For many Americans, default credit card debt is something that plagues their very existence. When consumers can no longer pay their card bills, they can expect a long and drawn out process to take place.
Once a person stops making payments on a card account, normal collections procedures are put into affect by the lender. This means that the debtor is called, sent letters, and contacted in other ways to try and collect payments. This beginning process usually lasts for about six payment periods assuming all are missed or 180 days.
After unsuccessful attempts at collecting a debt, a company will charge off the account as bad debt. This is an accounting term and in no way changes the amount the debtor owes to the company. At this point, a company can either sell the bad debt to a third party, usually another company that specializes in collecting bad debts, or continue with collection procedures.
If the company continues, they usually hire a third party collection agency to try and contact the debtor to pay back the balance or arrange for payment options. Collection companies usually charge a fee or commission which can be a percentage of the collected amount. This is where people commonly experience or hear about horror stories of nasty collections agents that threaten, bully or otherwise harass consumers. While this is not wide spread, it does happen.
If these attempts are unsuccessful, a company has a variety of legal options based on what the original debt was. Credit card debt is unsecured meaning there are no assets to repossess or foreclose on. Many companies simply continue collection activities on card accounts until so much time has passed without contact or the borrower pays. In some cases companies will seek legal remedies such as garnishment of wages or interception of income tax refunds.
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Default credit card debt should not be ignored. Just because a creditor or collection agency stops calling does not mean the debt has been erased or has gone away. Defaulting on loans can cause severely bad marks on credit history and can prevent you from borrowing any type of money in the future.
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