Sued by Discover: 6 Response Options for Business Accounts

Having debt is horrible. Getting sued over that debt is even worse. Being sued for a business credit card balance is, if possible, more frightening. There are several things you can do to help resolve the lawsuit. But, the lawsuit must be answered. It is never a good idea to ignore the lawsuit. If there is one thing I learned as a business owner and consumer is that ignoring a problem does not make the problem go away. When sued over a business credit card balance, you must take some action.

1. Find your deadline

The first thing you need to do is determine the date by which you must answer the lawsuit. This must be taken seriously. In federal court, you generally have 21 days to respond. Each state court will have a different rule for when a lawsuit must be answered. In California the response deadline is generally 30 days. If you miss the deadline, you may be subject to a default judgment. In California, you can still file a late Answer so long as the plaintiff has not yet gotten a default judgment.

As part of your research, read the lawsuit to see who filed the lawsuit. In 2025, Capital One bought Discover Financial Services and Discover Bank merged into Capital One, N.A. Unless your case is old, suits against Discover cardholders may be filed under the name Capital One. Note who the complaint names as defendant. Discover business credit card applications make the applicant personally liable, so you could be sued individually. The owner is personally liable on business charges made by any cardholder, which could be an employee.

2. File an Answer

With the deadline identified, you need to file a written answer to the lawsuit. You must answer each paragraph in the lawsuit. The answer is your chance to respond to the allegations against you. The answer should list whether you admit or deny each allegation. In many cases it may be difficult to remember your account with a particular card or date of a charge on the card. If you are unable to admit or deny the allegation, that is okay. In your response you can respond to the allegation by saying you do not know.

Don’t try to tell your whole story in your answer. The burden of proof will be on the plaintiff. If something seems to be not true, deny it. Giving too much detail in your answer can be risky.

Your answer should begin with a caption including the name of the court, the name of the case, and the case number. It should be written in numbered paragraphs. Don’t forget the Certificate of Service, which is a note telling the court that you sent a copy of your answer to the plaintiff’s attorney (the other side). Sign it, as some courts won’t accept a digital signature. Make a photocopy (one for the clerk and one for the other side). Go to the clerk’s office and ask to file the answer. Pay the filing fee.

If your LLC or corporation is the named defendant, in federal court the company can be represented only by a licensed attorney. If you file the answer yourself, the answer may be rejected.

3. Raise your defenses now

This is your first chance to list your defenses against the lawsuit. Any defenses that are not raised in the answer may be waived later and not allowed. In your answer you should add a section called “Affirmative Defenses” and then identify all the affirmative defenses that you have. If the plaintiff’s lawsuit is barred by the statute of limitations, you can list that as an affirmative defense. Other defenses include: the debt isn’t yours; you already paid it; your card was cancelled; and you were not served properly. Not being able to pay the debt isn’t normally a defense against paying it. Don’t count on consumer collection law. The Federal Trade Commission says that debts for business are not covered by the Fair Debt Collection Practices Act (FDCPA).

4. Look at arbitration

If the card agreement you signed had an arbitration clause in it, you should carefully look at it. This business credit card could send you to arbitration, instead of court. Discover gives itself the option to require you to arbitrate a claim. However, the cardholder had 30 days to reject binding arbitration after getting the card. Check to see if you did. It is a good idea to check the Discover card application form and see what you agreed to when you applied for the card.

5. Negotiate a settlement

You may be able to negotiate a settlement of the suit. This is a way to end the lawsuit now and hopefully not have a judgment entered against you. Even if the plaintiff offers to settle, you should still file your answer to avoid a default judgment. Don’t be afraid to offer what you can actually afford.

Understand that settling the debt may have tax consequences. If you settle a credit card debt for less than you owed, or have a debt forgiven, it generally counts as taxable income unless you qualify for an exclusion or exception. Insolvency is an exception. Your tax preparer can fill out Form 982 to claim an exclusion.

6. Know the cost of silence

If you are sued and do not respond to the lawsuit, the plaintiff can ask the court to enter a judgment against you. A default judgment may also include collection costs, interest, and attorney’s fees. After it gets the judgment, the creditor may be able to garnish your wages, put a lien on your property, or freeze your bank account, depending on state law. In federal law, ordinary creditors can’t garnish more than 25% of your disposable earnings in any week.

You need to take immediate action to avoid a default judgment. Whether you are sued on a Discover credit card issued to you or your company, you need to respond.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.