What is worst case scenario if someone stops making credit card payments?

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Submitted by citydweller on July 21, 2008 - 8:12pm

I have a friend who was unemployed a couple years ago. She used credit cards to cover the gap between unemployment benefits and her living expenses. She was doing ok for awhile, transferring balances to 0% cards and always making the minimum payments. Eventually she missed a payment on one of the cards so all the cards reset the interest to around 29%.

She finally started working and tried her best to keep up with the monthly payments, but it was bleeding her dry. She contacted a credit counseling service and they consolidated the debt and she has been making $1000 per month payments to them.

She is still working but has recently had some medical and car issues that have made it so she can't keep up with the $1000 per month payments.

What is the worst case scenario if she just stops paying? She is a renter and does not have any assets and her credit score is already bad.

‹ OT - Budget/Personal Finance book OT: Paging Nostra: Never second guess your investment decisions ›
citydweller, Here is a
Submitted by Aecetia on July 21, 2008 - 8:58pm.

citydweller,
Here is a recommendation from a previous post with a useful link:
"Submitted by dharmagirl on April 16, 2008 - 10:25am.

I would not recommend using "credit cleaning" agencies.

ANYONE can do the things that they charge money for. One of my best friends was almost bankrupt a few years ago. Her credit scores were in the 500s.

She had some terrible issues with medical collections in particular, and then found this forum: http://www.creditboards.com/forums/"

she should consider
Submitted by tucker... on July 21, 2008 - 9:22pm.

she should consider bankruptcy go see a bankruptcy attorney .i don't know how chapter 7 is now after 2006. but it sound like she needs to file.
if she just stops paying a collection agent will take over the account and hunt her down. att credit card did this to me and the collection agent forced me to file(the company was in san diego) . i got a letter from chula vista sheriff and said i had a court case to see if they would garnish my wages. as soon as you file with a bankruptcy lawyer all suits against you stop so do the calls. you just give them your lawyers number it cost 50.00 to start about 1000.00 to file your case in court .(auditorium wirh a dude from the court last less than ten minutes)

oh cease and deists letters
Submitted by tucker... on July 21, 2008 - 9:30pm.

oh cease and deists letters only work till they find a collection agent hungry enough try and garnish your wages.
may not happen right away it took them 3 and half years to try and get me. f them

Once they take her to court
Submitted by jonnycsd on July 21, 2008 - 10:56pm.

Once they take her to court and get a judgement they can put a lein on any real property - car, jewelry, etc. They can, with no notice, suck money out of checking and savings accounts, brokerage accounts and any other finanical assests (retirement assets are exepmt). They can levy her wages and take 50% to 65% of wages depending on the situation.

Rather than BK it would be better to try to negotiate a settlement with the card companies. Try starting with 20 cents on the dollar and removal of negative credit marks.

Use an attorney and threaten BK.

Do not use one of the "counselling" agenecies. They are funded by the card issuers and just try to get as much money out of people as they can.

Thanks for all the responses.
Submitted by citydweller on July 22, 2008 - 11:03am.

Thanks for all the responses. Does anyone know a good bankruptcy attorney in San Diego? Or how to go about finding a good one?

I ran up a debt of about 18K
Submitted by LAAFTERHOURS on July 22, 2008 - 1:05pm.

I ran up a debt of about 18K from 99-2002. I had a friend that worked for one of these credit counseling services (located here in SD) and bc of him, they managed my accounts without service charges. I guess I was a lucky one.

Bottom line is that they negotiated my rates down to about 9-12% each and as I got bonuses I pay off the higher interest cards one by one. They claimed it would take me 6 years to pay it off, I did it in 3 (2005). My FICO is back up above 720 after all of this so if you make the right decisions to resolve your situation, you can pull out of it rather quickly.

I recommend she work her way through trying to negotiate and pay them off without the "easy way out" approach of BK. I learned a lot from the experience in money management, so did my wife.

Looks like the company i used went out of business but I sifted through my emails and remembered that after I paid off a few of my creditors, I took the initiative to call the 2 that I had left and negotiated a rate with them on my own and left the credit counseling program.