Defaulting on credit cards, can you just stop paying?
I have met a few people recently who are in a very bad financial shape. They all accumulated too much of credit card debt while their incomes have drastically decreased due to economy. So the whole group seriously contemplates just defaulting on credit cards. That's it, simply stop paying with no consequences except ruined credit which is well worth it. According to their thinking, since credit card debt is unsecured, there is nothing much the lenders can do except report them to the credit bureaus. These misguided folks have their own little support group and convince each other that defaulting on their credit card debt is the best way to proceed.
I started asking some questions, like do you or your spouses still work, do you have any assets, liquid or real estate, have you talked to an attorney, have you consider some sort of settlement or hardship agreement, have you thought about consequences, like lenders suing you, getting a judgement and going after your assets, wages, etc. They looked at me in that particular way a good psych doctor looks at his schizophrenic patients. When I mentioned statute of limitations, their eyes simply popped out. So it was a lot of fun. Then after couple of days, one of them called me, asking if can explain the whole group in detail why defaulting on credit cards is such a bad idea. And what are the alternatives. I was quite mad at this point and told them to read the site, specifically this post.
Stop paying on credit cards only in two cases,
- temporarily if you want to persuade the credit card issuer to renegotiate the terms, reach a settlement or something along these lines
- for good, if you are qualified for Chapter 7 Bankruptcy and intend to file
Otherwise defaulting on credit cards can lead to lawsuits, judgements and subsequent asset liquidation and wage garnishment to satisfy the creditors. So unsecured doesn't mean noncollectable. There are many who hope that before the creditors get to file a lawsuit, statute of limitations will expire or even if the court award the judgement, it will never be collected. Especially today when there are so many borrowers defaulting left and right. Whatever may happen no one knows, but from what I heard and read, someone like Capital One or Bank of America definitely keeps up with all the statutes and goes after the delinquent credit card borrowers full speed.
So instead of defaulting, try to negotiate credit card debt and get a second job to help pay it off. You also can try to downsize, sell the junk you don't need to generate some extra cash. But in general, you must go extra mile and work harder to clean up the mess you created.
Sat Dec 25, 2010 05:12PM | Copyright: www.bad-credit-advisor.com | More in Credit Card Debt | Comments (0)
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