If you are unable to pay your debts, your creditors will begin to contact you to collect. These attempts typically begins with telephone calls. A customer service representative may call you and ask you to make a payment over the telephone or commit to a date you will make the payment. If you do not make the payment, the telephone calls become increasingly hostile and increase in number.
When telephone calls do not provide results, creditors turn to letters. The first few letters you receive from your creditors may have a nice tone; however, if you ignore collection letters, the letters grow increasingly threatening. Most creditors eventually turn your account over to a collections agency or debt collection attorney. Debt collectors and debt collection attorneys can be relentless in their attempts to collect a debt. However, when you simply do not have the money left over at the end of each month to pay your creditors, you probably feel the only option you have is to ignore the collection letters.
What Can Creditors Do If I Do Not Respond To Collection Letters?
In most cases, the consequences of ignoring collection letters depend on the type of debt and the creditor; however, in most cases you can expect at least the following collection attempts if you ignore collection letters.
- Your credit score will decrease
- Eventually you will be dealing with an aggressive debt collector or debt collection attorney
- Your stress level will increase as you deal with more letters, telephone calls, and collection attempts
- You may be sued for the debt
- Your property may be seized or levied
How Does The Type Of Debt Effect Collection Efforts?
Below are four scenarios regarding different types of debts, illustrating the progression of collection efforts if you do not respond to the collection letters.
Mortgage Collection Letters
When you are suffering a financial crisis, it is easy to get behind on one or two mortgage payments because you intend to catch up on them as soon as things turn around. Unfortunately, your mortgage lender may not be willing to wait on things to turn around. Most mortgage companies begin with telephone calls followed by letters. If you continue to ignore the collection letters, the mortgage company will turn the account over to a foreclosure attorney. Because this debt is secured by your home, the logical step for the mortgage company is to hire an attorney, serve foreclosure notices, and sell your home at a foreclosure sale.
Filing a Chapter 13 bankruptcy case can stop the foreclosure so that you can keep your home. Instead of paying the entire balance of past due bills in one lump sum as the mortgage company has been demanding in the collection letters, your past due payments will be paid over a 60-month bankruptcy plan.
Credit Card Collection Letters
Credit card debt is unsecured; therefore, if you do not respond to collection letters, the credit card company will turn the account over to a debt collector. In most cases, the debt collector or the original creditor will eventually retain an attorney to file a collection lawsuit. If you do not pay the debt or respond to the lawsuit, the judge will grant the credit card company a default judgment in the amount of the debt plus attorney fees, court fees, and costs. The judgment will accrue interest from the date of the judgment until it is satisfied.
The credit card company can go back to the judge and request that the judge require you to appear in court to disclose your assets to determine if you have assets for the creditor to seize and sell to satisfy the judgment.
Filing a Chapter 7 or a Chapter 13 bankruptcy case immediately stops collection lawsuits preventing a default judgment. Regardless of whether the lawsuit is in progress or a default judgment has been granted, the debt will be discharged through your bankruptcy.
Student Loan Collection Letters
Student loan companies will eventually garnish your wages if you continue to ignore the debt and fail to respond to collection letters. In most cases, student loan companies can garnish your wages for the debt. Even though student loans are not eligible for a discharge in bankruptcy, filing a bankruptcy often gives you the debt relief you need to pay your student loans and avoid wage garnishments.
Car Loan Collection Letters
Car loans are much like mortgages — the loan is secured by property the creditor can seize to pay the loan. Unlike mortgage lenders, creditors with car loans do not wait as long to take action to collect the debt when you do not respond to collection letters. In most cases, the lender retains a repossession agent to seize your car in the middle of the night, while you are at work, or while you are shopping.
If the repossession is “peaceful” (you do not object to the repossession), the lender does not need a court order to seize your vehicle. This is why most repossessions occur at night or when you are otherwise occupied and unable to object to the repossession.
Filing a Chapter 13 bankruptcy will save your car in the same way it will save your home. The bankruptcy filing prevents the creditor from repossession your vehicle while you reorganize your debts. In most cases, the full amount of your car loan is included in your bankruptcy plan and paid over 60 months. This can lower your monthly car payment and, in some cases, lower the interest rate on the loan.
As you can see, it is never a good idea to ignore your collection letters. If you are being harassed by creditors and are unable to catch up on your bills, get in touch with a bankruptcy attorney. They can help you determine what the best steps would be for your individual situation.
