When one cannot pay the minimum payment on their credit card in a timely fashion, the credit card debtor will be in default of their Credit Card Agreement and several consequences may follow
Credit Score
In the event of a Credit Card Default, it is very likely your credit score will decrease. This is because the credit card issuer reports your payments to the three credit reporting agencies; Experian, Equifax and Transunion, every month. Once a default is reported to one of the agencies, it will be incorporated into their credit algorithm, which is used to calculate a credit score and your credit score will decrease.
A low credit score means that conventional loans and other credit cards will be difficult to obtain and even if credit is obtained, the interest and rates you will be required to pay, are significantly higher, than prior to the credit card default.
Note: a default on a credit card debt will remain on your credit report for seven (7) years.
Credit Limit
Another result of defaulting on your credit card is that the credit card issuer may lower your credit limit and, in some cases, even close your credit card account.
Credit Limit
Another result of defaulting on your credit card is that the credit card issuer may lower your credit limit and, in some cases, even close your credit card account.
Lawsuit
As a result of defaulting on a credit card, the card issuer may begin a formal lawsuit against you. The main claim of the lawsuit is for breach of contract. This means that the agreement between you to pay and the issuer to provide credit has been breached through the default of not paying as agreed to in the terms and conditions of the Credit Card Agreement. The Lawsuit will be against the owner and originator of the credit card, not against any “authorized only” credit card users. Also, if a lawsuit is brought, it will be filed in the County where the debtor borrower resides.
Some credit card issuers, for example American Express, have their own internal legal departments with lawyers that work on filing lawsuits against delinquent borrowers, while other credit card issuers will farm out the legal component and have an outside Debt Collection Law Firm file on behalf of the credit card issuer.
If a lawsuit is filed against you for breaching a credit card agreement, it is imperative you ANSWER the lawsuit or you will face a Default Judgment. A default judgment is a valid judgment obtained when a defendant fails to respond to the lawsuit Complaint.
Depending on how one was served the lawsuit, one usually has between twenty (20) and thirty (30) days to file an Answer. If you received the credit card lawsuit by mail, you or your credit card debt settlement attorney will have up to thirty (30) days. In the event you were served the lawsuit personally, you will likely have up to twenty (20) days to file an Answer.
There is no template in Answering a credit card lawsuit. Rather, one is required to answer each allegation in the credit card lawsuit with an “accept or true” or a decline or incorrect. You do not need to give counter facts in an Answer but it is helpful to counter sue the credit card company, making sure you are defending yourself and your legal rights as it pertains to the credit card lawsuit.
Debt Collectors
Some credit card issuers may send the outstanding balance owed to a debt collection agency. The job of the agency is to hound you non-stop in order to reach a resolution and obtain the balance owing.
It is possible to negotiate a settlement of sorts with the collection agency but nothing is guaranteed and the debt collector is not obligated to provide a resolution that does not provide for full payment. It is always best to retain a competent and experienced credit card debt settlement attorney to step in and take on negotiations.
One of the most popular forms of settlement for credit card debt is to make a repayment plan whereby the borrower pays a fixed amount on a monthly basis. This amount is negotiated and differs from case to case and on who the issuer is and the amount owed in total as well as the borrower’s ability to make a fixed monthly payment.
A credit card debt settlement lawyer is trained in dealing with the credit card issuers directly, with their attorneys if necessary and the debt collectors. You are not required to retain an attorney and the conversations or litigation that takes place in seeking to settle can be done on ones own or pro se.
Some credit card issuers will file a lawsuit and simultaneously send the delinquent credit card account to a debt collection agency. Each credit card and its issuer will use their own internal protocol and practices.
Wage Garnishment
One of the most devastating consequences of defaulting on a credit card is Wage Garnishment. Wage garnishment is when the credit card issuer obtains a judgment against you for breaching the credit card agreement and uses the judgment to take a percentage of your hard-earned wages from your pay check.
Wage Garnishment has several laws related to it that vary amongst different States, but the long and short of it is that some of your paycheck will be automatically sent to the credit card issuer or their attorneys and debt collectors if your job and income is found. Wage Garnishment is thus far easier to accomplish if one is working for a company rather than for oneself.
Today, most Human Resource departments are fully apprised of the laws and when compliance is necessary or not with the garnishment. One cannot be terminated from a job due to a wage garnishment.
A wage garnishment lowers your take home pay, thereby making it difficult to cover your living expenses. Therefore, it is important to look if one qualifies for any exemptions.
There are different State exemptions or limitations on if, when and how much can be garnished.
Along with any Garnishment Notice, a credit card debt collector must include their States Exemption to Garnishment form. A competent and experienced credit card debt settlement lawyer will know what exemptions you qualify for and how to take advantage of them.
Wage Garnishment itself is not reported on your credit report. Rather, the delinquent account that led to the garnishment is reported.
What Happens If I Default on My Credit Card?
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