As unfortunate as it is, a major change in finances can make it so you can’t pay your credit card bills. If you fall behind and are able to make up your credit card payments within a few weeks to a few months, the worst that can happen is that your credit card account will be closed by your creditor. However, cardholders that do not make their credit card payments for an extended period can face lawsuits, have their bank accounts levied and their tax refunds seized.
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There is a major difference between being late on a credit card payment and completely ceasing to pay your bills altogether. After your creditor notices that your credit card payment is late, you may start to get phone calls from collection agencies and receive late payment notices in your mailbox. Being 30 days late or more on your credit card bill will also be reported on your credit report as a negative entry.
There are plenty of ways to negotiate with your credit card issuers when you stop making your payments.
If you do not have enough money to make a full payment, you can offer to make partial payments or ask about repayment assistance programs. Delinquent credit cardholders that do not take action often experience the worst possible outcomes.
What legal steps can credits take when you don’t pay your credit card bills?
Credit card companies can sue any of their past customers that have failed to keep up with their payments. However, multiple things have to happen before a credit card issuer can file suit.
First, the credit card has to be charged off, which is a process that usually takes six months. After that, the credit card company must retain a lawyer that is licensed to practice law in the same state as the delinquent credit cardholder. An intent to file suit letter has to be sent to the creditor before a lawsuit can be filed and the delinquent party must be properly served.
If you have been sued by your credit card company, you may still be able to stop further damage from occurring. Show up to court on the date scheduled and come with whatever proof you have available. At this point, your credit card issuer is only concerned with being paid, and if you are able to work out a payment arrangement with the plaintiff’s attorney, you can possibly have the lawsuit dropped.
Consumers that have been sued by their credit card companies and fail to defend themselves in court will end up having a default judgment filed against them. Default judgments allow creditors to get in contact with banks, employers and work with the IRS to be paid what they are owed. Laws concerning bank levies and wage garnishment vary from state to state, but it is best to take preemptive action beforehand.
Are all credit card debts collectible?
When you don’t pay your credit card bills, credit card companies can work with collection agencies, hire an attorney to file suit or do nothing at all. The course of action that they decide to take depends upon the size of the debt as well as the likelihood that they will be able to recover the debt. For instance, a consumer that falls behind on credit card bills due to permanent disability may not be sued if he or she has no assets.
Credit card companies also have to follow statutes of limitations on collecting credit card debt.
The Consumer Financial Protection Bureau refers visitors to the Federal Trade Commission website, which explains that the seven-year credit reporting period is different that state mandated statutes of limitations. In other words, recent credit card delinquencies are easily collectible, but aged debts may present a problem to creditors.
Are there any other negative side effects of failing to pay your credit cards?
Other than being blacklisted from any credit card company that you stop making payments with, many consumers find that getting a job with bad credit is more difficult. Additionally, having charged off credit card debt listed on your credit report can cause you to be denied security clearances.
With the exception of liens and judgments, delinquent credit card debts are no longer collectible after approximately seven years have passed. The Consumer Credit Protection Act applies to more than just credit card bills, so make sure that you read up on your rights before you settle your delinquent credit card debt.
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