Understanding the Consequences of Credit Card Default

I am sure you never planned to find yourself in a situation where you were in credit card default.  But, the debt crept up on you and now you are months behind on your account.  Collectors are calling day and night and you are receiving nasty letters in the mail with threats of a lawsuit.  What happens next?

First – relax!  Breathe!  Credit card debt is a civil issue not a criminal one.  No one is going to come cart you off to jail just because you failed to pay Visa.  Of course, that does not meant that their aren’t any credit card default consequences.

When you are in default credit card debt collectors can be really aggressive.  Let’s face it, dealing with debt collections is never fun!  If you are being harassed by phone calls and are not able to make some sort of payment, the easiest thing to do is sent the creditor a certified letter telling them that you only wish to be contacted via mail.  Once you have done this they may not legally contact you via phone again.  Problem solved.  Well, sort of.

There is still the little matter of the money you owe.  What you should be most concerned about is your creditor filing a lawsuit against you.  While this certainly can happen, the truth is that it is not very likely unless your balance is extremely large.   The reality is that most creditors are not going to invest the time and money it takes to file a lawsuit against you.

If they do sue, they will seek a judgment against you, which will remain on your credit file for up to 10 years.  They will then use this judgment to get a wage garnishment against you.  Once they have the wage garnishment they will go directly to your employer who will be required to give them a portion of your paycheck each month before you are even paid.

Employers hate wage garnishments.  They are extra work for them.  You don’t have to worry about losing your job due to a single garnishment but it can cause you to lose some good will.  (Not to mention cause some embarrassment.)  The law does allow them to fire you if you have multiple wage garnishments however.

The best thing you can do if you are in credit card default is communicate.  Ideally, try to communicate before you are in default on credit card debt.  Try to find a way to make some type of payment, even if it is very small.  In the face of credit card default, consumer debt settlement is a good alternative.  Most of the time, if you are making a payment, the creditor will not go to the trouble of suing you.

If you have the funds, you can also try to settle credit card debtConsumer debt settlement is where you negotiate with the creditor for them to accept an amount that is less than what you owe.  When you negotiate credit card debt, your credit is damaged but it is a far better alternative than filing for bankruptcy or ignoring the debt.

Leave a Reply