Credit Card Debt

Thomas Jefferson in a letter to a family member famously stated to, "Never spend your money before you have it." This of course turned out to be quite the contradiction as Jefferson died with large amounts of debt. It is also a statement from 1811 and the realities of life have changed. Most students have student loans and most cannot buy a house or even a car without a loan from a bank.

Credit card debt adds up quickly. It does for a few reasons. First, credit cards usually have very high interest rates and even higher rates if you miss a payment. If you miss a payment, they will tack on late fees. Before you know it, that debt of a few hundred dollars is now over a thousand and growing. Bankruptcy sometimes feels like the only option. By talking to an experienced Lowell Bankruptcy Lawyer, you can find out if there are other ways to go.

Each creditor, in this case the bank that has the credit card account, is different when it comes to how it responds to a debtor missing payments. However, here is generally what happens. A debtor will miss a payment and then they will start getting emails or letters telling them to pay.

A few more months will pass and the creditor will have reported the missed payments on their credit report causing their credit score to decrease. After about six months of no payments, the creditor will "charge-off" the debt and likely close the account. This does not mean the creditor is forgiving the debt. The bank generally does this for more favorable tax consequences. Most banks will not sue the debtor for the debt until it is charged off.

At some point prior to this, the debt was likely placed with a collection agency who will call the debtor to try to get them to pay something. After six months, an aggressive creditor will then place the debt with a debt collection lawyer to attempt to collect the debt. These lawyers might start calling the debtor or they might file suit right away.

The debt collection attorneys will likely file in the court that is in the jurisdiction where the debtor last lived. If the debt is above $25,000 in New Hampshire or above $50,000 in Massachusetts, the credit card's lawyer will file in Superior Court. If it is less than those amounts, the attorney will file in District Court and might even file a small claims matter.

The debtor will then receive the complaint and summons from the sheriff's department. The complaint will say that there was a credit card account opened on a certain date, that the debtor missed at least a payment, and that a certain amount of money is still owed. These are just allegations. The debtor will have to file an answer to this complaint with the court either agreeing or denying these allegations.

At this point, the collection law firm might send discovery (e.g., interrogatories, requests for production of documents, or request for admissions). These have to be answered within a certain amount of time. If the debtor does not answer those requests or the complaint, they will be defaulted and the court will enter judgment in favor of the credit card bank.

The lawyer for the bank will use the information obtained from the debtor's answers to discovery to file a motion for summary judgment against the debtor. They will allege all the facts are on their side using the account statements and discovery to show there is no dispute as to the facts and that they are entitled to a judgment in their favor. If this motion gets denied, the court might have a trial on the matter.

Trials are very rare in credit card cases. A trial would be an opportunity for the bank to call witnesses and introduce evidence to show you owe the debt they claim. You could also call witnesses and introduce evidence to dispute these claims.

The short answer is there are not many defenses to credit card debt. The fine print of the "Cardmember Agreement" controls whether you are responsible for the debt. The Cardmember Agreement specifically states that you agree to its terms by using it. The idea behind this is to prevent you from claiming you never signed anything. Even if you did not sign anything, you are bound to its terms if you use the card to buy something small, like a pack of gum.

The Cardmember Agreement also usually says that a different state's laws control its interpretation. This will prevent you from saying that the interest rates and fees you were charged are "unconscionable" (a fancy word for very unfair). The banks purposefully choose states that have relaxed laws on interest rates and what is considered unfair to the debtor.

In most cases, the bank's attorney will get their judgment. The judgment is the court order that tells you to pay the bank money for the unpaid debt. You might agree to that judgment being entered against you or they might get it after asking the court in one of the ways outlined above.

If they do get the judgment, the bank's attorney can then file to garnish your bank account, garnish your wages, or put a lien on your home. If you are being sued, the stakes are high. Give the Lowell Bankruptcy Lawyers of Marcotte Law Firm a call today for a free consultation, (978) 458 – 1229.