What Can Creditors Do to You?

Don't think that a creditor is powerless when you default on an account. Creditors have rights to recover money owed to them. If you fall behind on payments due to financial hardship, communication can keep your credit rating in good standing. If not, creditors can take various actions to obtain delinquent funds.

Collection Agency

If creditors do not receive a payment after a few months, they will most likely refer your account to a collection agency and notify the bureaus of the collection account. This notation lowers your credit rating and the collection account remains a part of your credit history for the next seven years. Paying a collection account does not remove it from your credit history.

Court Hearing

Creditors give debtors plenty of time to pay a collection's account before filing a lawsuit with a court to collect the debt. Going before a judge in a hearing can bring on further credit damage because the verdict may result in a judgment on the debtor's credit report. Like collection accounts, judgments remain for seven years and decrease credit ratings. Attending a court hearing can serve a debtor's advantage if he does not owe the creditor and can provide evidence of this. The judge listens to both sides and then makes an informed decision based on evidence presented.

Wage Garnishment

Debtors with previously bad credit may express little concern over a credit judgment, and make no plans to settle the judgment. Given the circumstance, creditors can submit a petition to enforce a credit judgment and obtain a wage garnishment order. A wage garnishment helps creditors recover monies owed from a judgment verdict. A sheriff serves employers with the order from the court, and employers subtract a specific amount from the debtor's paycheck.

Bank Lien

If a creditor does not have information on the debtor's employer, but has banking information for the debtor, creditors can skip wage garnishment and petition the court for authorization to seize or put a lien on the debtor's bank account. Bank liens freeze the account, and creditors can lay claim to funds deposited into the account. Some funds, such as unemployment compensation, alimony and child support, are exempt from bank liens. However, debtors must deliver evidence of exempted funds to have a lien released by the creditor.