Credit card companies don't accept your best intentions as payment. Excessive credit card debt can result from a number of factors. Poor spending habits, poor budgeting habits or unforeseeable events can prevent you from paying your cards on time. However, only certain types of creditors can take your possessions to satisfy debts, and credit card companies must go through a series of steps before they fall into that category.
A repossession is an act by a secured creditor to take the collateral that secures its loan. A creditor becomes secured by recording a security interest in your property. Typical examples of secured debts are home mortgages and car notes; when you buy the property, you give the lender a security interest in exchange for the money. The property becomes collateral for the loan, and if you default on the loan, the lender can take the property. For home mortgages, this process is called foreclosure, but for most other types of property, it's called repossession.
Credit card debt usually is unsecured debt. Some people have secured credit cards, which are credit cards that require you to put some money down in order to use them because you have bad credit or no credit, but typical credit cards are unsecured. Unsecured debts are debts with no collateral; the only thing you give in exchange for the money is a promise to repay the money. Every time you use a credit card, you implicitly borrow money and promise to repay it, but you give no collateral in return.
If you stop paying on your credit cards, your creditors will start to call you frequently and send you letters demanding repayment. They may hire a collection agency to take over the phone calls and letters. If their requests go unanswered, the creditors or the collection agencies will eventually file lawsuits. Unsecured creditors have no right to seize your property during a lawsuit. Debt collection lawsuits are governed by state law, so the procedures your creditor will use to sue you will depend on where you live. But generally, once the creditor sues and the court finds in the creditor's favor, the creditor will obtain a judgment against you for the unpaid debt. The debt changes from credit card debt into judgment debt.
A judgment is a binding decision by a court in favor of one party. A money judgment for debt is simply a court order holding you responsible for the unpaid debt, plus interest. Judgment debts are generally unsecured debts; however, creditors can take steps to use the judgment to put liens on your personal property, turning your personal property into collateral and making the judgment into a secured debt. The creditor can also use a judgment to garnish your wages and your bank accounts. These activities are also governed by state law, and your creditor's rights depend on your state. But once a creditor has a judgment lien or a garnishment, it can take your property or your wages and money to satisfy the judgment. The creditor may put a lien on the property you purchased with the credit card. More than likely, the creditor will simply place a blanket lien on any personal property you own, and if the creditor decides to execute, a sheriff can come to your home and look over your property to find things worth selling.
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