I Haven’t Paid My Bills, What Happens Next?

Although you may have the best intentions, you may find yourself behind your credit payments. If you are unable to borrow money from friends or family or obtain another loan, you may not be able to make the minimum payments on your accounts each month. What happens to your accounts if you fall behind on your payments? That depends on the type of credit.

Credit Cards

When you pay for a purchase with a credit card, it will cost you a lot more than the sticker price. You’ll pay interest for months, and if you are late or miss a payment, you’ll also pay late fees and penalties.

When you do not make your monthly payment, the credit company will add a late fee to your account. You will then be charged interest on this late fee every month, so the already high fee becomes even higher with each month. The credit company may also raise your interest rate, which means your balance grows even higher each month.

When you are more than two months behind, the issuing company will start calling you and sending you letters reminding you to pay your bill. They will also notify the credit agencies that you are late in paying, and your credit score will fall. After 180 days of nonpayment, the credit company will charge off your account. This means it is transferred to a collection agency, and your credit report will drop dramatically.

The collection agency will contact you often to collect the money to pay off the debt. You are still responsible to pay off the entire debt or come to an agreement with the collection agency, even if a collection agency owns the debt.

Student Loans

If you miss payments on your student loans, you will receive letters and phone calls to remind you to make a payment. After 90 days of nonpayment, your status will be reported to the credit bureaus. If you do not make a payment in 270 days, your account will be in default.

When your student loan goes in to default, one of several things can happen: your entire balance is due immediately, you will not be eligible for a repayment plan or a deferment, your loan will be moved to a collection agency, your tax refund will be held for repayment and your wages can be garnished until the loan is paid. Your total balance will continue to increase because late fees and interest charges will continue to accrue while the loan is in default. Your credit score will fall until your loan is paid off.

Mortgage

If you fall behind on your mortgage payments, the result is the same as when you are behind on your credit cards or student loans. The mortgage lender will remind you via mail or phone calls that your bill is past due, and they will report the nonpayment to the credit bureaus.

After a few months of nonpayment, the lender will offer you the option of a loan modification, short sale or forbearance. If you do not choose one of these options, or you are not eligible for one, the loan will go in to default. The mortgage lender could foreclose on your house, which means that they will own the house. Laws vary by state, and some states do not require legal proceedings to foreclose on a house. The lender may also try to force you to file bankruptcy in order to collect any money that you do have.

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