What If I Were To Stop Making Credit Card Payments?
So many people with high credit card debts don’t realize how dangerous their situation is because they can still meet the monthly payments.
They assume that, as long as they are able to pay, they are not in trouble.
However, a change in income or an unexpected bill can mean that you are suddenly unable to pay your credit cards.
Many people in this situation ask, what if I were to stop making credit card payments?
If you find yourself in this position, it’s important that you understand what will happen if you stop making credit card payments because, in many cases, it will make your situation a lot worse and it is usually better to explore different debt relief options rather than just stopping the payments.
Here’s what will happen if you stop making credit card payments.
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The First Six Months
If you stop paying your credit cards and your bill is overdue, the credit card company will not take any major action.
Their in-house collection department will continue to send demands for payment in the post and call you up on the phone to chase the money.
In some cases, they may hire a lawyer to send a request for payment, but it is unlikely that they will sue you during this period.
This leads many people to assume that they can stop paying for a while because the credit card company will not take any immediate action, but that doesn’t mean that there are not any consequences.
Your credit rating will suffer a lot if you keep missing payments, and the constant phone calls and letters can lead to a lot of stress.
Once you reach the six month point, the credit card company will start thinking about next steps, and they will usually take one of the following four options:
- Continue collection efforts on their own.
- Assign your case to a collection agency that works on a commission basis.
- Sell your account to a debt buyer.
- Begin the process of suing you.
In some cases, your creditors will try one of these options and if you still don’t pay, they will change their tactics and try something else.
Dealing With Collection Agencies
Collection agencies are usually the first option that credit card companies will try.
Dealing with a collection agency is relatively similar to dealing with your credit card company because they will take the same approach.
They will identify the debtor and then chase you for payments over the phone and by sending you letters.
They may also get a lawyer to send out letters demanding payment, just like credit card companies.
However, the main difference is that collection agencies earn money based on commission and they won’t get paid unless they recover the debt.
This is their only source of income, which means that they will be a lot more aggressive than a credit card company, and this leads to a lot of stress for the debtor.
Getting Sued By The Credit Card Company
Although most accounts will be handed over to a debt collection agency after the payments have been outstanding for six months, the credit card will choose to sue certain customers.
Every credit card company will have hundreds of thousands of people that are behind on their payments, and suing them all is not financially viable.
They will go through all of their outstanding accounts and pick a select few to sue, while the rest will be handed over to collection agencies.
When deciding which accounts to sue, the credit card companies have to decide how likely they are to be able to recover the money from you.
If you have very few assets and no cash in the bank, suing you is a big risk and they are likely to lose out because they cannot reclaim the money from you.
People that do not own their own home, for example, are not usually sued because they don’t have that asset to collect against.
However, if you have a lot of assets that can be reclaimed, the credit company is more likely to sue you.
The amount that you owe is also important because it is not worth their while to pay legal fees to recover a relatively small debt.
But if you owe over $5,000, your chances of being sued are a lot higher.
If they do decide to sue, credit card companies may sue you using their own in-house legal department or they may hire a local lawyer to manage the case for them.
Selling Your Account To Debt Buyers
If they have exhausted their other options and the credit card company no longer wants to spend time chasing your debt, they may decide to sell your account to debt buyers.
The difference between a collection agency and a debt buyer is that a collection agency collects money owed to other organisations and then takes a commission, but a debt buyer will purchase the debt themselves and will not chase money on behalf of somebody else.
Once the debt has been sold, you will no longer owe money to the credit card company, you will owe it to the debt buyer instead.
In order to collect the debt, they can use any of the methods that the credit card company can, so they can pass it to a collection agency, chase the debt themselves, sue you, or even sell it on to another debt buyer.
If you stop making credit card payments, it will not solve your debt issues.
The debt will continue to be passed around and you may eventually be sued for the money.
If you find yourself in a tough position and you are unable to pay your credit cards, you need to consider debt relief options, like bankruptcy or consumer proposals so you can actually clear the debt and start over.
We are here to help and our expert team can give you all of the information you need about debt relief, so get in touch today.
You can reach us on the phone or fill out an evaluation form and we will get back to you.