PHAM & CLOVES, PLLC

In today’s financial climate, it is not uncommon for a family to lose the income of one spouse due to market conditions. In these situations, belt-tightening may not be enough to make ends meet. When faced with the question of whether to pay the car note or mortgage or to pay the Citi card, the answer is simple – you need a place to stay and a car to drive more than a credit card that is current. These are undoubtedly hard decisions to make since most people want to pay their bills. Along with not paying the credit card bill comes the harsh reality of creditors’ debt collection methods; and, perhaps being sued.

The law looks at credit card debt as a series of mini-loans over time that are repaid based on an annual percentage rate and a minimum payment amount – or, in other words, a contract to repay over time. When you fail to make a minimum monthly payment on time, you are considered in “default.” Attached to every credit card account is a provision in case of debtor default. Most of the time, when a payment is not made timely or the allowable balance has been exceeded; the annual percentage rate will increase to the “default rate,” which can be as high as 30% in some instances. This can in effect double you minimum monthly payment, yet still not reduce the principal amount owed. Another negative result of defaulting on a credit card is a condition known as “universal default.” Universal default is used by some creditors as a triggering mechanism for the default interest rate. By way of example, if you are late on your American Express bill, your Discover card interest rate may raise to the default rate even though you may be current on that card. Being late on one card can trigger a default interest rate on another card that has a universal default provision. Not all cards have these types of provisions, however.

There are laws supposed to go into effect as early as 2010 that, in instances of default, allow for a reduction of the default rate back to the original APR after 6 consecutive on time minimum payments. Some credit card companies have already instituted policies reflective of the proposed new laws.

If you have been sued by a creditor, do not merely ignore the lawsuit as it will not go away. Unless you file an answer to the lawsuit, you run the risk of getting a default judgment against you. You really need to consult a credit card defense attorney to learn of your legal options. It is not uncommon to negotiate with the credit card company’s attorney for a settlement without having to go to trial. However, not all credit card company attorneys will do such.

Most creditors are willing to work with sued debtors to work out a repayment plan. However, as with any other legal issue, without competent legal representation, the bargaining process can be stacked against you. If you have been sued by one of your creditors, contact a Veritas Legal Group credit card defense attorney to discuss your legal options. You may reach a Veritas Legal Group credit card defense lawyer at 832-484-9015.