What if I just throw them away?
December 9, 2010 2:47 PM Subscribe
What would happen if I stopped paying my credit card bills?
I've got really good credit, own my home (mortgage but we have some equity), a good job. And a bunch of credit card debt.
In very practical terms, what would happen if I just stopped paying them and threw the bills in the trash every month? All total, we're talking about roughly $20K, spread across four different companies. Would my house be in jeopardy? Could they garnish wages? Would anyone other than me and the CC companies find out? Is there a chance it would be written off as uncollectable?
(Not interested in exploring the ethics of this, BTW.)
I've got really good credit, own my home (mortgage but we have some equity), a good job. And a bunch of credit card debt.
In very practical terms, what would happen if I just stopped paying them and threw the bills in the trash every month? All total, we're talking about roughly $20K, spread across four different companies. Would my house be in jeopardy? Could they garnish wages? Would anyone other than me and the CC companies find out? Is there a chance it would be written off as uncollectable?
(Not interested in exploring the ethics of this, BTW.)
I've got really good credit,
Not for long. Your credit score will be eviscerated.
...own my home...
More than likely, a lien will be put against your property. Most likely following a court appearance.
All total, we're talking about roughly $20K...
Which would ratchet-up wildly once penalties are compounded, as well as your interest rates being sent into space. That 20k could easily hit 6-figures, depending on how nasty the creditors want to get.
Would my house be in jeopardy?
Possibly.
Could they garnish wages?
Yes.
Would anyone other than me and the CC companies find out?
Employers and potential employers check credit reports. Hell yes.
Is there a chance it would be written off as uncollectable?
Only if you are penniless and living out of a box on the highway. If you have a job, you're on the hook. But, if you can demonstrate real hardship, you might be able to negotiate payment.
posted by Thorzdad at 2:55 PM on December 9, 2010 [3 favorites]
Not for long. Your credit score will be eviscerated.
...own my home...
More than likely, a lien will be put against your property. Most likely following a court appearance.
All total, we're talking about roughly $20K...
Which would ratchet-up wildly once penalties are compounded, as well as your interest rates being sent into space. That 20k could easily hit 6-figures, depending on how nasty the creditors want to get.
Would my house be in jeopardy?
Possibly.
Could they garnish wages?
Yes.
Would anyone other than me and the CC companies find out?
Employers and potential employers check credit reports. Hell yes.
Is there a chance it would be written off as uncollectable?
Only if you are penniless and living out of a box on the highway. If you have a job, you're on the hook. But, if you can demonstrate real hardship, you might be able to negotiate payment.
posted by Thorzdad at 2:55 PM on December 9, 2010 [3 favorites]
Well, if there were a chance it would be written off as uncollectable, then I imagine there would be tons of people just throwing their bills in the trash.
Instead you hear stories about people going into complete ruin and utter despair. And a lot of desperate, debt-related questions on metafilter.
Ethics aside, it's probably not a good idea.
posted by sprezzy at 2:57 PM on December 9, 2010
Instead you hear stories about people going into complete ruin and utter despair. And a lot of desperate, debt-related questions on metafilter.
Ethics aside, it's probably not a good idea.
posted by sprezzy at 2:57 PM on December 9, 2010
A lot of the answers regarding collection of judgments (whether your house is safe, for example) are wholly dependent on what state you live in (at least in the US). In Texas, for example, they can't garnish your wages & your homestead is protected -- that is very much not the case in other states.
At a minimum, your credit will go to crap, you'll get bugged by collectors until you figure out how to write a letter to stop contact, you might be get sued. They'll eventually write the debt off (and sell it to a debt collection company), and you'll eventually be able to settle, but that probably won't help your credit score very much in the short term.
Spend $200 and go speak to an attorney in your jurisdiction for an hour. Stopping payment as you describe could be a good choice, but that depends on many factors (and, in particular, how your state treats debtors).
posted by seventyfour at 3:07 PM on December 9, 2010 [3 favorites]
At a minimum, your credit will go to crap, you'll get bugged by collectors until you figure out how to write a letter to stop contact, you might be get sued. They'll eventually write the debt off (and sell it to a debt collection company), and you'll eventually be able to settle, but that probably won't help your credit score very much in the short term.
Spend $200 and go speak to an attorney in your jurisdiction for an hour. Stopping payment as you describe could be a good choice, but that depends on many factors (and, in particular, how your state treats debtors).
posted by seventyfour at 3:07 PM on December 9, 2010 [3 favorites]
They have to get a judgment to put a lien on your property or garnish your wages, but only after they make you fairly miserable. Why not call them up, work out a deal, freeze the cards, and pay them back? $20K isn't actually all that much--not, in my opinion, worth ruining your credit for.
posted by Ideefixe at 3:08 PM on December 9, 2010 [2 favorites]
posted by Ideefixe at 3:08 PM on December 9, 2010 [2 favorites]
To be clear, there's a really good chance it will be written off as uncollectable by the original creditor. But that doesn't mean that the debt collector they sell it to at .25 cents on the dollar (and the debt collector that debt collector sells it to at .10 cents on the dollar) won't try and collect it.
posted by seventyfour at 3:08 PM on December 9, 2010 [2 favorites]
posted by seventyfour at 3:08 PM on December 9, 2010 [2 favorites]
On the off chance this isn't a hypothetical question: 20K isn't awful. People have paid off more, and MetaFilter's JDroth has a nice blog at getrichslowly.org with some inspiring stories, including his own.
Being grossly in debt has a lot in common with being overweight, and no small part of it is how scary it is to take the first step when the obstacle seems overwhelming.
So, just a thought.
And if it's a purely hypothetical question and I'm totally off topic, forgive me -- the answer to your question is 'you wouldn't like what they'd do to you.'
posted by A Terrible Llama at 3:13 PM on December 9, 2010 [1 favorite]
Being grossly in debt has a lot in common with being overweight, and no small part of it is how scary it is to take the first step when the obstacle seems overwhelming.
So, just a thought.
And if it's a purely hypothetical question and I'm totally off topic, forgive me -- the answer to your question is 'you wouldn't like what they'd do to you.'
posted by A Terrible Llama at 3:13 PM on December 9, 2010 [1 favorite]
It's been a while since I paid attention so my information may be out of date. Also, I am not a lawyer, even on the internet.
Your credit score will take a hit. You'll get "later than 30 days, and later than 60 days" dings for each card. You'll get harassing phone calls and letters. Your interest rate will also sky-rocket, meaning you'll quickly end up owing more and more money. If you do this with a few cards/debt but not others, your rates may go up on the other cards anyway.
If the credit card company decides to hand things over to a third-party collection agency to collect on their behalf, you'll get more phone calls and letters. Fear and intimidation will be used. Another ding will be put on your credit report for each unpaid account (I think it'll be labeled a "Collection Account"). These collection agencies can't sue you. However, they can hand the debt back to the original creditor, and then the creditor can sue you for non-payment.
If a third party agency can't collect, the creditor may sell your debt to an independent collection agency. You'll get more harassing phone calls and letters. These collection agencies will be more aggressive, as they've paid for the rights to collect from you. These collection agencies may also sue you for non-payment. They may sell your debt again if they think they can't collect. Each time your debt gets sold it's usually to a more aggressive collection firm. Some of these firms push the limits of what's legally allowed to be done to collect the debt or monazite the information gained when they purchased your debt. Telling them they can only legally call you once a day often doesn't work, as they're betting you won't go to the trouble of bringing action against them for it. (your social security number is known by each of these firms, as well as your debt history).
No one can seize anything or garnish any wages until there's been a legal decision against you. The companies involved tend to sue people who have assets that are worth seizing (house, steady paycheck). They don't publish how they decide who gets sued and who doesn't, but I'm sure there's a spreadsheet involved.
With the debt spread across four cards, your credit score will take a hit for each card. Each "ding" on your report can stay there for up to seven years. It's rumored (and seems reasonable) that a second, secret credit score is kept for each consumer to allow companies to make decisions in the future, even once the items leave your credit report.
If you have good credit and some home equity there are less sketchy/risky ways to game the system.
posted by alana at 3:14 PM on December 9, 2010 [1 favorite]
Your credit score will take a hit. You'll get "later than 30 days, and later than 60 days" dings for each card. You'll get harassing phone calls and letters. Your interest rate will also sky-rocket, meaning you'll quickly end up owing more and more money. If you do this with a few cards/debt but not others, your rates may go up on the other cards anyway.
If the credit card company decides to hand things over to a third-party collection agency to collect on their behalf, you'll get more phone calls and letters. Fear and intimidation will be used. Another ding will be put on your credit report for each unpaid account (I think it'll be labeled a "Collection Account"). These collection agencies can't sue you. However, they can hand the debt back to the original creditor, and then the creditor can sue you for non-payment.
If a third party agency can't collect, the creditor may sell your debt to an independent collection agency. You'll get more harassing phone calls and letters. These collection agencies will be more aggressive, as they've paid for the rights to collect from you. These collection agencies may also sue you for non-payment. They may sell your debt again if they think they can't collect. Each time your debt gets sold it's usually to a more aggressive collection firm. Some of these firms push the limits of what's legally allowed to be done to collect the debt or monazite the information gained when they purchased your debt. Telling them they can only legally call you once a day often doesn't work, as they're betting you won't go to the trouble of bringing action against them for it. (your social security number is known by each of these firms, as well as your debt history).
No one can seize anything or garnish any wages until there's been a legal decision against you. The companies involved tend to sue people who have assets that are worth seizing (house, steady paycheck). They don't publish how they decide who gets sued and who doesn't, but I'm sure there's a spreadsheet involved.
With the debt spread across four cards, your credit score will take a hit for each card. Each "ding" on your report can stay there for up to seven years. It's rumored (and seems reasonable) that a second, secret credit score is kept for each consumer to allow companies to make decisions in the future, even once the items leave your credit report.
If you have good credit and some home equity there are less sketchy/risky ways to game the system.
posted by alana at 3:14 PM on December 9, 2010 [1 favorite]
How about a home equity line of credit (HE-LOC)? (Assuming the credit score, job and equity in the house are all decent.) Pay off the credit cards with that, and you can have a pretty reasonable monthly payment on the HE-LOC with vastly lower interest rate than your credit cards.
posted by partylarry at 3:17 PM on December 9, 2010
posted by partylarry at 3:17 PM on December 9, 2010
Would anyone other than me and the CC companies find out?
If it advanced to the point where you have a court judgment against you, that's a matter of public record, and theoretically anyone could know. At one time, you typically had to drive down to the courthouse to get that info (or have access to a credit report), as more court systems put records online, this info is slowly becoming more accessible to the general public.
posted by gimonca at 3:18 PM on December 9, 2010
If it advanced to the point where you have a court judgment against you, that's a matter of public record, and theoretically anyone could know. At one time, you typically had to drive down to the courthouse to get that info (or have access to a credit report), as more court systems put records online, this info is slowly becoming more accessible to the general public.
posted by gimonca at 3:18 PM on December 9, 2010
While normally I'd post this advice as a PM, since you posted anonymously, I'll just toss it in here. I would repost this question on either creditboards forum or the fatwallet finance forum. Creditboards is populated by people that have dedicated themselves to "beating" the sytem, but often take unethical approached. At the fatwallet finance forum, you will probably get better advice on how to clean up your current situation by taking control of your finances without trying to "beat" the creditors through legal means.
posted by ShootTheMoon at 3:22 PM on December 9, 2010 [2 favorites]
posted by ShootTheMoon at 3:22 PM on December 9, 2010 [2 favorites]
Again assuming that this is not hypothetical, why not file for bankruptcy? If you are willing to just stop paying you CC bills, something that will be hugely detrimental to you for a long time, why not take the legal route? Bankruptcy will certainly affect your credit for the next few years, but I would think it would be easier to rebuild your credit if you travel that road.
posted by AlliKat75 at 3:29 PM on December 9, 2010 [1 favorite]
posted by AlliKat75 at 3:29 PM on December 9, 2010 [1 favorite]
Seriously?
Many (most?) credit card contracts these days allow the company to raise your interest rates, or otherwise modify the terms of your agreement, with very little provocation—such as a single late payment. This is quite deliberate—they lure you in with attractive terms, then bend you over and assrape you at the first excuse. And don't think you'll be able to spot this clause in your contract without a legal degree—the contracts are intentionally long and difficult to understand. All of this is standard operating procedure in the credit card industry these days.
(Card companies also deliberately time the mailing of bills to increase the likelihood that cardholders will make a late payment. For example, they'll send a bill right before a major holiday, such as Thanksgiving weekend, knowing that many people will forget or be too busy to pay before the due date.)
Especially once your interest rates start to rise, your debt can grow very rapidly. A few hundred dollars can become thousands or tens of thousands of dollars.
Your credit, of course, will be wrecked, which will limit your ability to rent or purchase property, get loans for e.g. home improvement projects and emergencies, and pass certain kinds of background checks.
The rest of my comment is based on the two years I spent working for a debt settlement company. (We negotiated with credit companies and collection agencies, on behalf of debtors, to establish repayment terms that worked for both parties.)
Once your account has been in default for a couple of years—meaning that you've made no payments whatsoever—the debt will likely be sold to a collection agency. (I think the cutoff was 22 months when I worked there, but I could be totally wrong.)
These companies purchase debt for pennies on the dollar—e.g., they'll pay $500 for the rights to a $5,000 debt—hoping that they can recoup some of the money owed on some of the debts. The top tier of collectors buy the freshest debts that are most likely to bear fruit. As debts age, they get sold off to lower and lower tiers of collectors. The bottom feeders might pay literally pennies for the lowest-rated debts.
I am definitely not a lawyer, but as I recall, neither the credit card companies nor the collection agencies can bring legal action against you (or, at least, it's exceedingly unlikely that they will, because the cost/benefit analysis simply doesn't work out in their favor—I don't recall which). They'll definitely threaten legal ruin, though.
If you secure the services of a debt settlement company, they will negotiate with your creditor (whether that's the original credit card company, or a collection agency) on your behalf. If you have $50,000 in debt, your debt settlement company might tell the creditor that you'll settle the debt for only $22,000, paid in a certain monthly installment over a certain period of time. And the creditor might agree, simply because they'd rather get some of the money back than none of it. (Of course, the debt settlement company will add their fee to the monthly payment.)
You can attempt debt settlement on your own—i.e., you can perform these negotiations yourself—but you're probably better off hiring someone who spends 40 hours a week driving hard bargains with creditors, and knows the legal and financial ins and outs.
The exact terms that you can get away with depend very much on your specific situation, and the nature of your debt. The longer you've gone without a payment, the more leverage you have with the creditor, and the more of a "discount" you can swing. My company wouldn't even take clients who had made recent payments on their debts - it didn't give our negotiators anything to work with.
Definitely check with an expert before you rely on any of this information. I'm relaying it faithfully as I recall it, but I may be misremembering some things, or the situation may have changed in the meantime. I was just a programmer there.
(Something else worth knowing: the minimum payments on your monthly statements are intentionally calculated to bleed the maximum profit from you. The companies know that most people will just pay the minimum payment every month. But if you actually amortize things out, you'll see that it can often take 40+ years to pay off a debt with minimum payments, with interest costs orders of magnitude larger than the original debt.)
posted by ixohoxi at 3:34 PM on December 9, 2010 [2 favorites]
Many (most?) credit card contracts these days allow the company to raise your interest rates, or otherwise modify the terms of your agreement, with very little provocation—such as a single late payment. This is quite deliberate—they lure you in with attractive terms, then bend you over and assrape you at the first excuse. And don't think you'll be able to spot this clause in your contract without a legal degree—the contracts are intentionally long and difficult to understand. All of this is standard operating procedure in the credit card industry these days.
(Card companies also deliberately time the mailing of bills to increase the likelihood that cardholders will make a late payment. For example, they'll send a bill right before a major holiday, such as Thanksgiving weekend, knowing that many people will forget or be too busy to pay before the due date.)
Especially once your interest rates start to rise, your debt can grow very rapidly. A few hundred dollars can become thousands or tens of thousands of dollars.
Your credit, of course, will be wrecked, which will limit your ability to rent or purchase property, get loans for e.g. home improvement projects and emergencies, and pass certain kinds of background checks.
The rest of my comment is based on the two years I spent working for a debt settlement company. (We negotiated with credit companies and collection agencies, on behalf of debtors, to establish repayment terms that worked for both parties.)
Once your account has been in default for a couple of years—meaning that you've made no payments whatsoever—the debt will likely be sold to a collection agency. (I think the cutoff was 22 months when I worked there, but I could be totally wrong.)
These companies purchase debt for pennies on the dollar—e.g., they'll pay $500 for the rights to a $5,000 debt—hoping that they can recoup some of the money owed on some of the debts. The top tier of collectors buy the freshest debts that are most likely to bear fruit. As debts age, they get sold off to lower and lower tiers of collectors. The bottom feeders might pay literally pennies for the lowest-rated debts.
I am definitely not a lawyer, but as I recall, neither the credit card companies nor the collection agencies can bring legal action against you (or, at least, it's exceedingly unlikely that they will, because the cost/benefit analysis simply doesn't work out in their favor—I don't recall which). They'll definitely threaten legal ruin, though.
If you secure the services of a debt settlement company, they will negotiate with your creditor (whether that's the original credit card company, or a collection agency) on your behalf. If you have $50,000 in debt, your debt settlement company might tell the creditor that you'll settle the debt for only $22,000, paid in a certain monthly installment over a certain period of time. And the creditor might agree, simply because they'd rather get some of the money back than none of it. (Of course, the debt settlement company will add their fee to the monthly payment.)
You can attempt debt settlement on your own—i.e., you can perform these negotiations yourself—but you're probably better off hiring someone who spends 40 hours a week driving hard bargains with creditors, and knows the legal and financial ins and outs.
The exact terms that you can get away with depend very much on your specific situation, and the nature of your debt. The longer you've gone without a payment, the more leverage you have with the creditor, and the more of a "discount" you can swing. My company wouldn't even take clients who had made recent payments on their debts - it didn't give our negotiators anything to work with.
Definitely check with an expert before you rely on any of this information. I'm relaying it faithfully as I recall it, but I may be misremembering some things, or the situation may have changed in the meantime. I was just a programmer there.
(Something else worth knowing: the minimum payments on your monthly statements are intentionally calculated to bleed the maximum profit from you. The companies know that most people will just pay the minimum payment every month. But if you actually amortize things out, you'll see that it can often take 40+ years to pay off a debt with minimum payments, with interest costs orders of magnitude larger than the original debt.)
posted by ixohoxi at 3:34 PM on December 9, 2010 [2 favorites]
Is there a chance it would be written off as uncollectable?
Not impossible, but it seems unlikely, given that in your situation you have income and assets to go after. Court judgment, garnishing wages would be a fairly standard way to proceed.
'Uncollectible' debts could end up as a P&L write-off if they are genuinely uncollectible (like, the person is in a coma, disappeared, fanatically stubborn, etc.) and the amount is small enough that the company or collection agency would lose money on the deal by taking legal action. If putting an actual lawyer on it, filing court papers, and so on is more expensive than the amount you owe, they'd be idiots to do it. This seems unlikely in your hypothetical case.
(Me: Former credit professional, not a lawyer, not legal advice, this is all hypothetical anyway.)
posted by gimonca at 3:37 PM on December 9, 2010
Not impossible, but it seems unlikely, given that in your situation you have income and assets to go after. Court judgment, garnishing wages would be a fairly standard way to proceed.
'Uncollectible' debts could end up as a P&L write-off if they are genuinely uncollectible (like, the person is in a coma, disappeared, fanatically stubborn, etc.) and the amount is small enough that the company or collection agency would lose money on the deal by taking legal action. If putting an actual lawyer on it, filing court papers, and so on is more expensive than the amount you owe, they'd be idiots to do it. This seems unlikely in your hypothetical case.
(Me: Former credit professional, not a lawyer, not legal advice, this is all hypothetical anyway.)
posted by gimonca at 3:37 PM on December 9, 2010
It floors me that anyone, in this day and age, can think that just walking away from bills would not lead to consequences. Seriously? Have you been living under a rock for the last ten years? Even for the last two?
It sucks to be in debt. A lot. I would rather be in jail than in debt. So I feel for you if this is anything other than hypothetical.
See a non-profit consumer credit counselor and/or attorney. File bankruptcy if you must (and can) but don't just not pay - it's much worse from a day-to-day misery stand point that way. Dodging creditors is hellish beyond belief.
posted by FlamingBore at 4:16 PM on December 9, 2010 [2 favorites]
It sucks to be in debt. A lot. I would rather be in jail than in debt. So I feel for you if this is anything other than hypothetical.
See a non-profit consumer credit counselor and/or attorney. File bankruptcy if you must (and can) but don't just not pay - it's much worse from a day-to-day misery stand point that way. Dodging creditors is hellish beyond belief.
posted by FlamingBore at 4:16 PM on December 9, 2010 [2 favorites]
I have some knowledge in this area, by association.
You can stop paying your credit cards, or the ones you want to write off. If you have mortgages on your home, this becomes priority #1. Plus heat and other necessities. Pay your other bills! Then stop answering your phone. Seriously, don't pick up anything you don't know for sure is a friend.
Keep a file of all the letters. Once it gets to collection agents, they will likely call your parents and possibly your neighbors. You should instruct them to tell the caller that they don't know you and not to call again.
Most important: see a lawyer and begin bankruptcy proceedings. In my state, they can't take your home or the car you use to get to work. If you don't have any expensive toys or second homes or anything like that, you are probably okay.
You will not be able to get credit cards for the foreseeable future, which can hamper your life. Debit cards will work for online stuff, but some hotels and car rentals will actually require a credit card. Don't expect to get a loan from anywhere for anything for a long long time.
posted by RedEmma at 4:30 PM on December 9, 2010
You can stop paying your credit cards, or the ones you want to write off. If you have mortgages on your home, this becomes priority #1. Plus heat and other necessities. Pay your other bills! Then stop answering your phone. Seriously, don't pick up anything you don't know for sure is a friend.
Keep a file of all the letters. Once it gets to collection agents, they will likely call your parents and possibly your neighbors. You should instruct them to tell the caller that they don't know you and not to call again.
Most important: see a lawyer and begin bankruptcy proceedings. In my state, they can't take your home or the car you use to get to work. If you don't have any expensive toys or second homes or anything like that, you are probably okay.
You will not be able to get credit cards for the foreseeable future, which can hamper your life. Debit cards will work for online stuff, but some hotels and car rentals will actually require a credit card. Don't expect to get a loan from anywhere for anything for a long long time.
posted by RedEmma at 4:30 PM on December 9, 2010
I just stopped paying on a predatory private student loan when I was a student and basically unemployed (I worked low paying part time jobs, off and on). It was "charged off", and, for whatever reason, they never sent it to collections. It fucked up my credit pretty good- it just dropped off, in fact, so it took a year longer than a bankruptcy would have to go away. (From the time I stopped paying, through the nasty phone calls, the charge off, and finally the falling off my credit report, total was just over 11 years.) In hindsight, it was okay, because I had no real income or assets to go after. On the other hand, I had to pay 11% on a car loan.
I second talking to a lawyer. It sounds like bankruptcy would be a better option for you because you have things like a paycheck and house that you want to protect. Which is essentially what bankruptcy is for.
posted by Leta at 4:43 PM on December 9, 2010 [1 favorite]
I second talking to a lawyer. It sounds like bankruptcy would be a better option for you because you have things like a paycheck and house that you want to protect. Which is essentially what bankruptcy is for.
posted by Leta at 4:43 PM on December 9, 2010 [1 favorite]
I'm assuming you're in the US.
If you don't mind living on a cash basis, and you have no assets for them to take, there's not a lot they can do to you, actually, other than sue. They often don't sue if the debt is smallish (per creditor), but that entirely depends on the particular card issuer and which debt collector ends up with the charged off account.
The best course of action in your situation, if you're in a position where you really can't continue to pay your credit cards is to declare bankruptcy immediately. As in before you stop paying the cards. After you declare BK, they can't put lates on your report, so it's much easier to rebuild credit later. It also helps if you have a card or two paid off or with low enough balances that you can keep paying (affirming the debt, they call it) and not have those particular debts discharged, because you keep some good history through the whole ordeal.
By the way, it's against the law for them to continue to report a bad debt for longer than 7 years, so you can correct situations like the one Leta had. That date is calculated from the date of last activity on the account, so it's 7 years from the first missed payment. Obviously, creditors and credit bureaus (and especially the scumbag collection agencies that by the debt) often try to screw you on this, but the law is on your side. Also, once the account is charged off, they can no longer add interest/fees (aside from legal fees incurred in the process of suing you), although the scumbag CAs and junk debt buyers often try to do so.
Of course, these days you actually have to qualify for chapter 7, which is unfortunate for you if you have a job that pays more than the median income in your state. There are tools online which can help you make a first pass at figuring out whether you'd qualify.
Generally, just ignoring the creditors and not paying the bills is the worst thing to do, as you end up with lots of lates showing up on your report, which is worse than the bankruptcy itself.
The other problem you'll run into after stiffing a particular creditor is that they're highly unlikely to extend you credit in the future. Even though the account can't be put on your credit report anymore, the credit card companies will keep a record of the fact you stiffed them, and will often require you pay them back before they'll extend you credit again.
Seriously. Creditors by and large don't give a shit about bankruptcies, because they know you can't declare again for 10 years. You won't get the best rates, and in this environment it might be harder to get credit, but definitely not impossible. You can usually get a new mortgage after only 2 or 3 years if you can explain how you got in the situation that caused you to declare and why it's not likely to happen again. Having a job and the bills not being medical in nature makes it harder, but not impossible.
And don't listen to people who say it's unethical. If your debt is an unreasonable burden, there's no shame in declaring bankruptcy. There's also nothing wrong with using the law and the CRA's procedures to clean up your credit report. If you think the banks and the CAs and the JDBs don't use legal and extralegal means to attempt to get you to pay the debt, I've got a bridge to sell you.
The only way it's unethical, to my mind, is if you opened the accounts with the intention of stiffing the creditor.
posted by wierdo at 5:27 PM on December 9, 2010
If you don't mind living on a cash basis, and you have no assets for them to take, there's not a lot they can do to you, actually, other than sue. They often don't sue if the debt is smallish (per creditor), but that entirely depends on the particular card issuer and which debt collector ends up with the charged off account.
The best course of action in your situation, if you're in a position where you really can't continue to pay your credit cards is to declare bankruptcy immediately. As in before you stop paying the cards. After you declare BK, they can't put lates on your report, so it's much easier to rebuild credit later. It also helps if you have a card or two paid off or with low enough balances that you can keep paying (affirming the debt, they call it) and not have those particular debts discharged, because you keep some good history through the whole ordeal.
By the way, it's against the law for them to continue to report a bad debt for longer than 7 years, so you can correct situations like the one Leta had. That date is calculated from the date of last activity on the account, so it's 7 years from the first missed payment. Obviously, creditors and credit bureaus (and especially the scumbag collection agencies that by the debt) often try to screw you on this, but the law is on your side. Also, once the account is charged off, they can no longer add interest/fees (aside from legal fees incurred in the process of suing you), although the scumbag CAs and junk debt buyers often try to do so.
Of course, these days you actually have to qualify for chapter 7, which is unfortunate for you if you have a job that pays more than the median income in your state. There are tools online which can help you make a first pass at figuring out whether you'd qualify.
Generally, just ignoring the creditors and not paying the bills is the worst thing to do, as you end up with lots of lates showing up on your report, which is worse than the bankruptcy itself.
The other problem you'll run into after stiffing a particular creditor is that they're highly unlikely to extend you credit in the future. Even though the account can't be put on your credit report anymore, the credit card companies will keep a record of the fact you stiffed them, and will often require you pay them back before they'll extend you credit again.
Seriously. Creditors by and large don't give a shit about bankruptcies, because they know you can't declare again for 10 years. You won't get the best rates, and in this environment it might be harder to get credit, but definitely not impossible. You can usually get a new mortgage after only 2 or 3 years if you can explain how you got in the situation that caused you to declare and why it's not likely to happen again. Having a job and the bills not being medical in nature makes it harder, but not impossible.
And don't listen to people who say it's unethical. If your debt is an unreasonable burden, there's no shame in declaring bankruptcy. There's also nothing wrong with using the law and the CRA's procedures to clean up your credit report. If you think the banks and the CAs and the JDBs don't use legal and extralegal means to attempt to get you to pay the debt, I've got a bridge to sell you.
The only way it's unethical, to my mind, is if you opened the accounts with the intention of stiffing the creditor.
posted by wierdo at 5:27 PM on December 9, 2010
I paid off a little more than $20,000 in CC debt over the past 2 years. Of course that meant working my ass off (at one point working 2 full time jobs back to back (16hr days - 7days a week for 6months )). I was paying, on average, about $1000/month. So its totally doable, its hard hard work,... But you'll feel much better about yourself for not simply walking away from it.
posted by jmnugent at 5:33 PM on December 9, 2010
posted by jmnugent at 5:33 PM on December 9, 2010
first off, i have no ethics (well everyone has some)
I sort of did this. I had a rental property go bad and was losing it to foreclosure - it sold in the nick of time, but anyways... my credit cards were maxed, mostly from trying to keep up on said property payments. i had 2 huge ones maxed out, and it took about 6 months but i would take every phone call and call back on every message. i'd ask for a special settlement - they would offer 70% at first, later 50% and at the 6 month mark they went to where i had heard they'd settle for.
one card i owed 23k and got off for $6500 i think (citibank) the other was tougher, 21k for $7500 (MBNA).
this was in 2009, on taxes i should have paid tax on the debt forgiveness as it's income, but there is a special act if you are insolvent (broke) where you can deduct up to a million dollars one time. it's called 'The Mortgage Forgiveness Debt Relief Act and Debt Cancellation '
i had my own residence, car payments and other stuff i did not default on. one year later, i just leased a 2010 lexus as my credit has rebounded nicely. also, my wife recently got a new amex card.
posted by thilmony at 6:39 PM on December 9, 2010
I sort of did this. I had a rental property go bad and was losing it to foreclosure - it sold in the nick of time, but anyways... my credit cards were maxed, mostly from trying to keep up on said property payments. i had 2 huge ones maxed out, and it took about 6 months but i would take every phone call and call back on every message. i'd ask for a special settlement - they would offer 70% at first, later 50% and at the 6 month mark they went to where i had heard they'd settle for.
one card i owed 23k and got off for $6500 i think (citibank) the other was tougher, 21k for $7500 (MBNA).
this was in 2009, on taxes i should have paid tax on the debt forgiveness as it's income, but there is a special act if you are insolvent (broke) where you can deduct up to a million dollars one time. it's called 'The Mortgage Forgiveness Debt Relief Act and Debt Cancellation '
i had my own residence, car payments and other stuff i did not default on. one year later, i just leased a 2010 lexus as my credit has rebounded nicely. also, my wife recently got a new amex card.
posted by thilmony at 6:39 PM on December 9, 2010
Well. You'd have a min. of 7 years of hell.
I did this when I was 22 after hell of a month: I lost my job, my car was stolen and torched, my father was homeless due to legal issues, my friend died and also went through a huge break up.
I ignored collection notices and calls for a year or two.
Then what happened was:
-Sheriff showed up at my work with a subpoena
-Went to court twice
-Had all my money withdrawn from my bank account for unpaid student loans
-Unable to open a checking account for a long time
-Court order approved to take 29% of my paycheck (on top of health insurance and taxes)
-Unable to get credit cards for emergency purposes (or otherwise) (makes furnishing a ew home almost impossible)
-Unable to finance a car
-Denied a position at work because of past bad credit
-Unable to be on an apartment lease (I always subleased or the lease was in someone elses name)
-Extra deposits for things like cell phones
-Unable to rent cars because lack of a credit card
I'm 30 now and most of this has fallen off my credit reports. It's been a very hard road with crappy credit. I blame no one else but myself.
posted by KogeLiz at 6:42 PM on December 9, 2010 [3 favorites]
I did this when I was 22 after hell of a month: I lost my job, my car was stolen and torched, my father was homeless due to legal issues, my friend died and also went through a huge break up.
I ignored collection notices and calls for a year or two.
Then what happened was:
-Sheriff showed up at my work with a subpoena
-Went to court twice
-Had all my money withdrawn from my bank account for unpaid student loans
-Unable to open a checking account for a long time
-Court order approved to take 29% of my paycheck (on top of health insurance and taxes)
-Unable to get credit cards for emergency purposes (or otherwise) (makes furnishing a ew home almost impossible)
-Unable to finance a car
-Denied a position at work because of past bad credit
-Unable to be on an apartment lease (I always subleased or the lease was in someone elses name)
-Extra deposits for things like cell phones
-Unable to rent cars because lack of a credit card
I'm 30 now and most of this has fallen off my credit reports. It's been a very hard road with crappy credit. I blame no one else but myself.
posted by KogeLiz at 6:42 PM on December 9, 2010 [3 favorites]
Written off as uncollectable does the debtor no good. If they ever decide to check and see that you could pay it off, they can just un-write it off. That's something they do in their books, not as a courtesy to you.
Just not paying is mighty close to deadbeat territory. File for bankruptcy or suck it up and pay it off. It will affect your credit for longer and you will basically be stuck in cash-only land. This might seem fine, you aren't planning on financing a pit group any time soon, so who cares, right? Think about sillier things. Try buying a call phone. You are stuck with go-phones, or sending them a deposit. Try refinancing the house. Tough luck. Job changes could be troublesome, depending on the industry, because some places don't want people with debt problems working for them.
If you don't mind people calling you, your family, your workplace and your friends, and don't mind ignoring really nasty letters (but remembering to pay attention to the important nasty letters), you might get away with it. But you are talking about nearly a 10 year committment.
Thilmony makes some good suggestions.
posted by gjc at 6:51 PM on December 9, 2010
Just not paying is mighty close to deadbeat territory. File for bankruptcy or suck it up and pay it off. It will affect your credit for longer and you will basically be stuck in cash-only land. This might seem fine, you aren't planning on financing a pit group any time soon, so who cares, right? Think about sillier things. Try buying a call phone. You are stuck with go-phones, or sending them a deposit. Try refinancing the house. Tough luck. Job changes could be troublesome, depending on the industry, because some places don't want people with debt problems working for them.
If you don't mind people calling you, your family, your workplace and your friends, and don't mind ignoring really nasty letters (but remembering to pay attention to the important nasty letters), you might get away with it. But you are talking about nearly a 10 year committment.
Thilmony makes some good suggestions.
posted by gjc at 6:51 PM on December 9, 2010
one thing about my incredible story is I had cash from selling the rental property to offer for negotiating... but you know, 6 months of not paying $500-800 a month on the CC's might make it easy to save up.
i always felt like i was just talking to a call center rep who had no say in it, but i was hoping an analyst was looking it over.
they would want me to commit to a payment today, i would say "i have $5000 i can offer you to settle today, but i will not use it to pay 10 $500 payments"
then later, i would pay off other CC's i was still paying on. i had a home depot account i owed $3000 on. home depot credit is run by citi, so i told them "hey i told you i have some money to settle, i just sent $3k to home depot". i felt like i was negotiating smart but i really wonder if it mattered.
posted by thilmony at 6:56 PM on December 9, 2010
i always felt like i was just talking to a call center rep who had no say in it, but i was hoping an analyst was looking it over.
they would want me to commit to a payment today, i would say "i have $5000 i can offer you to settle today, but i will not use it to pay 10 $500 payments"
then later, i would pay off other CC's i was still paying on. i had a home depot account i owed $3000 on. home depot credit is run by citi, so i told them "hey i told you i have some money to settle, i just sent $3k to home depot". i felt like i was negotiating smart but i really wonder if it mattered.
posted by thilmony at 6:56 PM on December 9, 2010
You need to go talk to a bankruptcy attorney. A few hundred bucks to get the correct advise.
posted by Flood at 7:00 PM on December 9, 2010
posted by Flood at 7:00 PM on December 9, 2010
A lot of this is wrong and/or the product of folks who did not know the law, their rights, and the logistics of collection. There is a bundle of federal law regarding this issue, as well as state specific stuff.
Get an attorney in your area. Pay for good advice in the form of consultation... a few hundred bux worth. Decide on the outcome you want; i.e. a massive renegotiation of your balances, paid off over time at lower interest or none. Find out the mechanics of achieving that, and who can help you do it.
Unless you learn what the law is, what they actually can do (some of the above is incorrect), what your rights and options are, you shouldn't take any action. Study it for a month or two, then act. Don't act in ignorance. The advice you are getting here so far may be tainted by experience issues, jurisdictional issues, and may be out of date. New laws apply these days. Get more reliable info than that from Metafilter. It's a good place for hypothetical, and generally a wonderful place, but not the place for definitive answers on a topic like this, with major personal implications.
posted by FauxScot at 8:12 PM on December 9, 2010 [3 favorites]
Get an attorney in your area. Pay for good advice in the form of consultation... a few hundred bux worth. Decide on the outcome you want; i.e. a massive renegotiation of your balances, paid off over time at lower interest or none. Find out the mechanics of achieving that, and who can help you do it.
Unless you learn what the law is, what they actually can do (some of the above is incorrect), what your rights and options are, you shouldn't take any action. Study it for a month or two, then act. Don't act in ignorance. The advice you are getting here so far may be tainted by experience issues, jurisdictional issues, and may be out of date. New laws apply these days. Get more reliable info than that from Metafilter. It's a good place for hypothetical, and generally a wonderful place, but not the place for definitive answers on a topic like this, with major personal implications.
posted by FauxScot at 8:12 PM on December 9, 2010 [3 favorites]
Here in Austin there are bankruptcy attorneys all over the place that will give you a free consultation, give you a sense of what you're up against, what your best options are, what they would/will do to help you, should you decide to go with them. I don't think they're doing this for the fun of it, probably a lot of people who walk in their door hire them to do the deal, after the ins and outs of their situation are laid out.
I know you're not asking about bankruptcy in this thread, but fact is you could ask the attorney about this idea of just not paying, also, and what the repercussions of that would be, and which would/will be better for your particular situation.
Just to re-iterate what someone upthread said, don't hesitate to utilize the laws which are laid out for you to use. There's no shame to it, it's there to help you when you're in over your head. And you may not be the best judge of whether you're over your head or not; probably an attorney would be able to give you logical advice, unclouded by any emotional hangovers you might be having about these issues.
posted by dancestoblue at 12:24 AM on December 10, 2010
I know you're not asking about bankruptcy in this thread, but fact is you could ask the attorney about this idea of just not paying, also, and what the repercussions of that would be, and which would/will be better for your particular situation.
Just to re-iterate what someone upthread said, don't hesitate to utilize the laws which are laid out for you to use. There's no shame to it, it's there to help you when you're in over your head. And you may not be the best judge of whether you're over your head or not; probably an attorney would be able to give you logical advice, unclouded by any emotional hangovers you might be having about these issues.
posted by dancestoblue at 12:24 AM on December 10, 2010
gjc wrote: " If they ever decide to check and see that you could pay it off, they can just un-write it off. That's something they do in their books, not as a courtesy to you."
Ever? No. There is a thing called the statute of limitations. In many states, credit card issuers have to sue within three years of the date of default. Some have five or seven year statutes of limitations on credit card debt, though. If they fail to do so, you have an affirmative defense against any future lawsuit. That does not, however, mean that you can throw the papers in the trash. You still have to raise the defense.
Debts don't dog you forever in the US. (at least not until there's a judgment against you!)
posted by wierdo at 7:39 AM on December 10, 2010
Ever? No. There is a thing called the statute of limitations. In many states, credit card issuers have to sue within three years of the date of default. Some have five or seven year statutes of limitations on credit card debt, though. If they fail to do so, you have an affirmative defense against any future lawsuit. That does not, however, mean that you can throw the papers in the trash. You still have to raise the defense.
Debts don't dog you forever in the US. (at least not until there's a judgment against you!)
posted by wierdo at 7:39 AM on December 10, 2010
I happened to notice the "we" in your question:
"mortgage but we have some equity"
If you're married (and possibly even if you're domestic-partnered), there's a good chance that this could ruin your spouse's credit, too. If you do get a consultation with an attorney, I'd be sure to ask about how your choices might affect anyone else you're married or partnered to.
posted by kristi at 11:05 AM on December 11, 2010
"mortgage but we have some equity"
If you're married (and possibly even if you're domestic-partnered), there's a good chance that this could ruin your spouse's credit, too. If you do get a consultation with an attorney, I'd be sure to ask about how your choices might affect anyone else you're married or partnered to.
posted by kristi at 11:05 AM on December 11, 2010
If you really do ignore the credit card bills, get ready for the collectors to unleash hell on you and the lives of everyone they can connect you to.... in other words, your immediate family members.
My cousin got into some major credit debt, and decided to just ignore the warnings from the banks. For a few years, collection agencies would call ME relentlessly (several calls a day) asking for my cousin. I would give them the usual "Wrong number" or "I don't know him" responses, but I would just receive another call about an hour later. Btw, telling them to "Take me off your list" does not work, in fact I think it just encourages them. It's probably not legal for them to do so, but they will keep doing it repeatedly, because they know only a fraction of people they harass are actually going to take the time to sue them.
So, in addition to the phone calls... you better believe they show up in person. They will knock on your door at any time of day or night and make your life a living hell. They will make sure all of your neighbors hear them pounding on your door for a LONG time. They will scream your name at the top of their lungs, adding, "I KNOW YOU'RE IN THERE!" and so forth. Do you really want this kind of scene in front of your house for everyone to see? It happened to me thanks to my cousin.
Not only will they bother you in person... but everyone they can connect you to. They know how to find your relatives and friends. And believe me, they will bother THEM in person as well, at their homes, asking for YOU. Thanks to my cousin, my mother was harassed by a debt collector at MIDNIGHT at her own home. He pounded on the front door mercilessly until my mom called the cops. Do you really want your mother or any relative to go through that? You have no idea how angry I am at my cousin for letting it go that far. Pretty much unforgivable...
posted by fac21 at 3:04 AM on December 12, 2010
My cousin got into some major credit debt, and decided to just ignore the warnings from the banks. For a few years, collection agencies would call ME relentlessly (several calls a day) asking for my cousin. I would give them the usual "Wrong number" or "I don't know him" responses, but I would just receive another call about an hour later. Btw, telling them to "Take me off your list" does not work, in fact I think it just encourages them. It's probably not legal for them to do so, but they will keep doing it repeatedly, because they know only a fraction of people they harass are actually going to take the time to sue them.
So, in addition to the phone calls... you better believe they show up in person. They will knock on your door at any time of day or night and make your life a living hell. They will make sure all of your neighbors hear them pounding on your door for a LONG time. They will scream your name at the top of their lungs, adding, "I KNOW YOU'RE IN THERE!" and so forth. Do you really want this kind of scene in front of your house for everyone to see? It happened to me thanks to my cousin.
Not only will they bother you in person... but everyone they can connect you to. They know how to find your relatives and friends. And believe me, they will bother THEM in person as well, at their homes, asking for YOU. Thanks to my cousin, my mother was harassed by a debt collector at MIDNIGHT at her own home. He pounded on the front door mercilessly until my mom called the cops. Do you really want your mother or any relative to go through that? You have no idea how angry I am at my cousin for letting it go that far. Pretty much unforgivable...
posted by fac21 at 3:04 AM on December 12, 2010
Oh yeah, I should add that I had to change my cell and home phone numbers earlier this year, just because I was getting so many calls from debt collectors calling for my cousin. They were still calling my phone numbers SEVERAL times a day.
posted by fac21 at 3:11 AM on December 12, 2010
posted by fac21 at 3:11 AM on December 12, 2010
This thread is closed to new comments.
Then, they would slap a monthly fee on the card in addition to the balance. Then they would raise your interest rate to 25% or so, and they'd throw that stuff on the balance month after month. Eventually, they might take you to court, but in the meantime your credit would be ruined.
If something happened, and you needed a loan, you couldn't get one. You wouldn't be able to get a loan for a car.
In short, they would punish you long and hard and if you were lucky after ten or so years (after doing all of the above) there's a remote possibility that you simply would have no credit as opposed to the abysmal credit you'd have for the previous decade.
Pretty much covers it.
posted by A Terrible Llama at 2:51 PM on December 9, 2010 [3 favorites]