It’s not always easy to keep a track of the bills you have to pay every month. Especially if you are living from paycheck to paycheck and your expenses are exceeding your income then paying off your debt does become overwhelming. Not having your finances sorted can drain your budget and this leads to missed or delayed payments. In such a situation, if you haven’t been able to pay your bills for a long time then you should expect some unwanted calls from your debt collectors.
Now, if you think that debt collectors give up easily, you are wrong! This is exactly what their job is, they have to constantly remind the borrower to make the payments and they don’t just let it go. In simpler words, not paying your collectors is definitely not an option!
Consequences Of Not Paying Your Debt Collectors
Ignoring the calls or ignoring your pending bills will have several consequences. Pending payments aren’t something collectors let go easily and in the long run, not paying will cause more damage than what you can imagine.
1-It Will Severely Damage Your Credit Score
Your credit score is something that you shouldn’t take a risk with. With a poor credit score, you will face several challenges like, you won’t get a credit card or a loan easily (if you do, it will come with a high interest). Moreover, your housing or renting will also have a negative impact if your score is low. What happens is that when you have a long pending bill history, your creditor will either assign or sell it to a debt collector and that’s where things get complicated. Your account will show “in collection” and it will stay on your report for at least 6 years ultimately reducing your score.
2-The Phone Calls Will Never Stop
A debt collector has all the right to pursue the debt on behalf of your creditor. In other words, they have the right to call you again and again until you answer their call and clear your debt. Yes, these collectors have to follow some boundaries set by the provincial and federal legislation like they aren’t allowed to harrass you, they can only call during some specific hours of the day and there can’t be any misrepresentation or disclosure.
3-They Can Take The Legal Route And Sue You
The worst case scenario is that if you don’t pay your debt, your original creditor or the debt collector can take legal action against you and sue you for your pending payments. If you don’t fight the case and have no justification then the court can take out a judgement against you which allows the collector to use an even aggressive approach to collect the pending payments.
For example, if the court accepts that you have outstanding debt, the collector can garnish your wages which means he can directly cut the amount from your paychecks. If you somehow end up in this situation, the wiser thing to do is to fight in your defense and take legal aid or hire a collection attorney. This will help you save a lot of money and you won’t have to worry about paying the court fee.
4-Seizure Of Property Or Frozen Bank Accounts
It keeps getting scarier right? Well, it definitely is something you need to worry about and instead of just ignoring your debt collector, you should do something about the outstanding balance. If not, you’ll have to face asset seizure. Your collector can seize your property or simply block the payments coming into your accounts until you clear the debt or at least file for insolvency.
5-Your Debt Will Continue To Grow
The longer you wait to pay your debt, the more expensive it will become. The interest on your debt will keep piling up and on top of that, all the late or missed payments penalties will apply to your loan and it will just increase the amount.
6-Contacting Your Friends And Family
This is probably the last thing you’d want to happen. No one in their right mind would want their friends or family to find out about their debt and the fact that they can’t pay it off. Well, guess what? Debt collectors may even use this approach when you aren’t cooperating with them. They have the legal right to call your loved ones and find out your information. They can’t ask someone from your contacts to pay off your debt until they’ve cosigned a loan with you.
7-The Right Of Offset
Most of the financial institutions and banks have mentioned it in their debt collection clauses that they can take the money out of your savings account or cheque without even requiring a court order. This is what the right of offset means that the company you owe your money can withdraw any unexpected amount from your account which can lead to insufficient funds too.
How To Deal With Debt When You Can’t Make The Payments
If you really are struggling with a financial crisis and can’t really afford to pay the loan back then instead of ignoring your debt collectors, you need to take action. Fortunately, there are multiple ways through which you can get out of this situation. Starting with;
1-Debt Settlement
If you can’t deal with the debt and have a 5 to 6 months record of missed payments then you can apply for debt settlement. It basically is an agreement where you request your creditor to forgive a certain percentage of your loan and accept the partial payment to mark your debt as “paid”. Yes, it’s a long route, it requires consistency and patience but if you play strategically, you can actually become debt-free.
In debt settlement, you either contact your creditor yourself or hire a debt relief company to do the job for you. The only important consideration here is that you need to have an authentic and valid reason to apply for debt settlement. It should be convincing for your creditor that you really can’t afford to pay the complete amount so you would like to pay at least a half of it.
2-Apply For Bankruptcy
If you are crushing under debt and want to start over then bankruptcy is the solution for you. It’s one of the last resorts that people often opt for when they’ve had enough. Just know that even filing for bankruptcy comes with a cost. The cost depends on multiple factors like where you live, what your income is, the amount of debt you owe and the assets you have. However, you should expect to pay around $1500 to $6000 roughly.
Furthermore, you should know about the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 states the liquidation of your non essential property/assets to pay your creditor and Chapter 13 states that you’ll a more feasible monthly payment plan as per your income. You’ll have to stick to that plan and pay the dues as per the deal. In both cases, you’ll be paying something to your creditor so it will be a win-win for both the parties.
The Final Word
Back to the question, is it possible to just get out of debt without paying your collector? Well, unfortunately the clear answer is “no”. Even if you are hardwired to ignore the calls from your collectors and even if they give up on you, you won’t be marked “debt-free”. In fact, things can take an even worse turn if someday the collectors come back with a plan to get their money. So before you face such unwanted consequences, it’s better to find a way, face your collector and get out of debt.
FAQs
Q1. How Much Debt Is “Serious”?
Your debt to income ratio determines how serious your debt is. It basically is your monthly debt obligation compared to your monthly income. If the ratio is above 43%, as too much debt and you need to do something about it.
Q2. Can You Go To Jail For Not Paying Collections?
Fortunately, no! You can’t go to jail just because of some outstanding debt that you can’t afford. It can only happen if you get sued by your creditor and you just fail to appear in court or fail to comply with the court orders.
Q3. Can Collections Go Away Without Any Payment?
Well, no, a debt doesn’t come with an expiry date and it can’t just disappear until you pay it off. In some states, collectors and creditors have a time limit on how long they can take a legal action against you.
Are you tired of all the debt collection calls and don’t really know the way out? Try Mountains Debt Relief to get the best assistance on how to become debt-free.