Unpaid Credit Card Debt: What Are The Consequences
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When you have unpaid credit card debt, you might try to ignore the incoming bills. You are also likely stressed over the impact on your credit rating and your ability to keep paying for living costs like groceries and personal needs since you may be using credit to pay for those expenses.
You can tell your credit card provider, sorry, I dont have any money to pay my bill, but if you are unable or refuse to pay, that does have consequences both short-term and long-term. In this blog, Ill explain the consequences of unpaid debt. In addition, Ill propose some options to consider when you cant repay credit card debt.
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Here is an example. Joan Smith, like many Canadians, deals with only one bank, the ABC Bank, where she has one bank account. She obtained her VISA, her only credit card, through ABC Bank. Furthermore, she has her paycheque and her government baby bonus payments direct-deposited into her bank account at this same bank.
Joan pays her rent and her car monthly car insurance using a Pre-Authorized Debit on her bank account at ABC Bank. She also pays a number of monthly utilities cable television, internet, and cell phone bills using a Pre-Authorized Debit on her ABC Bank VISA, which has a $10,000 limit. She currently has $800 in her bank account at ABC Bank, enough to cover next months rent. This month, her minimum monthly payment on her ABC Bank VISA is $200. She cannot afford to make this payment because she needs to pay her rent as well as some unanticipated car repairs.
How Does Sol Work
If you want to know how to win a credit card lawsuit, you need to know how the SOL works. But heres a fair warning. The SOL does not provide ultimate protection from debt, but it can save you, depending on the cases facts.
Lets assume that John, a California resident, had outstanding credit card debt of $2,000. He had been a credit card holder since 2010. But unfortunately, in 2016, John experienced financial troubles, and he began skipping payments. His last payment was in May 2016.
CASE 1: John received a lawsuit in March 2020. He argued that the SOL has passed and the creditor cannot sue him anymore. Will the case succeed in his favour?
No. Johns last payment was in May 2016. Based on Californias SOL, the creditor has four years from the debtors last payment to file a collection suit. In this case, the creditor can sue until May 2020. Therefore, John cannot use SOL as a defense.
CASE 2: John received a lawsuit in June 2020. He argued that the SOL has passed and the creditor cannot ask him to pay his debt anymore.
Will the case be dismissed?
Yes. The creditor failed to file a lawsuit within four years from the date of Johns last payment. Thus, John can use it to dismiss the case.
Will John be forgiven for the debt?
No. The SOL only provides a time limit for legal actions. It does not extend to forgiveness of debt. So, the creditor can still demand payment from John, but it can no longer seek the courts help.
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What Happens If You Cant Pay Your Credit Card Debt In Canada
The reality is creditors expect regular recurring payments and will pursue all options to collect when you are unable to pay when you owe money. Ignoring the bills means you risk phone calls from a debt collector, lowering your credit score, and other potential impacts.
Beyond the stress of knowing you owe money, the consequences of unpaid credit card debts, vary depends on the situation and the credit card issuer. I am Scott Schaefer, a Trustee with Hoyes Michalos and Associates. Some of the possible outcomes are you will be charged a late payment fee, youll be charged interest, you could have details reported on your credit report of the late payment. The longer it remains outstanding, the more significant hit it will be on your credit report and the worse your score can become. Your interest rates could get increased.
But here are some of the more extreme outcomes: you will have debt collectors calling you the account could be written off your credit report which really significantly reduces your score. There could be court action. You could have your wages garnished or your bank account seized. But keep in mind that these circumstances are usually done over time. Time makes a difference. So the longer things are, the worse it will be. Late payments can be reported on your credit report for up to six years.
The longer the outstanding debts remain unpaid, the more severe the actions your creditor will take to collect.
Can A Credit Card Company Sue Me If I Stop Paying
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In a Nutshell
Failing to pay credit cards will result in a credit card company escalating its efforts to collect the debt. If these efforts fail, it will file a civil lawsuit to recover the debt. Once a creditor receives a judgment, it can take other measures, such as a wage garnishment, bank account levy, or judgment lien to satisfy the debt.
The following article explains, describes, and reviews the timeline of events that occur when you stop paying consumer debt such as credit card debt and the original creditor, a financial institution, a collection agency, or a law firm as a collection agent, files a debt collection lawsuit.
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Does Chase Sue For Credit Card Debt
Summary: Is Chase Bank coming after you for an old debt? Learn how to fight a debt collection lawsuit from Chase. Use SoloSuit to respond fast and win in court.
Although many credit card companies and banks choose to sell their accounts to a debt collection agency, Chase Bank is known for the opposite. Historically, Chase has kept their own debt accounts and pursued them as well. They often go through the process of filing collection lawsuits.
To prove their case, Chase Bank typically relies on witness testimony. This often comes in the form of a business record affidavit. If you have recently been served by Chase, then you must understand the rules of evidence when fighting these claims.
How Can I Avoid Being Affected By The Right Of Set
Ideally, Joan should do the following as soon as possible:
- Close her bank account at ABC Bank or withdraw all or virtually all of the money she currently has on deposit in that account
- Open a new bank account at another financial institution
- Deposit some money into her new bank account at her new financial institution
- Contact her employer and arrange to have her paycheque deposited into her new bank account
- Contact the government and make arrangements for her baby bonus payments to be deposited into her new bank account
- Contact her creditors to whom she was making monthly payments using Pre-Authorized Debit payments and provide them with authorization for Pre-Authorized Debit payments from her new bank account
- Contact her creditors to whom she was making monthly payments using Pre-Authorized Debt payments using her ABC Bank VISA and make alternative arrangements for paying these creditors
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Who The Legislation Does Not Apply To
The legislation does not apply to businesses or people collecting debts for which they are the original creditor or owner of the debt, a lawyer who is collecting a debt for a client, a civil enforcement bailiff or agency while seizing security or people working in the regular course of their employment while licensed under the Insurance Act.
Lawsuits And Legal Action
If you are being sued for credit card debt, you will receive a Statement of Claim. Suppose you ignore this notice or lose in court. In that case, your credit card provider may be granted a Judgment Order confirming that you owe the debt. This order gives the credit card company, or their collection agent, the ability to pursue harsher means to collect money like garnishing your wages or freezing your bank account.
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Collectors Use The Court System To Maximize Profits
Many people think debt buyers prefer to avoid lawsuits to collect old credit card debts because it requires them to pay lawyers and incur costs of litigation. If this were true, however, credit card lawsuits would be far less common than is the case. In fact, there were nearly 200,000 credit card collection lawsuits filed in New York in 2011 alone. Moreover, a report by ProPublica found that these lawsuits accounted for 48% of the court judgments filed in New Jersey in 2011.
Those consequences can include wage garnishment, funds seized from bank accounts, liens on property, and even the forced sale of automobiles and other assets to pay the debt. Whats worse is that the judgment continues to accrue interest, rising steadily over the years as the balance remains unpaid.
What A Collection Agency Cannot Do
A collector cannot:
- use threatening, profane, intimidating or coercive language
- give any false or misleading information including references to the police or a law firm, credit history, court proceedings, lien or garnishment or imply that the collector or agency is part of a law firm or legal department of the collection agency or client
- threaten or state an intention to proceed with any legal action where the agency does not have the legal authority and consent of the creditor to do so
- discuss your debt or the existence of your debt with any person except you , a guarantor of the debt, the creditor or someone you have identified in writing as your representative
- if you want the collector to contact your representative to discuss your debt, you must provide that persons current address and telephone number
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Pursue A Dismissal Or Settlement
If you respond with a strong case, then you have the opportunity of having your case dismissed or agreed upon to a settlement. This depends on your situation. But there are a few main claims you can make to help sway the judge in your favor.
Reliable defenses to a debt collection lawsuit might include:
- Proof that you do not owe the money and you are a victim of identity theft.
- You were not 18 years old when you acquired the debt.
- The statute of limitations has been reached.
- You have filed for bankruptcy.
- The bill has already been paid.
- The creditor is trying to collect more than you legally owe.
- The creditor cannot show proof of the debt.
- You were unfairly tricked into agreeing to the debt.
How Does Unpaid Credit Card Debt Affect Your Credit Score
There is no doubt that late payments are very harmful to your credit rating. While Equifax and TransUnion have different calculations, payment history makes up 35% of your overall credit score. How much late or missed payments impact your credit score depends on several factors, including:
- How large the payment or outstanding debt is
- How long the payment is overdue
- How many late payments you have
- What your current credit score is
If you have a credit score over 800, one late payment can drop your score 30 points or more. If you have a low credit score, an additional late payment will have a smaller impact but it will take you a very long time to recover from a recurring of missed payments and accounts in collection.
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How Much You Receive Will Depend On When You Report The Funds Missing Victims Of Debit Card Fraud Are Responsible For The Following:
- None of the missing funds if the loss is reported immediately and the card has not been used,
- Up to $50 if you notify the bank within 48 hours of the fraud,
- Up to $500 if you notify the bank between 48 hours and 60 days of the fraud
- All of the fraudulent charges if the bank isnt notified for 60 days after the fraud.
If the card hasnt been used yet, you will likely not even know about the fraud to report it. However, as soon as you suspect something is amiss, you need to report it to the bank to recover as much of the money as possible.
Can A Collection Agency Sue For Credit Card Debt In Nc
- NCGS 58-70-115: Requires written notice of the intent to sue be mailed to the debtor at least 30 days prior to filing suit. The written notice shall include the name, address, and telephone number of the debt buyer, the name of the original creditor and the debtor’s original account number, a copy of the contract or other document evidencing the consumer debt, and an itemized accounting of all amounts claimed to be owed.
- NCGS 58-70-150: Requires documentation of the debt be attached to the Complaint filed with the Court. A copy of the contract or other writing evidencing the original debt, which must contain a signature of the defendant. If a claim is based on credit card debt and no such signed writing evidencing the original debt ever existed, then copies of documents generated when the credit card was actually used must be attached. A copy of the assignment or other writing establishing that the plaintiff is the owner of the debt. If the debt has been assigned more than once, then each assignment or other writing evidencing transfer of ownership must be attached to establish an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership must contain the original account number of the debt purchased and must clearly show the debtor’s name associated with that account number.
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Black Mark On Credit Report
When you constantly defer or fail to make payment of your credit card debt then the Bank will put a black mark on your credit report. A credit report is basically a memo on how well the bank can trust you.
So are credit reports limited to just one bank? NO. Credit reports follow you for life and can be accessed by all banks linked directly to Bank Negara Malaysia through the online Central Credit Reference Information System . Having a bad experience with one bank can and probably will lead to you getting blacklisted by all Banks. So why ruin your future ability to borrow money? What if you need to take up a mortgage in the future and the Bank declines your application due to your poor prior credit history?
How To Deal With Collection Agencies In Canada
If youve stopped making payments to your creditors, they have the right to take you to court. Before that happens you can take action to stop the process, with one of these steps.
- Talk to aLicensed Insolvency Trustee. In a free, no-obligation meeting, a Licensed Insolvency Trustee can help you review all of your options and arrive at the best solution for your situation. Licensed Insolvency Trustees are regulated by the government and are experts in their field.
- Make a deal with your creditors. Call the people you owe, and see if they will work with you to arrive at a payment plan that works for both of you.
- Make a Debt Management Plan. A credit counselling agency can help you through the process. Be careful which agency you choose they are not regulated in most provinces.
Going to court is a daunting experience. Having an expert on your side who understands Canadian collection laws and who can outline your options, or who can stop the process of debt collection entirely could make all the difference. Talk to a Licensed Insolvency Trustee and get the professional advice and help you need.
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Can A Collection Agency Take Money From My Bank Account
Collection agencies can garnish your bank account if they have obtained a court judgment against you. Wage and bank account garnishments are particularly worrisome because they can happen unexpectedly and cause you to default on other planned payments. Again, the rules vary depending on your situation and province. A Licensed Insolvency Trustee can help you avoid or end garnishees and move forward.
Learn more about Debt Collection Agencies from the Government of Canadas Consumer Affairs office: Debt Collection Agencies.