What Can Happen If I Don’t Pay My Debts…
and don’t file for bankruptcy?
The credit card collection process often begins within a few days of a payment delinquency and accelerates from there. An account not tied to a credit card may vary procedurally depending upon policies established by the account holder but generally the collection process for credit cards and other debt accounts are similar.
The Phone Calls Begin
Representatives of the lender/creditor will begin calling you almost immediately. Although collector conduct is subject to mandates identified by the Fair Debt Collection Practices Act, individual collectors often have their own interpretation of the FDCPA guidelines and may not adhere strictly to the rules.
A credit card account is usually charged-off by the lender within 60 to 90 days of the delinquency but collector calls will generally be frequent and aggressive during the pre-charge off period. The tempo increases, however, after charge off when the delinquent account is either sold or assigned to national and regional collection companies. If assigned, the delinquent account remains under the control of the lender; if sold, the account is under the direction of the purchaser and its own collectors.
The Intimidation Begins
If the delinquent account balance is several thousand dollars or more, a lawsuit will be initiated sooner or later depending, in part, on the collector’s ability to assess the value of your assets and your ability to pay. Collectors will begin calling you repeatedly, at all times of the day or night, on your home phone, work phone and your cell phone—whatever number or numbers is known to them–seeking to intimidate you into paying your account, in full, making payments or settling for a reduced cash payment (usually by immediate telephonic transfer).
In California, if a lawsuit is filed, you’ll receive a summons and complaint, usually by personal service, after which you’ll have 30 days to file an answer. Because account obligors (defendants) in these actions rarely have a legitimate defense, a default judgment will usually be entered approximately 40-50 days after service of the complaint. If you file an answer, entry may be delayed, depending on the court, by 20 to 30 or more days.
Once entered, the account holder (plaintiff) can record the judgment in the county in which you own real property, thereby encumbering your property with a lien that accrues statutory interest at the rate of 10%. It can also levy against your bank accounts and, if you are a wage earner, can garnish your wages. In general, the collection process will force you to conduct your financial affairs strictly with cash and generally make normal financial transactions difficult for you.
If you file bankruptcy, however, all collection actions are stopped in their tracks by the action of the automatic stay. This means that garnishments are halted, harassing phone calls are stopped and any judgment liens may be avoided quickly, particularly if they impair your homestead exemption.
DISCLAIMER: The materials on this Website were prepared for informational purposes, only, and are not legal advice. This information is not intended to create or constitute an attorney-client relationship. Internet users and online readers should not act upon this information without seeking professional counsel. Please do not send confidential information to us until you speak with one of our attorneys and obtain express authorization to do so.