If you have accumulated a large amount of debt, efforts to pay it off may seem futile. Making the minimum payment every month may not even make a dent in your total balance, especially if you are burdened with high-interest rates. Fortunately, Resolvly can help by referring you to consumer protection attorneys that will fight to help you dismiss your unsecured debt. If your debt is dismissed, you will not have to pay back the full balance or interest.
What Happens When I Stop Paying on a Debt
Most lenders will gladly accept the minimum monthly payment every month because it will keep you indebted to them almost indefinitely. However, there may come a time when even paying the bare minimum will not be possible. Things like job losses or sudden medical expenses can make it difficult to meet all of your obligations. If you choose to default, what happens next will depend on the type of loan you default on.
If you stop making payments on a secured loan that involves collateral, the lender will ultimately repossess it and resell it. This does not mean that you will be free and clear, though. If the collateral has depreciated and was sold for less than what you owe, you will have a remaining debt.
If you stop paying on a credit card or other unsecured debt, the chain of events will be slightly different. Generally, you can expect to receive a flurry of emails, phone calls, and letters that are “encouraging” you to pay. Once the creditor has determined that this will not be successful, they will often sell your debt.
A collection agency may attempt to collect payment from you. They may even offer you a settlement that includes a single, lump-sum payment at a reduced rate. The final step is to begin debt collection litigation.
What is Debt Collection Litigation?
Debt collection litigation is the term that refers to legal action being taken to collect your debt. Even after litigation has begun, collectors are still bound by the Fair Debt Collection Practices Act. The FDCPA helps to protect you from unfair or deceptive collection practices.
The litigation process often starts with a negotiation phase, during which you and the collector will attempt to come to an agreement on debt repayment. This stage often results in an agreement for a partial payment or installments.
If negotiations are unsuccessful, the process will transition to mediation, arbitration, or trial. Mediation includes further negotiations in the presence of a neutral party. Mediation is not binding. In an arbitration, the presiding party will offer a recommendation that may or may not be binding.
Once you have reached a trial, the outcome will be fully binding. The court will likely resort to wage garnishments, judgment liens, and bank levies to ensure that you pay the debt.
About Resolvly
Resolvly connects clients nationwide with consumer protection attorneys that specialize in debt resolution. Since its founding in 2015, the company has helped thousands of Americans find legal-based solutions to reduce or eliminate their unsecured debt, including medical bills, credit card debt, business debt, private student loans, and vehicle repossessions.
Laila Azzahra is a professional writer and blogger that loves to write about technology, business, entertainment, science, and health.