LendingClub can sue you for non-payment, and so can any debt buyer that purchases your loan after it is charged off. Litigation is usually a last resort rather than a first move: the lender spends several months trying to collect, classifies the loan as in default around 120 days of missed payments, and then either hands the account to a collection agency or sells it. Whoever owns the debt at that point decides whether suing you is worth the cost.
When a Lawsuit Becomes Likely
Missing a single payment does not put you in court. LendingClub’s internal recovery team works the account first, with automated calls, emails, and written notices as the delinquency grows. At roughly 30 days past due, the late status is reported to the credit bureaus. By about 120 days of non-payment, the loan is classified as in default, and somewhere between 120 and 180 days it is charged off.
A charge-off is an accounting entry, not forgiveness. It means LendingClub no longer expects to collect through normal servicing, so the account either goes to an outside collection agency or is sold outright to a debt buyer. The new holder then decides whether to keep calling, let the debt sit, or file suit. That decision usually turns on whether you appear to have income or assets worth pursuing. Collectors run skip-traces to locate employers, bank accounts, and property records, and a borrower who looks collectible and refuses to engage is the one most likely to be sued.
Who Actually Files the Suit
The plaintiff on the complaint is not always LendingClub. It can be LendingClub itself, a collection law firm acting on behalf of a third-party agency, or a debt buyer that purchased your account in a portfolio. The distinction matters because a debt buyer suing you has to prove it legally owns your specific loan through a documented chain of ownership from LendingClub forward. That paperwork is often incomplete, and incomplete paperwork is where many of these cases fall apart.
Check the Statute of Limitations First
Every state sets a deadline for filing a lawsuit on an unpaid written contract like a LendingClub promissory note. The window runs from as short as 3 years in states such as Delaware and New Hampshire to as long as 15 years in Kentucky, with most states landing in the 5- to 6-year range. The clock generally starts on the date of your last payment.
If you are sued after that deadline passes, the debt is time-barred and you can raise the expired statute as a defense to get the case dismissed. Two cautions. First, in some states a small payment or a written acknowledgment of the debt can restart the clock, so do not make a token payment on an old account before you understand the consequences. Second, your loan agreement may contain a choice-of-law clause pointing to a different state’s rules than where you live. Read the agreement and your state’s deadline before you assume an old debt is beyond suit.
What a Lawsuit Looks Like
A collection lawsuit begins when the debt owner or its attorney files a summons and complaint in civil court, usually in the county where you live. The complaint identifies you as defendant and lays out the alleged breach: the original loan amount, unpaid principal, accrued interest, and any late fees. If a debt buyer is the plaintiff, the complaint also needs to establish standing by tracing ownership from LendingClub to the current holder.
A process server or law enforcement officer then delivers the summons to you personally. That delivery gives the court jurisdiction over you and starts the clock on your response deadline. The summons tells you exactly how long you have and whether you need to file a written answer, appear in court, or both.1Federal Trade Commission. What To Do if a Debt Collector Sues You The plaintiff will usually ask for court costs and attorney fees on top of the balance if the loan agreement permits that recovery, which can add hundreds or thousands of dollars to the amount sought.
How to Respond If You Are Served
Ignoring a collection lawsuit is the worst thing you can do. Miss the response deadline and the court enters a default judgment, meaning the plaintiff wins automatically without having to prove anything about the debt. From there the court can authorize wage garnishment, bank levies, and property liens without you ever having been heard.1Federal Trade Commission. What To Do if a Debt Collector Sues You
Filing an answer forces the plaintiff to actually prove its case. In the answer you admit, deny, or state that you lack knowledge about each allegation. You can also raise affirmative defenses, which are legal reasons for the court to rule in your favor even if a debt once existed. The defenses that come up most often in LendingClub-related cases:
- Expired statute of limitations: the suit was filed after your state’s deadline.
- Lack of standing: a debt buyer cannot produce the original signed promissory note and a clear chain of assignments from LendingClub.
- Incorrect amount: the balance includes inflated interest, unauthorized fees, or accounting errors you can challenge.
- Improper service: the summons was not delivered according to your state’s rules, so the court lacks jurisdiction over you.
Standing is where most debt-buyer cases are vulnerable. When charged-off loans change hands in bulk, the paperwork that travels with each individual account is often thin. Making the plaintiff prove its case can lead to a dismissal or, at minimum, a much better settlement offer than you would get by staying silent.
Settling the Case
You can settle at any stage, including before an answer is due and after litigation has started. Collectors often prefer settlement because trials are expensive and uncertain for them too, and debt buyers in particular paid a fraction of face value for the account, which gives them room to discount. Older debts and debts held by third-party buyers tend to settle for the least.
Get any settlement in writing before you pay, with explicit language saying the payment satisfies the debt in full. Verbal assurances do not stop a later collection attempt by someone else who claims an interest in the account.
If a Judgment Is Entered Against You
A judgment unlocks collection tools that reach your paycheck, your bank account, and your property.
Wage garnishment diverts part of your paycheck to the creditor through your employer. Federal law caps garnishment for ordinary consumer debts at the lesser of 25% of your disposable earnings for the week or the amount by which your weekly disposable earnings exceed 30 times the federal minimum wage.2Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment Some states set lower caps. If you earn near the minimum wage, that 30-times floor can shield most or all of your paycheck.
A bank levy lets the creditor freeze funds in your checking or savings account and withdraw money to satisfy the judgment. The creditor can also record a lien on real property you own, blocking a sale or refinance until the debt is paid from the proceeds. State exemption laws protect some equity in a primary residence and certain essential assets, but the specifics vary widely. Judgments stay enforceable for 10 to 20 years depending on the state, and many states let creditors renew them beyond that initial period.
Stopping Collection With Bankruptcy
Filing for Chapter 7 bankruptcy triggers an automatic stay that immediately halts collection activity, including an active lawsuit, a wage garnishment already in progress, and creditor calls.3United States Courts. Chapter 7 – Bankruptcy Basics Unsecured personal loans like LendingClub’s are generally dischargeable in Chapter 7, so you walk away from the remaining balance at the end of the case, and the discharge permanently bars the creditor from collecting.
Bankruptcy has real costs of its own. A Chapter 7 filing stays on your credit report for 10 years, and non-exempt assets can be sold to pay creditors. Student loans, recent tax debts, child support, and debts incurred through fraud generally survive the discharge. For someone facing a judgment they genuinely cannot pay, though, bankruptcy stops collection faster than any other option.
One Tax Surprise to Plan For
If you settle for less than you owe or the creditor otherwise cancels part of the balance, the IRS generally treats the forgiven amount as taxable income. When $600 or more is canceled, the creditor sends you a Form 1099-C.4Internal Revenue Service. About Form 1099-C, Cancellation of Debt You report that amount on your return, which can create an unwelcome tax bill the year after you thought the debt was behind you.
There is a meaningful exception. If your total liabilities exceeded the fair market value of all your assets immediately before the cancellation, you were insolvent and can exclude the canceled amount from income up to the extent of that insolvency. You claim the exclusion by filing Form 982 with your federal return.5Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments Many people resolving charged-off debts qualify for at least a partial exclusion without realizing it.