Stressed woman with credit cards.

What To Do If You Miss A Credit Card Payment

If you miss a credit card payment, it is important to know that not all creditors handle delinquent accounts in the same way. 

Typically, if you miss a payment, your creditor will start to call you. They will want to find out if you merely forgot or if something bigger is going on.  Many people avoid answering these calls because they are afraid of the consequences.

Charge Offs

Bigger problems start to occur if you have missed six payments or go 180 days past due.   At this point, the creditor is most likely going to “charge off” the account.  Many people have heard this term, but they aren’t really sure what it means.  

The basic definition of a "charge-off" is a debt that is deemed uncollectable by the creditor and removed from their balance sheet. 

The biggest misconception with charge offs is that debtors may think that because the creditor wrote the debt off they don’t owe it any longer.  This is simply not true. 

 

You still owe the debt and it can still accrue interest and fees. 

The confusion doesn’t stop there.  When a creditor charges off a debt, they may:

  • Keep the debt in their own collections department and attempt to collect the debt from you.
  • Hire a collection agency and pay them a portion of the debt they collect from you.  
  • Sell the debt to another company that will try to collect from you. 

As an example, you owe $5,000 and the creditor sells it to a collection agency for $2,500. You still owe the $5,000. In this case, the first creditor is happy to get something, and the second creditor hopes to collect more than $2,500. 

Legal Action

A creditor or collection agency may sue you in court.  If you receive a Summons and Complaint from a creditor, you need to read and respond to it.  If you don’t, you will be in default and could possibly have your wages or bank account garnished.

Statute of Limitations

Another factor that borrowers may lose sight of is the “statute of limitations” for collecting a debt.  This varies from state to state, and can also vary depending if it was a written or oral agreement. 

Click here to view the statute of limitations for your state.  Keep in mind that most creditors know the statute of limitations for each state.  If you owe a lot of money, they will make sure to sue you before the statute of limitations expires. 

Know your rights and know what to do!

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