Dealing With Unpaid Debts.
Consequences of unpaid debts
When financial hardships arise, you need to understand the consequences of the different types of debts and how they can be affected if they are not paid. Below will explain briefly of what can happen if either secured or unsecured debts are not paid.
Secured Debts
These debts are backed by collateral, which is property that can be seized in the event that the debt goes unpaid. Here are examples of what can happen if secured debts are not paid:
- Secured Credit Cards - If these are are not paid the card issuer who has control of your collateral (savings deposit) can seize your savings and suspend your rights to charge on that card in the future.
- Home Mortgage - If you should happen to fall behind on your mortgage payments the lender can seize your home (foreclosure). All current and future equity accumulated in the property would now belong to the mortgage lender.
- Car Loan - If you fall behind on you car payment the bank or financial institution has the right to legally repossess your car without your permission.
Unsecured Debts
If your unsecured debt goes unpaid, like credit cards, department store cards and medical bills, three basic things can happen:
- Cancellation of your credit charging privileges. What this means is that you will not be able to use your credit cards or credit for purchasing items or services. All charging privileges are terminated.
- Damage to your credit rating. Most collections agencies will tell you that your credit will be ruined unless you make a payment to them. If you are behind on your payments, the creditor that you owe money to has already reported your late payments to the credit bureaus. Therefore,your credit has already been damaged from non payment of the credit credit card bills
- Being sued for unpaid debt. Most creditors and collection agencies use this tactic to scare the consumer into paying the unpaid debt. Litigation is expensive and most creditors and collection agencies cannot afford this expense. other threats you may hear from creditors or collection agencies are, "we are going to garnish your wages and seize your home or car and sell it at an auction in order to pay the unpaid debt off", In order for creditors to garnish your wages, seize your home or car, they must file suit in court, obtain a judgment and court order. This process could take months and threats like these are illegal without a signed court order.
If you have unsecured credit card debt click the link below and one of our credit counseling experts will contact you to discuss how how we can help you pay off the debt and get you on the path to financial freedom.
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