What Happens If I Walk Away From My Credit Card Debt?

If you have used credit to purchase a home, buy a car or purchase personal items, chances are you have debt. Financial burdens such as job loss, child support payments or medical expenses could made it difficult for you to meet the minimum payments on all your combined debts. Some consumers have considered simply walking away from their credit card debt. Before you take this route, you should know the ramifications of this decision.

Damaged Credit

When you miss a credit card payment or submit a late payment, this information appears on your credit report and can reduce your credit score. If you decide to walk away from a credit card debt, your credit card lender may report your card as a charge-off or collection. Charge-offs and collections can decrease your score even more than missed payments. A damaged credit score can take years to repair and may affect your ability to purchase a home, get a new job or obtain new credit.

Lawsuits

Many credit card lenders forward your account to a lawyer for collection. The collection lawyer typically files a lawsuit against you for the amount of debt that is owed on your account. The total amount you owe may be increased by attorney fees and court costs.

Judgments

If you cannot effectively dispute a lawsuit, the court will issue a judgment against you in favor of the creditor. Judgments stay on your credit report and your permanent record until they are resolved. In most states, the judgment issued by a court has no statute of limitations and can be collected at any point in the future. A judgment in the creditor's favor allows the creditor or the creditor's attorney to continue to pursue you for payment of an unpaid credit card balance.

Garnishments

If the creditor wins a judgment against you in court, it may be entitled to garnish your wages. A wage garnishment means the creditor is entitled to take a portion of your income directly from your employer's payroll. Wage garnishment takes away your choice of whether to pay the creditor.

Liens

If a judgment is issued against you, and you do not have income or wages that can be garnished for repayment, a creditor may place a lien on your personal property. Liens can be placed against real estate, businesses and personal property such as a vehicle or business equipment. Before you can sell or transfer any personal or business assets, you may be required to pay off the lien first.