How To Settle Credit Card Debt When Lawsuit Has Been Filed?

Debt is an unfortunate reality that most of us have to live with. One of the major forms of debt that ominously hang around is credit card debt, non-payment for which could spell disaster in the short and long-term, as interest begins to pile up and bank reps and managers start hounding you for the payment. Which is fair, considering that the one spending the credit freely on smartphones, accessories, games and clothing items is the same person now unable to make payments. But humorous banter aside, its no wonder that many people opt to settle amicably with the bank without paying their dues, because the opposite of it would mean the dreaded visits to the courts, the whole lawyer bit and enduring the mental stress of having been dragged to the courts by a powerful bank bent on squeezing the last cent out of you. So, how can you settle credit card debt when lawsuit has been filed?

The first thing to keep in mind is to always avoid being in such a situation where the bank and you are forced to slug it out in a court. While this can’t always be helped, this can always be prevented with some common spending and saving tips. Considering that a good majority of Americans are in some kind of debt, be it student loans, title loans or credit card debt, there is a good chance that managing your pay check with your weekly repayments can be done with the help of some online guide or tips. There are many websites and blogs that teach financial fidelity and prudence that might seem cheesy or downright miserly at first glance, but they can help you wade out of that vicious cycle of borrowing and paying with interest. One of the last resorts to stay afloat is to settle credit card debt when lawsuit has been filed, which will be discussed in the passages below.

The fact that a lawsuit has been filed against is certainly cause for worry but isn’t something that means the end of the world. According to estimates by a financial website, on an average, banks wait for around six months of non-payment before resorting to legal proceedings to get their money. That means that a person has around six months to whip out a solution for the issue, not to mention that this same time can be used to intimate the bank of your financial situation and ask them to work out a payment plan that is mutually acceptable and saves/ protects your end and the bank’s. This would prevent the bank from going to court over the issue and would also serve to formulate a plan that can help keep you afloat all the while making your reduced payments to the plan, ideally on lower interest rates. However, if the situation has progressed past that, you will need to know how to settle credit card debt when lawsuit has been filed. 

Also Read: Why Do Prosecutors Sometimes Don’t Prosecute Criminal Cases?

How to Settle Credit Card Debt when Lawsuit has been Filed

Once a lawsuit has been filed, there’s little else that can be done other than to convince the bank to drop the suit and settle out-of-court. These meetings cannot go well, as a general understanding of the issue, considering that the bank stands to lose a good amount on the interest and late fee penalties and the person on the other side themselves is usually on the brink of defaulting on their loans. So, here are a few steps that you can use to settle credit card debt amicably with the bank once a lawsuit has been filed.

  • Know that the bank does not want a proceeding either

The first step towards resolving this matter is knowing a basic thing about banks; maximizing profits, minimizing losses, which is the basic mantra of the whole financial market. As such, apply this rule to the aforementioned situation and you can understand for yourselves why a bank would also like to settle this matter out of the court. Since they know that they won’t get much out of you (considering that credit card debt is an unsecured loan) and pursuing a case in courts is costly and takes up much time, they would instead resort to whatever they can get out of you without expending much money or time.

The point to note in this situation is that an unsecured loan is the type of loan wherein banks will have to wait before secured lenders take what they can before helping themselves to whatever is left. To summaries, an unsecured loan means that they will have to make do with whatever is left after vehicle loans and student loans take what they can from the person. When they’re through, then the court will allow the bank to step in and recover their money from whatever is left, which makes it very unfeasible for the bank.

However, this spells good news for the person in financial trouble. This can make it so that getting the bank to settle out of court can be easier than one can expect, since they can’t afford to spend thousands to receive hundreds. That simply isn’t feasible. 

  • Get the credit card company to settle credit card debt

The second and final step in this would be to get the credit card company on board to settle the debt amicably without the need for further pursuing the case, which, as you will have made abundantly clear will not bring them any good. Which will only serve to strengthen your argument that settling credit card debt is their only shot at minimising their loss and recovering most of what they can.

Once you get the credit card company on the negotiating table, you will first have to ensure that they are fully agreed on dropping the lawsuit and will provide written guarantee to that effect, since leaving this part unconfirmed could lead to other problems in the future. Once the bank has given you its written word that it will drop the suit and will not pursue this case legally, you can get to the negotiating part.

Start by completely explaining your financial situation to the personnel and try to get them to look at from the humanitarian side and not the bankers’ side. Ideally, you could work out a revamped repayment plan that would keep both the sides happy i.e., reduced payment terms and interest rates for you and continued bimonthly or monthly payments for the bank with an added grace period for the person to get back up on their feet. Such a plan could mean the difference between going completely broke and filing for Chapter 11 bankruptcy or getting back to your feet using your bank as your aide. It’s how you negotiate with them that would affect the outcome. 

  • Take court proceedings seriously and don’t ignore summons

If the bank or credit card company has taken you to court over the matter, the first step to do prior to getting them on the negotiating table and asking them to drop the suit is to take court proceedings seriously and never to ignore summons. Doing so could cause the court to bar both parties from settling out of court and could drag other parties into this, other banks or collection agencies that could have a stake in this, deteriorating the matter beyond your control, which would only end up getting you deeper into the mess.

When you receive the summons, do show up in the court, try to have a lawyer representing you in the proceedings and maintain your stance that you want to settle this amicably with as little negative repercussions as possible. This will help clear your stance in front of the court and the other party, which could then initiate efforts for an out-of-court settlement of the credit card debt.

  • Try to minimize debt collection agencies’ involvement

Banks and credit card companies have the right and usually end up selling the debt to collection agencies or debt collection agencies, which are firms specialising in collecting and recovering amount from the person. If your case gets beyond control, there is a good chance that it will do the rounds of debt collection agencies before settling in with the one that thinks it has got the most shot at recovering the majority amount. Should you find yourself in such a situation, you can always ask the bank to not sell your loan to a collector agency, which can meddle things up more and cause more headache for a credit card debt recovery. To appease the bank into agreeing for it, you can always offer to pay back some of your debt so it isn’t a complete loss-loss for both parties. Appeasement strategies like this can help the bank into understanding the futility of selling the loan and can convince them that they can get more from you than they can get from selling your credit card debt to a debt collection agency. 

 

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