If you owe on your credit cards, no legal action can be taken until you fall behind on your payments. At that point, your creditor will note your missed payments on your credit report, lowering your credit score. After about six months, your creditors will charge off your debt, which is another negative mark on your credit report. After a charge-off, you are still liable for your debt and may face lawsuits, judgments, wage garnishments and liens. Each of these will not only hurt your bank account, but will also have long-term implications for your credit score.
If you fail to pay your credit card bill and the creditor charges off the debt, they can legally sue you, issue a default judgment, garnish your wages, or even put a lien or levy against your personal property.
File a Lawsuit
If you don't pay your credit card bill, your creditor may file a lawsuit against you. Once you receive the summons notifying you of the lawsuit, you typically have 20 to 30 days to respond to the court, depending on the state where you live. If you respond to the court, you can usually delay further legal action until the resolution of your case. However, if you don't respond, the court will issue a default judgment against you, allowing the creditor to proceed with further collection actions.
Issue a Default Judgment
Even if you file a response to the court in your lawsuit, you will almost surely lose your case if you legitimately owe the money to your creditors. At that point, the court will issue a judgment that empowers your creditor to take more direct collection actions against you. The judgment will appear on your credit report for as long as 20 years, depending on your state's laws, or until you pay it off.
Garnish Your Wages
The judgment your creditor gets against you can entitle it to garnish your wages. Although wage-garnishment laws vary by state, most permit judgment creditors to take as much as 25 percent of a person's weekly wages. Your employer will be notified of your judgment, which can be awkward if you are concerned about your financial privacy.
Place a Lien or Levy
In addition to garnishing your wages, a creditor with a judgment against you may be able to place a lien or levy against your personal property. A lien essentially prevents you from selling any of your real estate, such as your home or any rental property you may own, before you pay off your debt. Levy laws vary by state, but typically they allow your creditor to take any cash you have in your bank, up to the amount that will satisfy the judgment.
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