What Legal Action Do Credit Cards Have on Not Paying?
When you agree to take a credit card, you and your creditor enter into a contractual obligation. Like any legal contract, you and your creditor have certain legal rights and obligations that arise from the relationship. A creditor's rights depend both on the terms of the contract and the laws in your state, as well as federal laws, so you should talk to a lawyer if you need legal advice about any of these areas.
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Debt Collections
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When you fail to pay back your credit card debt, the first actions a credit card issuer usually takes comes in the form of debt collection. Debt collection is simply when a creditor tries to convince you to pay back the money you owe, either by contacting you itself or by hiring someone to contact you on its behalf. The company has the right to contact you, but cannot harass, threaten or take other illegal actions, such as taking your property.
Lawsuits
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When you fail to live up to your contractual agreement to repay a creditor under the terms of the credit card agreement, the creditor can take you to court and ask the court to order you to live up to your contractual obligations. To do this, your creditor has to file a lawsuit. If you get dues by your creditors, you have the right to go to court and contest the claim, but the creditor can also try to convince the court that you have violated the terms of the contract.
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Judgment Collections
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If the creditor wins the case, the stakes raise significantly. After winning a lawsuit, your credit card company becomes a judgment creditor, a secured creditor that can take additional actions it was not legally allowed before winning the lawsuit. If a creditor wins the lawsuit, it may be able to seize your property, place a lien on your home, garnish your wages and even take money directly out of your bank account.
Selling Debts
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If you haven't paid your credit card company for a while, the company might decide to sell your debt to someone else. For example, if you owe $5,000, your credit card issuer might sell your debt to a debt collector at a discount, say $2,000. The debt buyer then becomes your creditor and can try to collect on the debt in the same manner that the credit card issuer cold, with the same legal rights.
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