your case with the creditor at mediation.
Debtors can garnish your wages, freeze your bank accounts, and place liens on your property, even for credit card debt.

The Path from Missed Payment to Litigation

Internal Collections (The First 90 Days)

Before a lawsuit is filed, the Original Creditor will typically attempt to resolve the debt internally. While they may offer payment plans, these are often rigid. During this phase, the debt is usually still owned by the credit card company, but it may be handled by an aggressive internal collections department.

If the debt remains unpaid, the original creditor may sell your account to a Debt Collection Agency (Debt Buyer).

Why this happens: Your credit card agreement is a contract, and most contracts contain an “assignment clause” allowing them to be sold.
The Red Flag: Always demand Validation of Debt. Because these debts are sold in bulk, paperwork often goes missing. Ensure the agency actually owns the debt before you pay a dime.

Navigating the Lawsuit Process

Service of Process: You’ve Been Served

A lawsuit officially begins with “Service of Process.” This is typically handled by a private process server or a local Sheriff’s deputy.

The Reality to Be Aware Of: While service should involve handing you the documents personally, some servers may resort to “sewer service,” leaving papers at your door and claiming you were served. That is NOT valid service!

The Summons: Read this document immediately. It dictates your deadline to file your response. Remember: these are calendar days, meaning weekends are included!

Filing a Formal Response

To contest the lawsuit, you must file a “Response” or “Answer” with the Clerk of Court, not the judge.

Resources: Most Clerk’s offices provide standardized forms or self-help centers to assist pro se (self-represented) individuals.

Mediation: In many jurisdictions, the court will schedule a mediation conference, sometimes called a pretrial conference. This is often your best opportunity to negotiate a settlement for less than the full balance before a judge rules against you.

The Consequences of a Judgment: Garnishment and Liens

If the case goes to trial and the creditor wins, they receive a Money Judgment. This is a court order that allows the creditor to:

Garnish Wages: The creditor will obtain a court order allowing the deduction of a set percentage from your paycheck, typically 15-25% depending on your state.
Levy Bank Accounts: Freezing and seizing funds in your checking or savings. Note that many clients believe creditors cannot take those funds because they are needed for their rent, mortgage, or other household expenses. That IS NOT true! They can and will!
Place Liens on Assets: Attaching a legal claim to your home or vehicle means that the lien sits there accumulating interest until the day you sell that asset.

Professor’s Note on Bankruptcy: As a bankruptcy attorney and professor of law, I must stress the importance of the Automatic Stay. If you file for bankruptcy at any point during this process, an injunction is immediately triggered. This halts the lawsuit, stops garnishments, and prevents further collection actions while your case is pending.

However, filing for bankruptcy isn’t enough. You should take additional steps to stop the lawsuit. I discuss those steps in this prior article.

The “Dashboard Light” Rule: Why You Can’t Ignore a Lawsuit

I often see people ignore lawsuits, hoping they will disappear. Think of a lawsuit like the “low fuel” light on your car’s dashboard. Ignoring it doesn’t solve the problem; it just ensures you’ll end up stranded.

A Cautionary Tale:

I once purchased a home from a seller who was facing various legal troubles. At the closing, he expected a significant payout. Instead, he received almost nothing. Because he had ignored years of lawsuits from utility companies, credit card issuers, and even the county (for unpaid dog tags), the interest and attorney’s fees had ballooned his debts.

A $1,000 problem can easily become a $5,000 nightmare if you let a creditor win by default.

The Professor’s Conclusion

Navigating the intersection of debt collection and the legal system is complex. If you are facing a lawsuit and considering your options:

Consult a qualified attorney in your jurisdiction to discuss filing an Answer or Response to the lawsuit.
Do not let the time to file a response expire!

Professor Hernandez is an attorney specializing in consumer finance and debt relief. He is the published author of Consumer Bankruptcy Law (Routledge Publishing) and teaches law and finance courses in both English and Spanish for an international university.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this lin k. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

Updated on January 19, 2025.

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