Suits Filed Over Credit Card Defaults

Monday, March 5th, 2012

If you have a credit card in your wallet, you have to be on double alert with the payment of your bills. Otherwise, you can get into some serious trouble if you fall behind on your bill payments. You could be inviting a lawsuit from the lenders as well as collection agencies seeking damages.

In the past, major lenders would think twice before filing a lawsuit and these were relatively rare because lenders only went to court if the debts were in thousands of dollars. However, that is not the case anymore as lenders are going after customers who have poor credit scores. There are instances where lenders are even filing lawsuits for debts that are less than $1,000.

The challenging economy could be the contributing factor.These days, a number of customers are defaulting on their payments and lenders seem to have no choice, but to pursue the matter aggressively.

In some cases, the defendants cannot be located and the courts cannot serve them their notices. But in some cases, the defendants acknowledge their debt and also agree to settle the matter out of court. It has been noticed that the plaintiff generally gets a favorable judgment and wins the case. Under such circumstances, the defendants will have to pay up the entire amount with interest and also have to reimburse all the collection expenses that can run up to $500. The debts are rarely disputed.

A plaintiff may establish lien on the property and get a default judgment in their favor, states Judge John Collins. The plaintiff may also obtain an order by garnishing wages. The credit rating agencies pick up these judgments, which further add to the pressure. Having a judgment against you can have serious consequences, he added.

County court administrator, Phil McCollister also attributed the increase in court cases to the failing economy. The courts are finding it difficult to keep up because there has been a 17% cut in the last 2 years, he added. So, they have to do more work with fewer work forces, but they have some back up in some quarters.

There are efforts now to maintain records by storing everything electronically, so it is easier to access them when needed. At the moment, they are spending a huge amount of time just looking for files. So, this change can be of great help.

This kind of debt is unsecured and makes it easier for the borrower to walk away from it, states Linda Schwichtenberg from West Coast Bank.

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