What happens when you don't pay an unsecured debt?

Question

I'm having some financial difficulties, just lost my job and had some uncovered medical expenses I had to pay out of pocket that ate away at my savings. Now I'm being harrassed by credit companies calling me threatening legal action. I've tried to make payment arrangements but they won't take what I can afford. These are unsecured debts, can they go after me legally or get my paycheck with held when I start working again? I'm hoping to get a temp job that will start next week so I can get back on track but this lady is telling me my checks are going to be withheld. HELP!

I'm so far behind they won't take the $40 I can pay and some have gone to collections and the collection agencies don't want payments that low either, they want 3 installments at the very least but that is $500 a pop for some. I just found out I got the temp job, I start Monday. I guess I'll have to take what's coming and deal with it the best way I can. I was very ill and my health is my primary importance right now.
Thanks all for the answers!
JD

Answer 1

First off do not deal with collection agents over the phone. Make your dealings in writing and by certified mail. Keep in mind they are not there to help you. They talk a very good game but they are notorious for lies and trickery.
Best bet is to figure out what you can pay and set up payment arrangments with those that are still with the original creditor. Again do this by postal mail not on the phone. Customer service reps are clueless and you won't get it resolved at all. send your correspondence certified.
Collection agencies on the other hand have purchased your debt from collectors for a fraction of the cost. So don't believe them when they don't want to negotiate. They make thier money by how much they squeeze out of you. Offer to work out a payment plan but put conditions on it. Again it will take a lot of work but you can negotiate a better deal. You also need to check your state laws. As some states allow them to take any portion of your debt that is not part of the settlement and sell it off to another collection agency. This only hurts you and makes your credit worse.
There is a lot you can do to minimize the damage but you will need to research it and know your rights. Also what they can do to you.
Yes they can sue you as someone said. But it is highly unlikely. The cost to them is not worth it. But again they can and that is the biggest scare tactic they use on people that do not know any better.
I put a link in here to a very informative site. There is a lot more I can give you and a lot more detail then I could ever fit in here. But if you email me i will be gald to send you any info I can and offer any help I can. I have a personal bone to pick with collection agencies.

Answer 2

Having something of a similar situation, I sympathize with your situation. While it's easy to blame the whole mess on your employer, that generally isn't really the underlying problem and is just a way to lay the blame somewhere else. I know, I felt the same way until I looked at the situation rationally. First of all, you're right. There is no debtors prison, so jail time is out of the question. And you're also right that your credit rating will take a hit. Refusing to pay the unsecured debt does have a certain appeal, but you should be prepared for the consequences. Chances are, if you ignore the creditors long enough, your accounts will be turned over to debt collectors. And if the amounts are worth the trouble, and you ignore them long enough, chances are good that a lawsuit(s) will be filed. If you can not persuade the court to accept that it is all your employer's fault, chances are that there will be a judgment against you. Giving the creditors to the power to garnish your wages, and perhaps place a lien against your property. Again, this may not be the end of the world if you are prepared and willing to deal with these outcomes. If I were you, I'd contact these creditors before it gets to this. MAYBE they will be willing to work with you? Maybe not. If not, then check into credit counseling. Research these agencies first, as many are not your friends. Check with your states BBB or Attorney General for recommendations. In addition, you might also check in to bankruptcy. Like you said, your credit rating is going to hell anyway. And almost any course of action other than paying them off is going to affect your rating negatively. One last thought. Not much fun of course, but a part-time job is perhaps a possibility. ?

Answer 3

I suggest you begin by writing to your creditors, stating that you are no longer able to make any payments. Explain that you have no salary, and you have nothing available for debt repayment. You could also just ignore the bills for a while; either way, the accounts will soon be charged off and turned over to a collection agency.

When the collection agency contacts you, send the agency a letter asking them not to contact you (it's your right). When the accounts are sold to a new collection agency, send the new collection agency the same letter. You have enough problems without having to deal with a collection agency.

You already know your credit will be shot to heck for the next 7 years, but at your current income level getting credit is the least of your worries.

The only really bad thing that could happen: A creditor may take you to court to collect a judgement against you, although without any assets that's pretty much a waste of time on their part. Only after a judgement is entered against you can the creditor attach a lien to your property or garnish your wages.

Each state has its own statute of limitations concerning debts, and after a certain amount of time (ranging from 3 to 6 years) the debt is no longer legally enforceable.

Whatever you do, don't even think about bankruptcy, unless the creditors are actually taking you into court (and not just threatening to).

Answer 4

It really depends on how much you owe them and how aggressive of a company they are. They have to pay legal fees to go after you so the debt has to be cost effective for them to take on the additional expense.

They can go after your paycheck, but they have to go through the courts first and that can be a fairly long process. They can sue you and get a judgment against you, but if you don't have any assets there isn't much they can take.

Your best bet is to continue to try to work out payment arrangements. Perhaps even send them the $40 each month even though they want $500. That way if it goes to court you can show a good faith effort to pay.

A reasonable creditor would prefer something over nothing.

Best of Luck.

Answer 5

They can't garnish without legal action. First they will sue you, and from that they can garnish. I know what your going through, I have been there. They reach a point where they won't work with you, and its so hard. The legal process is time consuming. First someone comes to your door with the court papers. From there, you file an answer to the court. Most of the time when it reaches this point, a company has bought the debt and they are the ones sueing you. They will try to contact you and make payment arrangements with you, because they don't want to go to court either. However, you will at this point have a judgement on your record. Either you work with them, or you go to court, and that's when they can garnish your wages.

Answer 6

If you are truly willing to make payment arrangements, it may not be what they want, as fast as they want it, but they will accept it. Just make sure when you make your payments, you keep your receipts and always include your account number on your money order or check. A little is better than nothing at all. Just make them aware that due to circumstances, this is all you can afford at the moment, but when things get better, you will make higher payments or more frequent payments. They can't dock your entire paycheck, but they can dock a percentage of it until the balance is paid in full.

Answer 7

Generally they will just call but not go to any legal action. They buy these debts for 5 to 10 Cents on the Dollar, and just see how many people they can scare into paying up.
Of course it also depends on the amount involved. For several thousand Dollars they may sue. None of my 'debts' were ever close to that!
I have had junk debts (for things incorrectly charged for) forever and they just lie there. I don't get bluffed by these creeps.
For big amounts, you could also send them $5.00/month, that will make it impossible to take it to court. You are showing 'good will'.

Answer 8

They can sue you and have your wages garnished if you don't pay. Also, your credit rating is getting battered by all this. A default on unsecured debt will make it very difficult for you to get financing on just about anything for the next 7 years.

Get that temp job - wash dishes, clean toilets - whatever you have to do in the short term until you get back on your feet.

On wage garnishment - depending on the state, they can take between 10% and 25% of your net pay. But, they can only do this after going to court and sueing you for the balance you owe.

Answer 9

filing a bankcruptcy is also an answer if there's no way you can come up with the payment in a month. BK takes 5-7 years to clear but you will clear up your bills soon and will put you back in a good credit standing after the release. Leaving your bills unpaid can further ruin your credit and clearing them later will only cost you more.

Answer 10

it is possible that they can take PART of ur check, but i dont think they can take it all.. they know u have to eat and live. otherwise they will never get a cent right? and yes its possible that they will take u to court for it. but even if they dont agree send as much as u can whenever u can. that way it shows u are at least making an effort to pay ur debt.