Financial question

[mattocs]

What does happen when you stop paying your credit cards other than negative things on your credit report? What if the person has no assets? (ie. house was just bought recently and has no real equity and cars are also financed?)

Sure, the lender could take them to court, but how could a judge make them pay back more than a few dollars a month if they are struggling to just to put food on the table and pay basic utilities? Put them in jail...?...but then they'd stop making payments on their home, cars, etc.

Sure, you could say consolidate, but that requires decent credit. Usually when one would just let credit cards and such go, they are at a point where they could not get a loan to do this.

I have known several people who did this (illness, loss of jobs, etc) and they pretty much just were not able to get credit for like 7 - 10 years...and even some were able to start getting credit cards again after 5 or 6 years.


So what really does happen when you just stop paying your credit cards?

 

[waggy]

sure you can do what you posted but why? if you can afford to pay them off do it.

 

[mattocs]

Originally posted by: waggy
sure you can do what you posted but why? if you can afford to pay them off do it.

No, thats my point. What if one could just not do it? Minimum payments cannot be done.

Putting priority on the house and cars comes first, then basic utilities and food.

Getting a loan is not an option, and a neither is a better paying job.

I am not saying this is happening to me...but it seems to be happening to so damn many people I know...I am just curious what happens.

 

[intogamer]

Collection Agency

 

[mattocs]

Originally posted by: intogamer
Collection Agency

I understand that...but what could they do? Court seems silly...how can you make someone pay money they don't have?

 

[HyTekJosh]

garnishment of future wages

 

[xeemzor]

Originally posted by: HyTekJosh
garnishment of future wages

The legal expense and risk isn't worth it to most companies, and most will be willing to settle for a revised payment plan if you call them up and explain your difficulties. They would rather still get money from you at a lower amount per month than take you to court. The most I see them doing is hurting your credit score unless you really have a significant amount of debt.

 

[rocadelpunk]

maybe force you to file for bankruptcy?

dunno

 

[kranky]

When you come right down to it, they can only ruin someone's credit report for 7 years from the last activity on the account.

But a collection agency can get a judgment. The interest continues to pile up. Once the judgment is granted, a lien can be filed against any asset, wages can be garnished and bank accounts can be seized. The number of years a judgment is enforceable depends on the state, and some states allow judgments to be renewed.

While the judgment is on the credit report, mortgages and loans are probably out of the question. Insurance may be hard to get as well.

So just looking at the 7 years of credit report problems is not necessarily the worst of it. In order to avoid paying a judgment, it might be necessary to job-hop for many years to avoid wage garnishment while owning no assets or having a bank account. That would be a tough way to live.

 

[mattocs]

Originally posted by: kranky
When you come right down to it, they can only ruin someone's credit report for 7 years from the last activity on the account.

But a collection agency can get a judgment. The interest continues to pile up. Once the judgment is granted, a lien can be filed against any asset, wages can be garnished and bank accounts can be seized. The number of years a judgment is enforceable depends on the state, and some states allow judgments to be renewed.

While the judgment is on the credit report, mortgages and loans are probably out of the question. Insurance may be hard to get as well.

So just looking at the 7 years of credit report problems is not necessarily the worst of it. In order to avoid paying a judgment, it might be necessary to job-hop for many years to avoid wage garnishment while owning no assets or having a bank account. That would be a tough way to live.

Yeah, thats what I was thinking...but it just leads more problems...then people would let a house go into foreclosure, etc.

 

[spidey07]

Originally posted by: mattocs

Originally posted by: kranky
When you come right down to it, they can only ruin someone's credit report for 7 years from the last activity on the account.

But a collection agency can get a judgment. The interest continues to pile up. Once the judgment is granted, a lien can be filed against any asset, wages can be garnished and bank accounts can be seized. The number of years a judgment is enforceable depends on the state, and some states allow judgments to be renewed.

While the judgment is on the credit report, mortgages and loans are probably out of the question. Insurance may be hard to get as well.

So just looking at the 7 years of credit report problems is not necessarily the worst of it. In order to avoid paying a judgment, it might be necessary to job-hop for many years to avoid wage garnishment while owning no assets or having a bank account. That would be a tough way to live.

Yeah, thats what I was thinking...but it just leads more problems...then people would let a house go into foreclosure, etc.

They'll get their money. Unless you file bankruptcy (if you can actually prove it). Even then the recently passed legislation on bankruptcy means you're gonna get it up the rear anyway.

 

[mattocs]

Originally posted by: spidey07

Originally posted by: mattocs

Originally posted by: kranky
When you come right down to it, they can only ruin someone's credit report for 7 years from the last activity on the account.

But a collection agency can get a judgment. The interest continues to pile up. Once the judgment is granted, a lien can be filed against any asset, wages can be garnished and bank accounts can be seized. The number of years a judgment is enforceable depends on the state, and some states allow judgments to be renewed.

While the judgment is on the credit report, mortgages and loans are probably out of the question. Insurance may be hard to get as well.

So just looking at the 7 years of credit report problems is not necessarily the worst of it. In order to avoid paying a judgment, it might be necessary to job-hop for many years to avoid wage garnishment while owning no assets or having a bank account. That would be a tough way to live.

Yeah, thats what I was thinking...but it just leads more problems...then people would let a house go into foreclosure, etc.

They'll get their money. Unless you file bankruptcy (if you can actually prove it). Even then the recently passed legislation on bankruptcy means you're gonna get it up the rear anyway.

Yeah...but even fileing bankruptcy costs money.

So the moral is: Don't be poor?

 

[spidey07]

Originally posted by: mattocs

Yeah...but even fileing bankruptcy costs money.

So the moral is: Don't be poor?

No. The moral of the story is don't be an idiot with your finances.

You can be making 200 grand a year and still have to claim bankruptcy, all you have to do is rack up a ton of debt.

I see it all the time with kids coming out of college waking up in their late 20s, making decent money and they say "What happened? Why is bankruptcy my only option?"

 

[mattocs]

Originally posted by: spidey07

Originally posted by: mattocs

Yeah...but even fileing bankruptcy costs money.

So the moral is: Don't be poor?

No. The moral of the story is don't be an idiot with your finances.

You can be making 200 grand a year and still have to claim bankruptcy, all you have to do is rack up a ton of debt.

I see it all the time with kids coming out of college waking up in their late 20s, making decent money and they say "What happened? Why is bankruptcy my only option?"

well, this comes from a situation my friend is in.

He grew up to fast. Got married young, bought a house young...doing all fine. Not making great money, but had money and etc. Then his wife had some awful back injury...they had heath insurance...but she couldn't work...so they went like 6 months without her income....which hurt, because she made more money than he did. So they tried to get money from family, etc...but it didn't work. They had to use CCs and etc. So, now, when his wife got a new job...it does not pay as much, and they are left with all this CC debt, which is like $20 from the limits. Min payments, high interest = going no place.

So sometimes, it isn't just from people spending money on cars, boats, woman, drugs, etc.

 

[spidey07]

Originally posted by: mattocs
well, this comes from a situation my friend is in.

He grew up to fast. Got married young, bought a house young...doing all fine. Not making great money, but had money and etc. Then his wife had some awful back injury...they had heath insurance...but she couldn't work...so they went like 6 months without her income....which hurt, because she made more money than he did. So they tried to get money from family, etc...but it didn't work. They had to use CCs and etc. So, now, when his wife got a new job...it does not pay as much, and they are left with all this CC debt, which is like $20 from the limits. Min payments, high interest = going no place.

So sometimes, it isn't just from people spending money on cars, boats, woman, drugs, etc.

*SMACK*!!!!!!

That is what you call living beyond your means.

I am sorry for your sister's injury. But if the loss of her income for a few months means they were already on the downward spiral of debt and financial hardship. It sounds like it isn't too late to help them. (ie, live within your means).

 

[JEDI]

Originally posted by: mattocs
What does happen when you stop paying your credit cards other than negative things on your credit report? What if the person has no assets? (ie. house was just bought recently and has no real equity and cars are also financed?)

Sure, the lender could take them to court, but how could a judge make them pay back more than a few dollars a month if they are struggling to just to put food on the table and pay basic utilities? Put them in jail...?...but then they'd stop making payments on their home, cars, etc.

Sure, you could say consolidate, but that requires decent credit. Usually when one would just let credit cards and such go, they are at a point where they could not get a loan to do this.

I have known several people who did this (illness, loss of jobs, etc) and they pretty much just were not able to get credit for like 7 - 10 years...and even some were able to start getting credit cards again after 5 or 6 years.


So what really does happen when you just stop paying your credit cards?

declare bankrupcy.

last year, b4 the credit crunch of sublime loans, you could have gotten a credit card within months after discharging your debt. now banks actually *gasp* care about your credit in making a decision.

 

[PokerGuy]

Normally what happens is, if you don't pay that unsecured debt, the creditor will try to obtain a judgement against you. Assuming they do, they can try to use the judgement to collect, but how they can go about doing that differs a lot by state. For example, in TX and FL, they can't take your house or even things in the house (in FL you could probably have a $1 Million painting hanging on the wall and they could not touch it), your vehicle etc etc. In other states, they can pretty much take everything, though most (all?) states limit the amount of the wages they can garnish to 25% of the gross wage per month.

They can also usually take anything in a bank account titled to the debtor, which means you'd have to set up an account in someone else's name (other than the debtor on the CC's) to be able to use an account.

Basically, it's a mess, but it depends on where you live how big of a mess. Bancruptcy is pretty much meant for situations like the one you described, but it's not pleasant either.

 

[rh71]

file4bankruptcy