It's difficult to track exactly how many debt collection cases for defaulted credit card debt are filed because they are filed along with all civil cases through the prothonotary's office. Capital One, a credit card company known for lending money to individuals with less than perfect credit histories, have filed a large number of cases. In Lancaster, Pennsylvania, of 255 cases filed during the first three weeks of April, Capital One filed 45% of them (a total of 114). Neither the attorney representing most Capital One lawsuits in court, Paul Klemm, nor Capital One representatives returned phone calls from reporters regarding this issue.
Attorneys who have counseled clients facing bankruptcy or credit card defaults have stated that more credit card companies than ever before are attempting to recoup some of their financial losses by taking card holders to court. In previous years, credit card companies would sell off their debts (for pennies on the dollar) to debt collectors and collection companies. Lawsuits, if filed, would be filed by debt collectors - not the credit card companies themselves. Now that the economy has nosedived and credit card companies are having trouble finding buyers for their unpaid debts, they are becoming more aggressive about collecting on defaulted accounts themselves. A successful lawsuit means a greater recovery rate for the credit card company.
The credit card industry states that the changes made by the U.S. House of Representatives on Thursday, April 30th, would cost the industry more than $10 billion per year in interest payments. The figure was obtained through a study by the law firm Morrison & Foerster. Changes to the credit card laws include restriction of interest rate increases and prevention of credit cards given to anyone under the age of 18.
If a creditor takes you to court, here is what you can do to build your case:
Prepare a Budget: list all of your monthly expenses and obligations from utility statements, invoices, receipts, and billing statements and show proof of your monthly income.
Document Medical Conditions: if a medical condition has made it difficult for you to keep up with your payments, or medical expenses are eating up all of your income, get documentation of your medical condition from your doctor(s).
Respond to the Court By the Due Date: do not ignore the situation as it will not go away. If you don't respond to the court prior to the date listed on your letter, the creditor will automatically win due to your inaction. There are sample response letters you can use online, or call and talk to the court clerk for assistance in how to respond to the court regarding your credit card suit.
Document Changes: many people are unemployed or laid off at this time, which makes it difficult or impossible to pay your bills on time. Get documentation if this has happened to you. Other life changes can also contribute to the inability to pay for bills, from having a baby, becoming depressed, medical conditions, etc. If they can be quantified by doctors or employers, these are all viable reasons and should be mentioned in court.
Document What You're Doing: If you've joined a debt relief solution, such as a debt management company or a credit counseling service, obtain proof from the company. This shows you aren't just sitting back and skipping out on your bills and that you're making an attempt to remedy the problem.