Can credit card collection lawsuit be settled before trial?

Answer 1

There are several ways, but never offer to pay the entire amount claimed in the lawsuit. If you understand a few things about the whole process you will be better able to save yourself some money.

Companies at this stage are motivated to accept less than the amount they claim is due for many reasons. They have probably written the debt off by now and taken a tax deduction on it. Even if they haven't yet written it off, they will if they don't get the entire amount you owe. so it isn't like they are not getting every dollar they are owed anyway. Besides, these companies set their interersts and fees so high to that they have built in protection from losses in other accounts. Don't look at your debt as if the company is looking for all of it the same way you might look at it if you were owed this money. The companies know they won't collect everything they are owed. You don't think MBNA or FirstCard is going to go broke if they don't get all of the $5,000 you owe them do you?

If the lawsuit has been filed, be sure to file an Answer to the Complaint within time so as to buy yourself some time to negotiate a settlement. You never want them to get a default judgment for the whole amount they claim and they will if you don't answer the complaint. If you do let them get a default judgment then they have no reason to settle for less than the amount in the judgment. Filing an Answer also tells the lawyers and the company that now they have to go to trial and waste time that could be better spent on other matters.

If the credit card debt has come down to a lawsuit, then the company is somewhat desperate to get its money to a degree where they prefer to have an end to the whole matter even if they don't get every dollar owed. Most of the debt is exhorbitant fees and interest anyway and they can absorb a loss of some of that easily. If you can swing it, offer to make an immediate payment of about half to 75% of the total amount owed. Plead poverty. Tell them if they don't accept, they will have to garnish your wages. They don't want that because it takes too long to close out the case and the bookkeeping at their end is awful. No company wants to collect $5000 $100 a week at a time, especially when if you leave your job, they have to do the garnishment paperwork all over again. Try to make a lump sum payment even if you have to borrow from a family member.

You should also know that the lawyers filing the suit will get at least 20% to a third of the amount they collect anyway, so the company knows it is not going to see the whole amount. Some lawsuits try to add their attorney's fees to tha amount owed on the card, but not every state allows this, or at least not in the percentages they claim. Also be aware that some law firms will charge one amount if they settle the case without going to trial and a higher amount if they have to go to trial. So offering a settlement is in the companies' interest, because they will see less money anyway so they figure its best to settle the case and be done with it. On the other hand, some lawyers get the same percentage of the amount collected whether the get a settlement after writing one letter or spending 50 hours on a contested trial. So, many times the lawyers are motivated to convince their client to take the amount offered in settlement instead of trying to squeeze a few more dollars out of you.

In the Answer deny that the amount in the complaint is correct, that interest and fees have been illegally calculated and that attorney's fees (if claimed by the lawyers) is illegally high. If the suit is by a collection agency instead of the credit card agency itself, deny that the collection agency has the right to collect the debt. A collection agency cannot just file a lawsuit , say they are authorized to sue and go to trial. They must prove that they are. This is in the form of a written authorization or a document that evidences the fact that the credit card company has sold the debt to the collection company. You are entitled to see that before trial and if you ask for it they have to give it to you. These all will force the cedit card company or collection agency to go to trial and have someone appear at court to testify as to the amount of the debt and the right to collect it. No company wants to waste time like that, and it is to their advantage to take less in settlement than have have to pay an employee to go to court to testify.

One advantage you get if you find out that the collection agency bought this debt from the credit card company as a bed debt is that the credit card company paid less than the amount of the debt. A credit card company will sell an old $5000 credit card debt to a collection agency for maybe half of that amount. So the collection agency paid $2500 for the right to sue you for $5000. But they take the risk of losing that if the debtor goes bankrupt. So even if you offer the collection agency $3500 as a settlement of a $5000 debt, the collection agency just made $1000. This is not a bad profit, so don't think that these agencies want everything you owe. They want as much as they can, to be sure, but they will be willing to take less, make some profit and avoid taking a loss of their $2500 investment. I know a person who settled a $30000 claim for $17,000 and I bet the collection agency mad a good buck on it too.

These companies have made life miserable in general for their former customers with phone calls and threatening letters and now a lawsuit. It is time for you to make their lives miserable. In every lawsuit you have the right to what is called discovery. This means you can ask all sorts of questions about the debt, how it was calculated, how they have authorization to sue and so forth. This is done through interrogatories. (You also can take depositions but these are probably not practical in these cases. And they are expensive. )

Interrogatories are written questions that someone with knowledge of the debt from the company must answer. This wastes their time, but they must do it. Make them show in writing before the trial date everything about the debt that you can think of. Make them show all calculations and give legal reasons why they are correct. Make them work for their money. Once they see that they are going to have to spend some time and money in collecting this debt, they will make a business decision whether it is better for them to take less or have to go through all this hasssle just to get a judgment that might take them years to collect. You might have to do some homework and legwork on these. Check the court rules or ask the clerk of the court about the rules for written interrogatories.

Be wary if you are sued by FirstCard, you know, the one that asks What's in Your wallet?" Well what's in your wallet is their greasy hands trying to steal your money. I had an occasion to represent a client in a lawsuit by FirstCard. They wanted almost $10000 claiming that about $6500 was owed on the account, $1500 in interest and about $2000 in attorney's fees. The lawyers told me that FirstCard insists that they bring in about 70% to 80% of each claim so they offered a settlement of $8000. They filed a proof of claim that included no interest and the court denied the claim for the attorney's fees. In other words, FirstCard itself said no interest was owed and the court threw out their claim for the attorney's fees. Result was a judgment for $6500 plus about $400 in interest and court fees, totalling less than $8000. Not even the amount the lawyer told me he was giving my client a break on. So the complaint overstated the amount owed by just enough to collect even more than what they were actually owed, had we taken the settlement.

Another thing I was told by the lawyer is that at this point in time FirstCard no longer cares if you eve do business with them again. So forget about offering to settle the case and get your card reinstated. They may send you an unsolicited card later on, but that will be by some other division than Collections.

Remember this: Credit card companies, collection agencies and collection lawyers know how the economy is going and that there will be defaults. They ARE motivated to get what they can and get out as fast as they can. They might not take less than 70% but they will take less, especially if you show them youre going to put up a fight and waste their time.