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What To Do If You're Sued By Your Credit Card Company

Thursday, August 1, 2013 - 10:28 AM
Whether the notice comes in the mail, or is delivered to your doorstep, being told that you are being sued for a credit card debt can be terrifying. For many people, the first reaction is to shut down and ignore the situation. “The tragedy…is not that the consumer was sued but that most never respond,” says Steve Rhode, founder of who is also working on a research project about lawsuits filed over consumer debts.

If a debtor ignores the lawsuit, however, the creditor will get a judgment against the debtor, which in turn will provide the creditor with additional powers to collect the debt, including seizing bank accounts or garnishing wages, in some states. (Note that in this story we are talking about situations where a credit card company itself sues you – not when a debt collector sues you.)

How to react when you are sued by your credit card company depends on a number of things — including, first and foremost, whether you acknowledge that you owe the debt in question.


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pearlbrownpearlbrown1,491 posts since
Nov 2, 2010
Rep Points: 6,486
1. Thursday, August 1, 2013 - 10:39 AM
According to IRS Publication 4681 (Canceled debts, foreclosures, repossessions, and abandonment), if a debt for which you are personally liable is forgiven or satisfied for less than the full amount owed, the debt is considered canceled - in whatever amount -  if it remains unpaid,  and the canceled amount included in your income, but there are exceptions to the rule. 

In the case of cancellation of non- business credit card debt, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation.
pearlbrownpearlbrown1,491 posts since
Nov 2, 2010
Rep Points: 6,486