What Happens If I Don’t Pay My Credit Card Debts?
This article is posted under Personal Finance.What will happen if you don’t pay your credit card debts? Will you go to jail because of it?
These and a lot of other questions about credit cards have been answered below, courtesy of a credit card officer which I had the opportunity to interview.
Due to the sensitivity of the topic, the credit card officer, who currently works in one of the largest banks in the country, requested me to make his/her identity anonymous.
Moreover, he/she says that the answers provided are solely based from his/her knowledge and may differ from how other banks conduct their business. Thus, one should NOT consider the information below as an absolute fact that applies to all cases.
Lastly, please be guided that the answers given in this article is NOT intended to replace the advice of your financial adviser or legal council.
And with that disclaimer said, let’s now go to the credit card questions.
What happens if I don’t pay my credit card debts?
When you default on your payment, the bank will flag you as a delinquent card member. They will call you to remind you to pay.
If you continue your non-payment, the calls will be more frequent until you reach a pre-determined number of missed payments. After which the bank will dismiss your case and turn your account over to a collection agency.
The collection agency is not a part of the bank. They are a third-party business who buys the delinquent accounts. The collection agency will now take over the responsibility of convincing you to pay your credit card debt. Whatever they collect from you becomes their profit.
You said collection agencies BUY the delinquent accounts?
Yes, the bank sells the accounts to them. This will minimize the bank’s loss. The costs (legal and otherwise) that will incur if the bank continues to pursue the delinquent account can be expensive. Asides, it’s not worth their time anymore – that’s a simple way to explain it.
Furthermore, the bank cannot just freeze and take the money in your savings account to pay for those debts. They would need to have a court judgment against you to make it legal for them to do that. And that will again, cost them money and can take a long time.
So what happens when your account is turned over to a collection agency?
Then it just remains there. The collection agency will do their best to convince you to pay because that’s how they will make money.
I know there are a lot of horror stories when it comes to credit card debt collection. That’s a sad reality that many people around the world actually experience. The best thing to remember is that all those are just empty threats so stay calm and don’t worry.
Will I really go to jail if I don’t pay my credit card debt?
No. That’s the most honest answer I can give you.
To my knowledge, nobody has ever gone to jail for not paying their credit card debts. Why? Because incurring debt is not considered a criminal act. Of course, this is assuming that you just simply failed to pay your credit card debts for whatever reason.
It’s important to know that circumstances will be different if you have issued a check or has signed a contract because a bouncing check or a breach of contract can be turned into a criminal case such as estafa.
That’s why some collection agencies will try to make you issue checks or sign a payment agreement because that could give them legal grounds to file a real case against you.
How about my credit history?
Not paying your credit card debt will reflect badly on your credit history. Which means it will be difficult for you to acquire a loan when you need one.
Aside from that, some companies do check the credit history of their job applicants so a bad credit history may affect you if you’re looking for employment.
Honestly, there’s no definite list of ways how a bad credit standing can affect you negatively but trust me, it can and it will.
There is some good news though. Your bad credit history will actually not remain in your record forever.
It will be erased after several years BUT NOT because you’ve been “forgiven” but because the computer database is close to full already and it needs to purge some old data.
And with higher capacity computers becoming more available nowadays, the time it will take for your bad credit history to disappear can and will become longer.
So what is the worst case scenario if I don’t pay my credit card debts?
The worst case scenario is that first, you would have to live by cash for the rest of your life. Thinking of buying a house or a car someday? Then start saving for it now because chances are, you won’t be able to get a loan from any bank.
Secondly, you would have to deal with calls, letters and threats from credit card collection agencies for a very long time. Sure you can just ignore them but they do find ways to involve your family and friends in the situation.
I think personally, that’s the worst part of not paying your credit card debts – having to deal with the worry and unnecessary burden that collection agencies can possibly bring your loved ones. That is personally something that my conscience can’t take.
Thank you for your time, any advice to my readers?
Always be conscious of your credit card spending and be smart with your finances.
But if unfortunately, circumstances work against you and you find yourself deep in credit card debt – then my advise is really not to worry.
Be honest and tell your family and friends regarding your situation so they can offer a support system. And lastly, consider the option of getting a financial planner to help you fix everything.
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This post is part of the article collection, All About Credit Cards. Start improving your finances today and subscribe to Ready To Be Rich.
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Photo credit: Andres Rueda and vipez
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Hi, my name is Fitz and this is my blog on personal finance.
I must admit, I have a pending loan with which I have not yet paid since I still don’t have a job. My daily earnings right now is not almost even with my expenses.
Anyway, they keep on calling me before and telling me that they investigate if I really don’t have the capacity to pay, as well as they will cease my valuable things and others.
I keep telling them to that they are very much welcome to my place and check, but they did not come.
So, my advise to everyone with the same problem is to tell the truth and be ready to prove it. They should also update the company so that they will not feel that you just want to escape from your responsibility.
And yes, be honest to your family members and friends about it. But of course, choose the ones who you think can help. Some of them may just be adding your problems by telling it to everybody, which may ruin your image.
This is great information Fitz! I keep only one credit card with a low credit limit. If I decide to pay it all in one month, I can easily do it. This way, I can control my spending. I don’t want to be caught in any downward spiral involving credit card debts.
thnx for the advise on this issue…
thanks for sharing!
this is like “Killing me softly””…
Very informative. I’m really trying to eliminate my credit card debt now. I never liked being in debt.
Very nice article
Like others who have read this–I am trying to rise from my poor financial choices when I was younger
I am currently paying my cc but still struggling.
May I re-post your article at my blog?
With link to this post, as well as a proper acknowledgment to the author and this site.
Thank you!
It’s tempting to NOT pay your debts and learn to live with it…But the reality is, it is much harder to face yourself in the mirror knowing that you owe someone and you didn’t pay him what he is due. In my opinion, I’d rather pay it and learn a thing or two about taking care of my own finances than living a life of constant worry and hiding away from collectors. Running away from debts is not a way to live a financially abundant life.
Hi Fitz, nice interview there. Since I have a background on credit cards, definitely, no one will get into jail because of non-payment of credit card debts. Why? The case that you are going to face for non payment is what you call “SUM OF MONEY”. It is a civil case and not a criminal case so you won’t be jailed. This is in contrast if you have bounced checks which is a criminal case and that’s what you call BP22 or Batas Pambansa 22.
However, even if you did not get into jail because of non payment of credit card debts, you will surely be blacklisted if you are availing a loan or a credit such as housing loan, car loan, etc. This is because as you have said, the bank already put your name into the deliquent accounts and all banks share their database of delinquent ascounts.
Also, yes, the bank will turn over the deliquent account to a collection agency which is not part of the bank. These agencies usually get paid if and only if they were able to collect payment from the debtor. Thus, their service is called “no cure, no pay” basis.
does it mean that you can pay a minimal amount (not the amount demanded from you) just to give tell them that you wont run away from your unpaid credit?
Thank you everyone for sharing your thoughts.
@Lani – sure, thanks for asking.
Thank you for this article Fitz.Finally, my questions about what will happen if i don’t pay is answered. I cant ask my friends because Im afraid…afraid that they would make chismis about my credit card problem. It’s not that ” i dont want to pay”…but we have financial problems now. I have 3 kids & my husband’s salary is just enough for our monthly expense. We wanted to settle our accounts but the collection agency is demanding us to pay in full… & we cant do that.
Some even say that it will appear in NBI records if we dont pay. Is it true?
the article is very enlightening. but what does someone do if a collection agency persists in collecting even if the debt has been settled years ago?
this has happened to me. in the latter part of the 1990s, i settled all my credit card debts incurred under bankard. now after these many years, this collection agency sent me a letter urging me to pay up or else they would haul me to court. this they followed up with a phone call. i have told them that i have already settled that account but unfortunately i misplaced the documents proving that the debt has already been paid up. what can i do under the circumstances? please help…thanks a lot.
Hi, very informative. Thank you very much.
I was reading inquirer’s articles and i encountered the “Credit Info Database” article posted last 1/28/10… i just want to share it. here’s the link…
http://business.inquirer.net/money/columns/view_article.php?article_id=249990
How long does a bank keeps the record of their delinquent accounts?
A person with bad credit history can’t get loans from banks, does it include the Pag-ibig Housing Loans and the SSS housing loans?
thanks again
Reminds me of the “Shopaholic” movie!
Nice site.
No one can be imprisoned from debt, know the distinction of civil obligation from estafa.
http://panyero.net/nakulong-sa-utang/
First, when you apply for a credit cards, there is something that if you can’t pay your debt on your credit cards they will have something to get your things.
Fitz, what advice do you have for those who are looking to repair their credit?
One thing that was not mentioned here is if the debt is significant enough, sometimes the credit card company will pursue legal action (instead of selling to a collection agency). If they do this, the consumer will receive a court summons. If a judgement is place on the debt by a judge, then you can run the risk of your checking account being garnished (which basically means the creditor can take the money out without your permission) or your paycheck will be garnished. So, it’s not always cut and dry where the creditor just sells it to a collection agency. Some of them will come after you legally for the money.
Warning! Credit Card Collection Scam in the Philippines:
http://www.equalizerpost.com/2009/12/warningcredit-card-scam-in-philippines.html
Debt collectors have been the most complained-about people in the credit card business.And abuses by out-of-control collectors appear to be getting worse.
Domingo and Molaer Collection Harassment!
http://www.equalizerpost.com/2010/01/domino-molaer-dealing-with-debt.html
Well it is true that you won’t go to jail if you don’t pray your credit card debt.
However bear in mind that according to the Access Devices Regulation Act of 1998 (Republic Act No. 8484) “A cardholder who abandons or surreptitiously leaves the place of employment, business or residence stated in his application for credit card, without informing the credit card company of the place where he could actually be found, if at the time of such abandonment or surreptitious leaving, the outstanding and unpaid balance is past due for at least ninety (90) days and is more than Ten thousand pesos (P10,000), shall be prima facie presumed to have used his credit card with intent to defraud.”
So in other words you can somehow be imprisoned for credit card debts ! But technically speaking you are imprisoned here because of the presumption of “fraud” and not really for non-payment of credit card debt. (As guaranteed by the 1987 constitution article 3, sec. 20 that nobody shall be imprisoned for debt)
After a long months of non-paying of personal loan to the bank way back last quarter of 2008, the account been transferred to a different collection agencies / lawfirms. Receives demand letters, but there’s this one agency who handled the account recently who’s text stating they’ll publish the account’s photo on newspaper . Is it legal for a lawfirm agencies to publish your photos on newspaper for the unpaid personal loan (P33,000 included the long overdue interest) without proper court litigation?
Thanks for the information. I’m in a bad credit card situation now and i’m afraid to tell it to my family. i want to solve it on my own.
Filing cases in court based on 10K or above loan is not an option collection agencies would take because the filing fee for a case in court is much higher than that. Got this info from a contractor pal of mine. He got a demand letter from a lawyer with a threat of a court case. Never did happen because the contested amount was not worth the cost of full blown court case. And the threat of publishing your name or account for unpaid debts is again an empty threat in my opinion. Its like putting you in on trial by publicity. I don’t think any paper would entertain those things without legal basis. If this is indeed possible then a lot of papers would be publishing those bad debtors … again without factoring legality of such action the cost of publishing just to make you pay is not at all feasible. Again getting a court order to freeze or take your personal bank deposit or personal items from your home or very home even is a very complicated legal process but then again there are lawyers who actually make a living out of this and are very resourceful. So if the amount is considerable then the lawyers of those collection agency would indeed work hard to get that court order. To be in a bad credit listing is really a hassle once you try to get a loan. An office mate of mine who even after she paid off her credit card was unable to get a loan from a bank. She was denied because her name was still in the bad credit listing. And it was almost a year when she already settled her debt with her credit card. Its like a bad dream only difference is it haunts you when your awake.
Stop Credit Card Collection Harassment In The Philippines!
http://www.equalizerpost.com/2010/03/stop-unfair-credit-card-collection.html
Thank you for the very informative post, i am also a recipient of a demand letter from Domingo & Molaer Law Offices that was sent to me last March 2009. However, until today after applying for a checking account with my bank I was informed that I have been flagged for bad credit made in 2000 until I settle it and show proof or certification coming from the bank they will not give me a checking account and it will also be subject for approval of the branch manager. My card is under Bankard, and I remember very well that during that time I was able to negotiate with the collecting agency to pay only the principal if I do it within the same day which I did. Unfortunately like Jun, I have lost all of the documents since I’ve been married since and moved out my parents house.
This incident happened years ago and I can say I have matured financially and been able to be debt free since I’ve been married 8 years ago. I am planning to put up my own business now and these bad credit history will be a problem esp. in my application for a checking account which I need instead of exchanging cash, application for credit to create bigger opportunities for my business…etc. Like I said, this was years ago and financially different right now…even if they check on my current credit card standing they will see that I always settle by account before its due date. I would like to erase this bad credit history rating, any advice will be greatly appreciated.
Thank you!
Just wondering,what should i do if the credit card company failed to dispute unauthorized transaction?I was billed almost P72k on my acct,victim of fraud..coordinated with the bank and the merchant already but it is still under investigation though.So scared on what to do,if it won’t be disputed.Any advice?tnx.