If you are struggling to pay your bills, it is likely you are considering the decision to stop paying some of your bills, such as your credit cards. Before you make the choice to stop paying your credit cards, it is essential to understand what the ramifications are.
1. Know the Statute of Limitations
When you stop paying your debt, the credit card company has a limited amount of time to recoup its money. Once the statute of limitations is over, the creditor can no longer take steps to force you to repay the debt.
The statue of limitations varies based on the state that you live in. For example, it is three years long in Alabama, but in Montana, the period is eight years. If a creditor does try to sue you or pursue collection efforts once the statute of limitations is over, the creditor is in violation of the Fair Debt Collection Practices Act.
2. Understand What Your Creditor May Do
After you stop making payments, your creditor will take certain steps to recoup the money that you owe. For 180 days after you stop making payments, the credit card company will call you directly to collect the debt. Once 180 days have passed, the creditor charges off the debt.
When the debt is charged off, this means that the credit card company removes the debt from its assets. Legally, you still owe the debt. At this point the debt is usually sent to a collections company, either within the original credit card company or through an outside collections agency.
Once the debt is sold off, the collection company may take you to court to force you to pay. If a judgement is secured against you in court, your wages can be garnished (company takes what you owe directly from your paycheck) and you can have a levy filed against your home (the levy must be paid off before the home can be sold).
3. Your Options for Dealing with the Credit Card Company
You may be able to settle the debt for less than it is owed by contacting your credit card company. If the debt is in collections or a judgment has been issued, a settlement is still possible. Collecting judgments is expensive, and credit card companies want to mitigate their losses.
Filing for bankruptcy is another possibility to legally dissolve debt obligations.
It may be helpful to consult with a lawyer that deals with judgments. You can find one at a firm like Sinsheimer, Stuart J. If you truly do not have the financial resources to pay the debt or have few assets, the judgement may not have an effect on you.
Financial distress is a difficult time in any individual's life. Take control of the situation by learning what to expect if you stop paying your credit cards.