What Happens With Unpaid Credit Cards?

Unpaid credit cards have a number of possible consequences, including credit damage and even lawsuits. When credit cards are not paid as agreed, a legal contract has been broken. What happens with unpaid credit cards largely depends on the company and the amount of the actual debt, as well as whether the defaulted customer has any assets that could be attached.

Late Payments

When credit card payments are first more than 30 days late, these facts will be reported each month to the credit bureau.

Collection Efforts

Collection calls and letters will increase, especially the later the debt is. At some point, the cards will be cancelled and reported to the credit bureau as closed by the credit grantor.

Six Month Mark

Once the unpaid credit card debt is six months old, a charge-off will be reported to the credit bureau. This is a serious negative mark and means the creditor feels they will never be repaid.

Lawsuit as an Option

After the charge-off is posted, the credit card company may choose to file a lawsuit demanding repayment. They could also hire a collection agency, which might also opt to sue or simply continue demanding the money.

Judgments

If a lawsuit is filed and the consumer loses, then the judge can order the company take assets such as home equity or garnish wages to repay the debt. This is also reported to the credit file.