Being sued by credit card company for unpaid debt can feel overwhelming. However, ignoring the lawsuit can lead to serious financial consequences, including wage garnishment, bank levies, and court judgments.

If you have been sued by a credit card company, it is important to act quickly and understand your legal options.

Step 1: Do Not Ignore the Lawsuit

If you receive a summons and complaint, you must respond within the deadline listed in the paperwork. Failing to respond can result in a default judgment, meaning the court automatically rules in favor of the creditor.

A default judgment may allow the creditor to:

• Garnish your wages
• Freeze or levy your bank account
• Place liens on property

Responding properly preserves your legal rights.

Step 2: Review the Debt Carefully

Before assuming you owe the amount claimed, consider:

• Is the debt amount accurate?
• Has interest been calculated properly?
• Is the creditor the original lender or a debt buyer?
• Has the statute of limitations expired?

Many credit card lawsuits involve documentation errors or incomplete records, especially when debts have been sold to third-party collectors.

Step 3: Consider Possible Defenses

Common defenses in credit card debt lawsuits may include:

• Improper service of process
• Expired statute of limitations
• Lack of documentation proving ownership of the debt
• Incorrect balance calculations
• Identity theft or fraud

Each case is different, and a careful legal review is important.

Step 4: Explore Settlement Options

In some situations, negotiating a settlement may be appropriate. Creditors often prefer recovering part of the balance rather than incurring ongoing litigation costs.

However, you should avoid agreeing to terms that are not in your financial best interest.

Step 5: Evaluate Bankruptcy as an Option

If your debt situation extends beyond a single credit card lawsuit, bankruptcy may provide broader relief.

Depending on your circumstances, Chapter 7 or Chapter 13 bankruptcy may:

• Stop collection efforts
• Eliminate certain unsecured debts
• Prevent wage garnishment

Bankruptcy should be carefully evaluated with legal guidance.

What Happens If You Lose a Credit Card Lawsuit?

If a judgment is entered against you, the creditor may pursue collection methods allowed under Florida law, including wage garnishment and bank account levies.

Taking action early often improves your options.

Free Consultation

If you are being sued by a credit card company, contact Wites & Rogers to discuss your legal options.

Call 954-933-4400

Early legal intervention can make a significant difference in the outcome of your case.

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As litigation over consumer debt mounts, however, some of the tactics in these lawsuits resemble those that marred the mortgage foreclosure cases a few years ago.  “We are seeing more and more complaints and evidentiary filings that appear ‘robo-signed,’” commented attorney Marc Wites.  He explained, “we see lawsuits that are computer generated in a generic manner so that there is no way to tell to whom the company claims the credit card – or cards – were issued by, how the company claims to own the debt, or even the basis for the amount of the debt.  Sometimes, in collection agency lawsuits, they don’t even identify of the original creditor.”

The issue also comes up in later evidentiary filings in affidavits signed by company personnel with no apparent personal knowledge of the facts to which they attest.  “The affidavits are usually form documents which contain errors and information irrelevant inapplicable to the particular case that it is obvious that no one even read them before filing with the court,” observed attorney Marc Wites .

These concerns, which the firm has observed in cases over the last couple of years, have been the focus of recent media attention by the New York Times, Time magazine, ABC, American Public Media, and other news outlets around the country after a New York state court judge, who sees about 100 credit card collection cases a day, estimated that 90% of the cases are based on legally-flawed evidence.

As the number of consumer debt defaults increase, banks and other lenders bundle the debts and sell accounts in bulk to collection agencies who then pursue some of the consumers.  Many collection agencies, in turn, sell off accounts in bulkto other collection agencies.  In the process of these sales and transfers, records are lost, the source ownership and basis for forming the alleged balance of the debt becomes murky, and errors occur, such as lawsuits by more than one company suing over the same debt.

“The reality is that these companies file the lawsuits expecting that most consumers will not respond to them, and they will go into default,” Wites & Rogersobserved.  The number of lawsuits where this happens is overwhelming.  However, there are so many errors in these cases that consumers may find themselves facing court judgments for incorrect amounts, or from entities that do not even own the debt.

When representing consumers in court Wites & Rogers aggressively protects their interests, to ensure that the entity suing them can prove their right to collect any debt and prove that the amount sought is accurate.  “We scrutinize each boilerplate affidavit and call into question the record custodian’s trustworthiness and qualifications to provide testimony based upon a variety of factors including inconsistencies in the documents themselves, unsubstantiated testimony about account activity, and the record custodian’s lack of qualification to testify to the statements in the affidavit,” explained Wites & Rogers attorney Steven Canter.

“The rules of evidence apply to everyone in court; there is no exception for companies who claim to own consumer debt,” noted Law.  “Consumers need to understand that they have rights, and we do our best to protect their interests in these cases.  In fact, many debt collection lawyers seem annoyed when we appear in a case because it derails their usual practice of filing the case and getting a judgment without a fight from the consumer.

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Given the current condition of the real estate market, many home owners find themselves with a lot of debt, and some very tough choices.  For those who are struggling to keep up with mortgage payments, both refinancing and loan modification can provide relief, but often such relief may be difficult to secure.  In particular, when the value of one’s home has decreased to less than the amount that is owed on the home, it can be difficult to refinance or obtain a modification.  Fortunately, there are some government programs that can help.

The Home Affordable Refinance Program (“HARP”), an official program of the Departments of the Treasury and Housing and Urban Development, may provide a solution for some homeowners who are not behind on their mortgage and owe more than the current market value of their property.  While the following list does not include all requirements, you may qualify for this program if you meet these criteria:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

See Home Affordable Refinance Program (HARP) (January 3, 2012) at  (on file with Wites & Rogers).

HARP will end December 31, 2013.  See Id. For a formal determination as to whether you qualify for HARP, you should ask your mortgage servicer.  You can also contact Fannie Mae or Freddie Mac for help in determining if you may be eligible.

By the way, HARP is just one of a number of government programs designed to help homeowners in financial distress.  So if, for example, you do not qualify for HARP because you are not current on your mortgage, you might be eligible for the Home Affordable Modification Program (“HAMP”).  You may be eligible for HAMP if you meet all of the following criteria:

• You occupy the house as your primary residence.
• You obtained your mortgage on or before January 1, 2009.
• You have a mortgage payment that is more than 31 percent of your monthly gross (pre-tax) income.
• You owe up to $729,750 on your home.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

See Home Affordable Modification Program (HAMP) (January 3, 2012) at (on file with Wites & Rogers).

If you are not eligible for HARP or HAMP, don’t give up hope.  There are several other programs which may be an option depending upon your specific needs and circumstances.  A more detailed list of these programs and their requirements can be obtained from the Department of the Treasury and the Department of Housing and Urban Development.  For more information, visit www.MakingHomeAffordable.gov.  And of course, it is always a good idea to consult with an attorney who has experience in dealing with such issues.

Authored by: David Sternberg an associate with Wites & Rogers

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Credit card debt can easily and insidiously become overwhelming, especially in today’s difficult economy.  Lately, many well-intentioned consumers have seen their debts spiral out of control due to layoffs and depressed real estate values, as well as factors not related to the economy such as unanticipated expenses resulting from the loss of a loved one, the need for medical care, or a disability.

The question of how to resolve such debts is a difficult one.  Should you attempt to negotiate with your creditors, and when necessary litigate with them, in an effort to obtain a settlement that you can afford, or should you file bankruptcy?

For many people, bankruptcy is a last resort. For example, some people wish to avoid the stigma associated with bankruptcy. Others simply feel better settling their debts by paying a more meaningful portion of the amount owed than a creditor would receive in bankruptcy; in bankruptcy, credit card companies and other unsecured creditors often receive a few pennies on the dollar, and sometimes nothing at all. For some, bankruptcy is not an option as it would negatively impact their job or business in an unacceptable manner, or they may have assets which they do not want to sell or lose in a bankruptcy proceeding.

Of course, debt settlement, like bankruptcy or any arrangement that falls short of paying one’s debts as originally agreed, will negatively impact one’s credit.  However, settling your debts, rather than filing bankruptcy, may have less impact on your credit, for a shorter period of time, than bankruptcy, and thus may provide a quicker path rebuilding credit.

The Fair Credit Reporting Act, [15 U.S.C. §§ 1681 et seq.], a federal law, allows a bankruptcy to be reflected on a consumer’s credit report for a longer period of time than most delinquent credit card accounts.  While a bankruptcy may be reported for up to ten years, 15 U.S.C. § 1681(a)(1) (2011), most credit card accounts placed for collection or charged off may be reported for no more than seven years, with certain limited exceptions. See 15 U.S.C. §1681(a)(4) and (b). The seven year period begins to run upon the expiration of the 180-day period beginning on the date the account goes delinquent immediately preceding the collection activity, charge off, or similar action.  15 U.S.C. §1681(c)(1).

When a delinquent account is settled, the consumer’s credit report is typically updated with a notation indicating that the account is settled and that the consumer no longer owes a balance.  If such an update is not made, the consumer may dispute the inaccurate information and the credit reporting bureau must delete the information if it is found to be inaccurate or its accuracy cannot be verified.  15 U.S.C. § 1681i (a)(5)(A)(i) (2011).  Thus, even prior to the time the delinquencies are removed from the credit report, lenders will generally be able to see that the consumer took charge financially by settling the delinquent account(s).  And, according to Experian (one of the three major credit reporting bureaus), the fact that a previously delinquent account has been settled and has a zero balance may help the consumer’s credit score to recover a bit more quickly than if the account remained unpaid.  Ask Experian: Benefits of Paying a Collection Account (November 9, 2011)  (on file with Wites & Rogers).

Further, when a delinquent account is settled the consumer is eliminating outstanding debt.  Since one factor which may negatively impact credit is excessive debt, the elimination of debt is generally an improvement.  Lenders who are considering extending credit will be able to see from the consumer’s credit report that the consumer’s total debt has been reduced.

(Consumers should periodically check their credit reports with the three major credit reporting bureaus, which are Experian, Equifax, and TransUnion.  If anything is being improperly reported, the affected consumer should contact the credit reporting bureau to initiate a dispute.  The credit reporting bureau must comply by removing inaccuracies or face civil liability to the consumer which may include any actual damages sustained, attorney’s fees and court costs, and, when the noncompliance is willful, punitive damages.)

While debt settlement has its advantages, in some cases bankruptcy may be a better option for certain debtors.  For example, when a debtor is faced with multiple lawsuits over credit cards debts and does not have reasonable prospects of being able to negotiate a settlement to pay the debts, bankruptcy may be a solution.  This is because filing bankruptcy results in what is know as an “automatic stay.”  With certain exceptions, the automatic stay stops all collection efforts and halts all lawsuits and proceedings to enforce judgments against the debtor.  This includes, but is not limited to, lawsuits and proceedings relating to personal, unsecured credit card debts.  11 USCS § 362 (2011).

Another advantage of bankruptcy is that the time frame for being discharged of one’s debts may be relatively short.  For example, in an uncomplicated Chapter 7 liquidation, a debtor’s debts could be discharged within a matter of a few months.  However, this will not always be the case and, in contrast, a Chapter 13 adjustment of debts will require monthly payments to be made over time to creditors, and as such, could take several years to complete.  Also, bankruptcy likely will cost far less to complete then negotiating settlements of your debts, which of course must be paid.

In sum, whether debt settlement or bankruptcy is a better choice for resolving overwhelming debt depends upon the circumstances.  Debt settlement and bankruptcy each present their own unique advantages for consumers faced with the prospect of inability to pay their debts.  In deciding which choice is better, consumers should take the time to do some research, and it is always a good idea to consult with an attorney who has experience in dealing with such issues.

Authored by: Attorney David Steinberg

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What Is the Fair Debt Collection Practices Act (FDCPA)? Your Rights Explained

The Unfortunate Reality.

Many Americans are facing the sad reality of not being able to pay their bills. The country’s depressed economy has left many without jobs, or with far less income than during the boom times.  Calls from debt collectors often impede the balance of silence and calm in your home, and can add undue pressure to financial and emotional stress. To make matters worse, some debt collectors attempt to collect debts using harassing tactics that may violate Federal and/or state law.

What is the FDCPA?

The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates how debt collectors may attempt to collect a debt from consumers. Unlike some state laws, the FDCPA applies only to third-party debt collectors, and does not apply to first party creditors. For example, the FDCPA does not govern the conduct of the department store (a first-party creditor) at which you have an outstanding account, but does govern the conduct of the collection agency (a third-party debt collector) the department store hired to collect the debt from you.

Examples of FDCPA Violations.

Examples of potential violations of the FDCPA include, but are not limited to, the following:

• The debt collector cursing or threatening to use violence in order to get you to pay the debt.

• Calling you before 8:00 A.M. or after 9:00 P.M.

• Calling you at your job after the debt collector knows they should not be calling you there.

• Contacting you even though the debt collector knows that you are represented by an attorney.

• Contacting your friends, neighbors, and relatives (other your spouse) without your permission or without an order from a court allowing such contact.

• Leaving voice messages that discloses information about your debt on an answering machine where it can be reasonably expected to be heard by others.

• The debt collector in an attempt to collect a debt,  makes false and misleading statements or engages in some act the natural consequence of which is to harass you.

• The debt collector fails or refuses to identify himself/herself or their employer’s identity and/or fails to inform you that they are a debt collector.

You Have Rights and Remedies.

If you have been subject to any or all of the conduct listed above, you need not stand silent and take it. You should begin by immediately requesting, in writing, that the debt collector stop contacting you. Fax or mail (through certified mail with a return receipt) the debt collector a written request to stop contacting you, and keep a copy of the letter, fax confirmation and/or return receipt card. The FDCPA requires the debt collector – after the receipt of your written request –  to cease all communication with you concerning the collection of the debt.  The debt collector’s failure to honor your request may result in a violation of the FDCPA for which you can sue the debt collector for money damages.

You should also keep a written log of the calls from debt collectors to monitor the frequency of the calls, and to record in writing any offensive and/or threating statements made by the collector. Also, if debt collectors leave voice messages, you should save them.

If debt collectors are found to have violated the FDCPA, you could be entitled to money damages if you prevail in a lawsuit against the debt collector.  Many states also have their laws that govern debt collection activities, and such laws often allow the debtor to sue the collector and/or creditor and collect money damages.
Most importantly, the facts and circumstances that led to your inability to pay a debt are not in any way relevant to your rights under the FDCPA and similar state laws.  These laws are intended to protect you, and you should know your rights.

Authors: Marc Wites and Jay Arjoonsingh, of Wites & Rogers

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It’s 8 p.m. and you arrive at home after a 12-hour day at work.  You’re exhausted, but feel thankful that you found a job that is putting food on the table.  On your way in, you grab the mail and start flipping through the stack, when you see an envelope from the local court between the phone bill and a coupon from Bed Bath and Beyond.  Your heart begins to beat faster, as thoughts of an unpaid debt rush into your head.  Opening the envelope, you realize that ignoring all those legal notices brought you to this moment; the bank is garnishing your pay check.

The best way to avoid garnishment is to be pro-active and settle your debt before you are facing garnishment.  If this is not possible, you have other options and rights under Federal and state law.

The good news is that both the U.S. Congress and state legislatures have enacted laws protecting some of your wages from garnishment.  In reality, the banks can only have part of your cake.

Federal wage garnishment law limits the amount that the Bank can take (i.e., garnish) from your wages to 25% of your disposable earnings or the amount that your take home pay exceeds 30 times the federal minimum wage per week, whichever is less.  So , if your take home pay exceeds 30 times the minimum wage, for example, with a take home pay of $500 per week, the maximum amount that that the creditor can garnish from your wages under Federal law is $125 per week ($500 times 25% equals $125 per week).  $125 is the maximum amount that can be garnished because it is less than the amount by which such take home pay exceeds 30 times the minimum weekly wage.

(Calculation explained: 30 times the current Federal  minimum wage ($7.25) equals $217.50.  With take home income of $500 per week, your disposable earnings exceed 30 times the Federal Minimum Wage ($217.50) by $282.50, which is 56.5% of take home pay of $500 per week.)

If you are a Floridian, the news is even better.  Under Florida law, the disposable earnings of what a person entitled to the “head of family” exemption are protected in various ways.

You are considered the “head of family,” under Florida law, if you provide more than 1/2 the support for a child or other dependent. A head of family is exempt from garnishment if the head’s disposable earnings are equal to or less than $750 a week.  In other words, if you meet this exemption, your wages cannot be garnished.  You can keep all of your wages.

For the lucky heads of family with a disposable income greater than $750 a week, your wages cannot be garnished unless you waive the head of family exemption in writing with the creditor.

If you are a head of family and your take home pay is $750 per week, you get to keep all of your wages, provided that you properly claim your exemption.

Most states use the Federal Guidelines as their standard.  For example, Illinois offers no special exemptions beyond those provided to all states by Federal law.  On the other hand, Illinois law does limit the amount of your earnings that can be garnished to 15% of your gross weekly wages or the amount by which your disposable earnings for a week exceed the total of 45 times the federal minimum hourly wage, whichever is greater.  However, Illinois narrowly defines “disposable earnings” to the amount remaining after withholdings (such as Federal, State, and Local taxes; Social Security (FICA); required disability contributions and retirement contributions; and mandatory health insurance or union dues) are deducted from gross income.

Texas gives you a big break by not letting the creditors in the cake shop. Texans get to hang on to all of their wages because in Texas wages are not subject to garnishment by creditors.  Of course, creditors can garnish your income if it is not a wage for personal services rendered. Income that is not considered a wage for personal service rendered in Texas includes capital gains on investments and business income to an owner or shareholder.

In California, 25% of your earnings are fair game for these cake-loving creditors. Also, in California the creditors can garnish bank accounts that are held jointly by people that did not incur the debt.  In fact, a bank account held jointly by a married couple can be garnished without court order if proper notice is given.  In other words, you need to keep a close eye on the spending habits of those that you share bank accounts with.

This is only a brief overview of garnishment.  To ensure that your wages are protected, you should consult an experienced consumer protection attorney.

Authors: Marc Wites and April L. Castoro, of Wites & Rogers

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In today’s difficult economic times, many good, hard working people find themselves unable to pay all of their bills, and still provide for basic necessities, such as food, shelter and medical care.  This often results from unemployment, or the inability to keep up with mortgage payments in our collapsed real estate market.

For many people, bankruptcy is an acceptable option to obtain a fresh start, by asking a federal bankruptcy court to wipe out, or eliminate, one’s debts.

Bankruptcy is not for everyone.

Here are a few reasons why. First, you have to qualify for filing under the bankruptcy code.  Second, you may have to give up certain assets to the bankruptcy trustee in order to pay some of your debts. Third, you have to live with the social stigma of bankruptcy.

While bankruptcy is an appealing and appropriate option for many, it is not for everyone.   Bankruptcy might jeopardize your job, or negatively impact a small company that you own.   You may have assets that you wish to keep, and that you otherwise might have to give up in bankruptcy, assuming that you qualify for bankruptcy in the first place.  And, many people simply want to avoid the stigma, whether real or perceived, that goes along with a bankruptcy filing.

There are other options.  Creditors realize that many consumers simply can’t afford to pay all of their debts.  Faced with the reality that they will get little or nothing if the consumer files bankruptcy, many creditors are willing to make a deal, and often will settle the debt for a meaningful discount on what is owed.   Sometimes an agreement to settle your debt can be reached prior to the start of litigation between you and your creditor, and sometimes a settlement may be reached during the litigation process, or after the creditor obtains a judgment on which it can’t collect.  While these options almost always result in the consumer paying more to settle their debt than if they had filed bankruptcy, it is a viable option for those who conclude that bankruptcy is not the right option for them.

Alex N. Law, Jr. is a founding shareholder of Wites & Rogers  The firm’s main office is in Lighthouse Point, Florida, and it has satellite offices throughout South Florida, as well as in various states.  The firm’s practice areas include the representation of injured persons and their families in personal injury and wrongful death actions, investment disputes, and class actions; immigration; the representation of consumers in lawsuits and pre-litigation collection efforts brought by creditors, as well as in bankruptcy; and commercial and civil litigation.

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What Is the Fair Credit Billing Act (FCBA)? How to Dispute Credit Card Charges

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