When a Credit Card Debt Goes to Court, How Much Is It Usually Settled for?

Negotiating with your credit card company can keep you from going to court.
i George Doyle/Stockbyte/Getty Images

A credit card company or collection agency must take you to court to get a judgment against you. If you lose the lawsuit and a judgment is issued, a creditor can collect the money you owe. Although it’s better to try to settle the debt before you actually get sued, in most cases, a creditor is still willing to settle after judgment.

Being Sued

Creditors often threaten lawsuits if you don’t pay, although sometimes it’s a bluff they use as a scare tactic to pressure you into settling. If you’re unemployed or have no assets, you may be able to temporarily forestall being sued. However, if your financial situation eventually improves, the creditor can come after you again. Creditors and collection agencies aren’t usually willing to settle for less money without first trying all other options available to them for collecting on the debt.

Negotiating a Settlement

Being contacted by an attorney for a creditor doesn’t mean that you are being sued. Even at this point, you may be able to negotiate a settlement. If the attorney is willing to negotiate the debt for less than the full remaining balance you owe, the amount you will have to pay varies. The reasons for not paying can have an impact on whether a creditor is willing to work with you as well as how much less it is willing to take. According to Mark Brinker, founder of the debt settlement firm Hoffman, Brinker and Roberts, while some creditors will settle for as little as 30 cents on the dollar, others won’t take less than 50 percent of the outstanding balance you owe.

Statute of Limitations

Before contacting the credit card company or collection agency in an effort to settle the debt, check the statute of limitations in your state. If the time the law allows to collect the debt has passed, the creditor can no longer take you to court. Although credit card debt that is older than the statute of limitations is not collectible, the statute of limitations varies by state. Even if the statute in your state expires, the bad debt may still appear on your credit report. As a rule, negative entries remain on your credit report for seven years. Likewise, even after the debt no longer shows on your credit report, you can still be sued if the statute of limitations hasn't expired.

Settling a Judgment

If a judgment is filed against you, a creditor may be able to garnish your wages, place a lien on your property or levy your bank accounts. While you can still settle an outstanding lien or judgment for less than what you owe, hire an attorney to file the necessary paperwork with the court once you finalize the settlement. Settling a judgment can be in the creditor's best interest as well as your own. It costs a creditor time and money to recover a judgment. For one thing, the creditor will have difficulty collecting the judgment and related court costs if you have no assets or if you have more liabilities than assets. Before paying off the judgment, get the agreement in writing detailing the terms and conditions.

the nest