Credit cards can be a convenient way to manage expenses, but they also come with a serious responsibility to repay the borrowed funds on time. When a credit card account goes unpaid, it can result in late fees, penalty interest rates and damaged credit scores — and in certain cases, non-payment can lead to even more severe repercussions, like being sued for your unpaid debt. A lawsuit over unpaid credit card debt may sound extreme, but it’s a real possibility if your debts are left unaddressed.

The good news is that creditors don’t initiate lawsuits lightly — they typically attempt to work with the borrower first. But when these attempts fail and a credit card account remains delinquent, a lawsuit can be an option for creditors to pursue. Knowing when this step is likely to happen can help you take proactive measures to avoid such a scenario.

So when exactly can a credit card company sue you for non-payment? And what are the ways to resolve credit card debt without facing a lawsuit? Below, we’ll explain what you should know about when a credit card company can take legal action over unpaid debt and what strategies you can use to manage and reduce your debt load effectively.

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When can a credit card company sue you for non-payment?

In general, a credit card company can sue you for non-payment once your account becomes severely delinquent, typically after 90 to 180 days of missed payments. When you initially miss a payment, the company will notify you and your account begins accruing late fees and possibly a higher penalty interest rate. As missed payments accumulate, the creditor’s collection efforts intensify. This can involve more frequent phone calls, letters and possibly offers to set up a payment plan. 

If you’re unable to make a payment during this initial period, the account will likely be “charged off” or written off as a loss by the credit card company after 180 days of delinquency. At this stage, it’s common for the credit card company to sell the debt to a collection agency at a discounted rate — typically pennies on the dollar. At that point, the collection agency typically owns your debt.

Once a collection agency takes over your account, they have the right to pursue the debt on their own behalf. Collection agencies may contact you through calls, letters or other forms of communication to collect the balance. However, if the debt remains unpaid even after collection efforts, the collection agency may file a lawsuit. The decision to sue depends on several factors, including the amount owed, the collection agency’s policies and whether they believe legal action will yield repayment.

Receiving a lawsuit summons is typically the final warning that your debt has reached a critical stage. If the court rules in favor of the credit card company or collection agency, they may be granted a judgment that allows for methods like wage garnishment or property liens to recover the owed amount. Remember, though, that each state has a statute of limitations on debt, which is typically between three and 10 years. After that point, the creditor may no longer sue, although they can still attempt to collect it through non-legal means. 

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How to avoid a lawsuit over unpaid credit card debt

If you’re struggling with credit card debt, there are strategies available to avoid a lawsuit, including:

Contact your credit card company

When financial hardship makes it difficult to meet payments, one option is to contact your credit card company, as they may have hardship programs or alternative payment plans that can help. These programs can reduce interest rates, waive late fees or extend payment deadlines temporarily and addressing the issue early can prevent the account from escalating to collections or legal action.

Use debt relief to tackle what you owe

The following debt relief strategies could also be worth considering to avoid a lawsuit over unpaid credit card debt:

• Debt management: With a debt management plan, a credit counseling agency negotiates with your creditors to create a single, affordable monthly payment, often with reduced interest rates and fees. 
• Debt settlement: With debt settlement (also known as debt forgiveness), the goal is to negotiate a lump-sum payment that’s less than the total owed, reducing your debt obligation.
• Debt consolidation loans: A debt consolidation loan through a bank or traditional lender may also be an option. This type of loan combines multiple credit card balances into a single loan, ideally with a lower interest rate, making monthly payments more manageable. 
• Debt consolidation programs: When you enroll in a debt consolidation program, you work with a debt relief company to secure a debt consolidation loan through a third-party lender, allowing you to make one monthly payment at a lower rate.

The bottom line

Facing a lawsuit over unpaid credit card debt can be intimidating, but understanding when legal action is likely to happen can help you take control of your financial situation before it reaches that point. Early intervention, such as contacting your creditor or pursuing debt relief, can prevent your debt from escalating and help you manage repayment in a way that suits your financial needs. After all, taking the time to address unpaid credit card debt now can relieve stress and safeguard your financial future.