Credit cards are unsecured debt, which means the loan isn't backed by an asset like a house or car. If you avoid paying your bills for at least six months, the credit card company will write the loan off of its books as a bad debt. But it can still go after payment by filing a lawsuit against you.
Following a Judgment
If the credit card company wins a judgment against you, it can take steps to get money directly from your bank accounts. In fact, a creditor could potentially take all that you owe from your bank account. If there isn't enough to pay back all you owe, the creditor has the option to go back to court to get approval to take future amounts from your account. However, credit card companies can't take money from pensions, IRAs and 401(k) plans, unless you start withdrawing funds and put them into a savings or checking account.
Additional Ways to Collect
A credit card company may sue after repeated attempts to collect the money from you, through phone calls and letters, have failed. A credit card company typically wins a court judgment by showing it has the agreement you signed promising you'd pay back the loan, as well as billing and accounting statements that show lack of payment. Following a judgment, it can also potentially garnish wages, get a lien against your house and try to seize personal property to collect on the judgment.
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