If you have unsecured debt that is delinquent, such as credit card debt, your creditors have certain rights they can execute for the collection of the debt. These collection activities are normally performed by a third-party debt collector. When you fall past due, contact your creditors immediately to make arrangements. This will stop your creditors in most cases from taking action against you. Sometimes you can negotiate favorable arrangements that fit your budget. You may be able t negotiate a settlement for less than your balance.
Judgment
When your debts fall past due your unsecured creditors can seek legal action. They can file a claim with the court and have a trial date set. You will receive a notice in the mail, called a writ of summons, information you of the date, location and time of the trial. If the creditor receives judgment against you they will begin to actively pursue efforts to collect your past-due account.
Credit Report
Your creditor can report this information on your credit report as a collection account, which remains in place for seven years. This will lower your credit score and make it more difficult to get approved by other creditors. If you are able to get approved, you will have to pay higher interest rates for credit products.
Lien
An unsecured creditor can have a lien placed on your real estate property. When the lien is filed with the court it must be paid off if you decide to refinance your mortgage balance or decide to sell your home. The lien will be paid from the proceeds of the sale. This process can vary from state to state.
Bank Levy
After a judgment is received an unsecured creditor can attach your bank account with a levy. A levy will freeze all or a portion of the funds in your account. The funds will then be applied to your outstanding balance. If you share this account with another account holder they will not be able to access the funds.
Wage Garnishment
An unsecured creditor can have your wages garnished. The amount of money taken varies, but it is usually about 25 percent of your disposable income. They can continue to take money out of your paycheck until the debt is paid.
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