What Happens When Someone Stops Paying a Debt?

You won’t go to jail for not paying your debts on time, but this wasn’t true in the not-too-distant past. From the late 17th century to the early 19th century, states and cities in the United States operated debtors’ prisons. These were facilities created to house people who failed to pay their debts. In some cases, the debts they owed were very small.

These days, the story is quite different. The United States federal government has banned debtors’ prisons since 1833. So, what will happen if you fail to pay your debts in the modern era?

Let’s take a brief look at the cycle of events that will take place if you fail to pay your credit card debts:

When your debts are 30 days late: After your debts are past due by 30 days, you will normally receive some kind of contact from the creditor, either by email, letter or phone. Do not try to avoid this contact. Read the email or letter and talk to the person who calls.

These calls are not typically very demanding. Your creditors just want to let you know that you’re late and that they’re aware you’re late.

When your debts are 60 days late: When your debts are 60 days late, you have probably missed two payments. You’ll start to see the financial consequences, such as an increase in your interest rates or an assessment of late fees.

The calls at this point will not be demanding, but creditors probably will call you and see what they can do to help you get back on track.

When your debts are 90 days late: Here, you’ve missed three payments. Your credit card will probably stop working, as the bank will shut it down. You will then be asked to pay your balance in full. Your debt may also be referred to or even sold to a third-party debt collection company not long after the 90-day mark.

Once a debt collection agency gets a hold of your debt, the phone calls you receive will probably become increasingly more harassing. The debt collection agency might even file a lawsuit to try and get your wages garnished to collect on the debt.

What should you do if creditors are harassing you?

If a creditor is harassing you, or filing lawsuits against you, there’s one important thing to remember: Don’t panic. You cannot go to jail for not paying your debts. Yes, a court might rule to garnish your wages. But even in those cases, you can still seek a resolution of your debt through bankruptcy. A qualified bankruptcy attorney should be consulted right away to find a resolution to your debt situation as quickly and cost-effectively as possible.