What Can Credit Card Companies do If I Don’t Pay My Debt?
If you’re asking if failure to pay your credit card bills will put you to jail, the general answer is no (unless there is fraud involved). However, if you are that worried about your debt, then you might be in serious debt trouble. Even if you cannot go to jail for not paying your debt, it does have serious consequences.
Interest charges and late payment fees
If you are already facing some financial difficulty, things are about to get harder if you cannot pay your credit cards in full each month because it will accumulate interest. Depending on your credit card, it may also charge other fees and fines for late payments, or paying less than the minimum payment required.
Poor credit history
The credit card company may list a default on your credit report if you owe more than $150 and if you fail to make any payments in about sixty days or notify your credit card company of your situation. A default will be reflected on your credit report for five years and may affect your application for mobile phone contracts, other credit cards or loans, and renting a home. If you have received phone calls or letters reminding you to pay your credit card debt and you honestly cannot pay anytime soon, do not wait for sixty days until you contact the bank. Let them know you are having a hard time and try to renegotiate the terms of payment.
Letters and phone calls
Generally, your credit card company will send you a series of letters reminding you to pay your bill, each with increasing urgency. If you still have not paid after the letters, they will start calling you at reasonable hours, the manner of calls ranging from pleasant to assertive.
If you still have not paid and showed no intent to cooperate in paying back your debt, the credit card company has the option to take you to court, especially if you owe more than $3,000. If the debt is found to be legitimate, the court will generally order you to pay the debt within a certain period. This will also reflect on your credit period for five years.
Before this happens, keep in mind that going to court will also cost the credit card company in time and money, and they might still be willing to renegotiate the terms of your debt to avoid these costs. They might accept a lump sum payment of a smaller amount, or an installment. Before you try to negotiate, make sure you can afford either of the options.
Repossession of properties and bankruptcy
After the court has ordered you to settle your debt and you still cannot comply, you can ask the court to allow you to pay in installment or apply for bankruptcy protection. If you are declared bankrupt, the debt collectors can still apply to have your assets seized and sold to repay the loan. The bankruptcy will also reflect on your credit report for seven years. Alternatively, the debt collector can also seek to file bankruptcy against you. Like a default, it will affect your application for other loans.
What credit cards company cannot do when collecting debt:
- Debt collectors cannot call you at unreasonable hours.
- They cannot refuse to provide details on your debt or loan.
- They cannot threaten violence in any form.
- They cannot threaten to put you in jail.
- They cannot threaten to tell your family, friends, or coworkers without your permission.
- They cannot scare or intimidate you.
If you observe any of these behavior from your debt collectors, you can report the incident to the Australian Securities and Investment Commission (ASIC), or the Office of Fair Trading in your state. Debt collectors can be investigated and have their license removed if proven to commit unethical collection practices.
To sum things up, if you know you won’t be able to meet your next few payments because of financial difficulty, do not ignore the problem and do nothing about it. Contact your debt collector or credit card company and try to explain the situation, and negotiate for more affordable terms. Seek the advice of a professional debt counselor if necessary to help you explore your options.