Is Credit Card Debt Enforceable?

Credit cards are a form of consumer loan or unsecured loan. While unsecured loans are valid, enforceable debts, they are not backed by any form of collateral, which can make collection difficult in the case of default. What it boils down to is that in many states, the credit card company has no recourse except to report your nonpayment to the credit bureaus (which will hurt your credit rating).

Secured Loans Vs. Unsecured Loans

A secured loan, like a mortgage or a car loan, is backed by some form of collateral, such as a car or house, but an unsecured loan (often also called a signature loan or consumer loan) is only backed by the reputation and credit rating of the borrower. Credit cards are the most common type of unsecured loans.

Credit Card Debt is Valid, Legally Enforceable Debt

Just because credit card debt is unsecured does not mean it is not a valid debt. Credit card debt is a valid and legally enforceable contractual obligation. However, in some states, there is no legal recourse other than reporting the nonpayment to the credit bureaus, as even if you get a judgment for the unpaid debt, you cannot garnish wages or seize real property or funds from a bank account for unsecured personal debt -- like you can for back child support, tax debt, student loans and certain other types of debt.

Getting a Legal Judgment Against a Debtor for the Amount Owed

In some states, it is legally possible for credit card companies to get a judgment for defaulted credit card accounts, and the judgment is enforceable with garnishment or seizure, but they rarely do this due to the expenses and the fact that most of the time the individuals involved have few to no assets to seize, making the whole process a waste of time and money.

Other Legal Issues Including Full Disclosure

In most countries, including the U.S. and U.K., credit card companies are required to fully disclose all fees and interest charges on consumer accounts. However, there have been cases in which credit card companies intentionally hid various charges from their account holders, and courts have generally ruled that accounts in which hidden fees were charged were not enforceable debt -- i.e., the account holder did not have to pay.