Chase or Huntington bank credit card charge off – small balance lawsuits.
Just curious if i charge off a credit card with a balance of only $1000 through a big bank like Chase or Huntingington. What are the chances they come after me with a lawsuit?
Do collection lawsuits get filed for such small balances?
Having a small balance credit card debt with Chase bank or Huntington bank that gets charged off does have lawsuit implications and other concerns.
Common sense would suggest that getting sued for smaller balanced debt that goes unpaid for sometime would happen only a small percentage of the time. There is a cost to suing someone after all. Some courts filing fees are high enough that a debt collector would not bother suing on low balances.
Lawsuits for small balance charged off credit cards may not be filed by Chase
Chase bank may not have a history of suing on smaller credit card debts that charge off like Capital One does. But Chase sells off bad debts to debt buyers. Those buying debts may target a certain portion of the accounts they buy in bulk for placement with attorney debt collectors with authorization to sue in order to collect.
The collection attorneys a bank or debt buyer may hire to collect may be working a volume game. The collection firm is often paid based on a contingency of what they collect. They are also often awarded with continuing business from banks and debt buyers when they have a good collection performance. Suing is an aggressive way to get someone to stand up, take notice, and pay up.
Statistics show most people do not respond to credit card lawsuits.
There are many reasons people will ignore a lawsuit. Regardless of the reason, studies suggest that roughly 90% of lawsuits on debts like credit cards end up with a default judgment against the consumer, if payment arrangements are not made. Most of these defaults are because there was no reply to the lawsuit.
If your historical data shows that filing a lawsuit gets you paid on some accounts, and gets you default judgments on the vast majority of collection files you don’t get paid on, why not file a bunch of suits? If I were in the game and had data that showed “collection common sense” meant I was more profitable and paid better for chasing down low balance debts in the court, I would have to stay competitive and roll with it.
The math with letting small balance credit cards go into default, charge off, and lawsuits.
Starting with a 1000.00 balance is not where you end up. The first few months of missed payments the account balance only grows with late payment penalties and potential over limit fees. After a couple of months though, the interest rate will get jacked up to the default rate outlined in your credit contract. This is typically in the low 30% range. If the credit card agreement allows for this interest rate to accumulate as long as the debt remains unpaid, you can see the balance owed on the defaulted account double very quickly.
What if you have a 1k balance when you first miss payments and are sued by a creditor like Chase, or a debt buyer 18 months later? You could have a balance of 2k-ish. The lawsuit will add legal costs and attorney fees. If a judgment is entered, lets assume it is for a total of 3200.00. That judgment amount is going to grow with interest set by the courts and capped by state law (often around 10%).
That judgment could lead to lien, levy and garnishment. If that leads to full payment on the judgment – you pay on a debt anyway, and it more than tripled!
The late pays and charge off hammer your credit profile. The judgment sledgehammers the credit further. The balance grew and the typical collection cycle you get to endure was miserable. And… the debts still there.
All of that can be avoided by:
- Keeping current with smaller balance credit cards whenever possible.
- Accumulating enough money to settle small balance accounts early in the collection cycle if the accounts are already in advanced staged default.
The odds of being sued by Chase or Huntington Bank
The odds of being sued by either of these banks directly are not all that high. Not like the odds with other banks. Your odds should also consider being sued by a debt buyer. There are also increases to the odds depending on where you live.
Banks, debt buyers and collection firms are playing odds too. They have years worth of data and metrics that show suing on certain small balance debts makes business sense. If it was not profitable they would not do it. Even if they never collect on the judgment debt, the judgment can get sold to another debt buyer. A good example of this would be my post from yesterday: https://consumerrecoverynetwork.com/arrow-financial-services-debt-buyer-closed-shop-debts-purchased-lvnv-debt-collection/
The above may be more answer than you were expecting. I wanted to provide some perspective. If you cannot keep up payments on a credit card, no matter the balance, it is what it is. You will simply have to face the challenges that can result from defaulting on the debt. You can also look forward to the opportunities that will be presented through out the debt collection cycle to resolve the debt for less than the 1k balance owed at the start. You just need to try and take advantage of the early opportunities before the balance doubles, triples, etc.
If you, or anyone reading has questions or concerns related to anything in the above post, please post them in a comment reply below. If you have several accounts you are juggling and wondering how to prioritize them based on risks and later opportunities, lets talk about it.
A related article on this topic is included in our online debt relief system found here: https://consumerrecoverynetwork.com/credit-card-debt-to-include-in-settlement-plan
Any reader with questions or concerns regarding settling smaller balance accounts, and creative alternatives, is encouraged to post below for feedback.