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Debt Management Law News

July 27, 2010

Laws on Defaulting on Credit Card Debt

1. Defaulting on credit card debt can feel scary and do serious harm to your credit rating, according to Bankrate and Experian. However, if you honestly incurred a debt and couldn't pay it, you cannot go to any type of "debtor's prison." Learning what can and can't happen if you don't pay your bills as agreed is an important objective that can help protect your finances even during difficult times.

Lawsuits

2. You won't be sued for being a month or two late on your credit card account, according to Bankrate. However, once your account "charges off," after about six months, and is deemed uncollectable, your credit card lender or a hired collection agency might sue you in your local civil court. Not every credit card default results in a lawsuit; people under the age of 40, those with assets such as a home or those who work a steady job are much more likely to be sued for credit card debt. If you are served with a lawsuit, you can go to court and try to work out the situation to avoid potential financial problems.

Wage Garnishments and Tax Refund Considerations

3. No matter how much money you owe, a creditor can't just arbitrarily take part of your wages, according to Bankrate and the Michigan State Courts website. A representative must first successfully sue you in civil court and then file for a garnishment order. A judge may grant the credit card company or its collection agency the right to garnish a percentage of your wages until the debt and any reasonable legal costs are repaid. The percentage that a creditor can seize and how quickly it can do so depends upon your state of residence. In Michigan, a lawsuit winner must wait at least 21 days to file a request for wage garnishment. The amount garnished depends upon the type of debt. A credit card company sometimes can legally take part or all of your state tax refund.

Negative Credit Reporting

4. Under the Fair Credit Reporting Act (FCRA), your credit card company can legally report your defaulted debt for seven years from the date of your first missed payment, according to Experian. If a collection agency picks up your bad debt, it also can add a negative report for seven years from the date of that first missed payment. If you are successfully sued for a credit card debt, that "judgment" entry will be on your credit report for seven years from the date of the lawsuit verdict. Paying the court, credit card company or collection agency will not remove the negative marks from your credit reports; the negative notation will remain but should be marked as paid. A paid negative entry usually hurts your credit standing as much as an unpaid one.

www.ehow.com

Sometimes, debt can be overwhelming, and bankruptcy becomes necessary.
Bankruptcy can sometimes be difficult. If you are considering bankruptcy, contact the Houston bankruptcy lawyers of Weston & Associates, PLLC at 713-623-4242


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