Credit card debt can be a serious problem, with the ease of using credit cards making it easy to build up more debt than you can afford to pay. Unfortunately, credit card companies have a legal right to pursue repayment that can last for years. Depending on the amount of time that has passed since your last credit card payment, the credit card company may even take legal action against you in an attempt to recover their money.
Internal Collection Attempts
The first option available to credit card companies when credit card debts aren't paid is to attempt to collect the unpaid debt directly. The creditor may contact the debtor by mail or by phone, attempting to get him to submit a payment or agree to a repayment schedule for the entire amount owed. The unpaid debt is reported to credit bureaus based on the amount of time that has passed since the debtor's last credit card payment was received, and if the debt remains unpaid, the debtor's credit privileges may be suspended or canceled.
Selling the Debt
A common option for creditors who have not been able to collect overdue credit card debts is to sell the debt to a third-party debt collection agency. The creditor recovers some or all of their money by selling the debt, while the collection agency gains a legal right to pursue the debt for collection. A collection agency that has purchased a debt may negotiate installment payments with the debtor, offer to change the amount owed and take legal action as though it was the original creditor if the debt remains unpaid.
Legal Action
A creditor may file a civil lawsuit against a debtor if collection attempts to recover unpaid credit card debt prove unsuccessful. The lawsuit will seek damages equal to the amount of the debt owed and may add legal fees or other expenses to the amount as well. The creditor must provide proof that the debt is owed and that collection attempts have failed. If the judge hearing the suit finds in favor of the creditor he may order that the debt be paid in full or establish a payment plan for the debtor.
Wage Garnishment
When a creditor successfully sues a debtor for the amount of their credit card debt and the debtor is unable to pay, a judge may order a garnishment of the debtor's wages until the debt has been paid. This garnishment takes money directly from the debtor's paycheck and turns it over to the sheriff or district attorney, who then distributes it to the creditor in regular payments. Any wage garnishment is taken from the money owed to the debtor in his paycheck before he receives it, ensuring compliance with the court order.
Property Seizure
In rare cases, a judge may rule that real estate or other property can be seized and sold to recover the money owed to creditors. The property seized may be a secondary piece of real estate other than the debtor's primary home or other physical property that has a significant value to it. Seizure orders are typically only issued when the amount of credit card debt owed is exceptionally high and when the seizure of the property will not leave the debtor destitute.
Limitations
Though there are several methods available to creditors in regards to collecting credit card debts, there are limitations on these methods. Each state places a statute of limitations on the filing of legal suits for unpaid debts, limiting the amount of time that a creditor has to take legal action. Additionally, certain types of income such as disability benefits and welfare cannot be garnished to recover unpaid credit card debts. Creditors making threats of legal action or harassing debtors may also be subject to fines or other penalties under federal law.
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