People who are swamped with debt often give up, stop paying, and hope the creditors simply go away. While this strategy may work for some people, most will only end up in a worse position than when they started. Here's how to tell whether a standoff with a creditor will actually work in your favor, or if it's best for you to take another tactic.
The Type and Amount of Debt
The kinds of repercussions you may face when you simply stop paying your bills will vary depending on the type of debt you owe and the amount of your account balances. Creditors in some industries will simply settle for dinging your credit report and writing off the bad debt. However, others will take a more aggressive approach and come after you with everything they've got.
In the case of credit card debt, for instance, most times the bank will destroy your credit with reports of late payments and then sell the bad debt to a collection agency for pennies on the dollar. The agency will then harass you about paying the amount up until the statute of limitation for debt collection and then leave you alone. If you owe tens of thousands of dollars, the debt collector may file a lawsuit against you that provides them with more options to get the money (e.g. wage garnishment).
However, in cases where there is collateral backing the debt, the creditor will typically take possession of the item (e.g. repossess the car). If the collateral is no longer available, or you still owe a significant amount of money even after the sale of the item, the creditor may sue you for the balance.
It can be challenging determining which tactic the creditor may take. You can find a lot of information online about a creditor's collection practices by doing a search online. Use the information you discover to help you make a decision about your finances, or consider speaking with a bankruptcy attorney for more information.
Whether You Have Any Assets
Another thing that can determine whether you can simply outwait your creditors is if you are judgment-proof. This means you don't have any money or assets the creditor can collect even if it sues you. For instance, Social Security benefits are exempt from wage garnishment. If your only source of income is Social Security disability, and you don't own or a home or have any other possessable assets, it won't be worth the time, effort, or expense to sue you because the creditor won't get anything from the action.
If all of your income and assets are exempt from debt collection, then waiting until the statute of limitation for debt collection expires may be a good course of action.
At the end of the day, the only way to guarantee a debt collector won't pursue you is to have your debts discharged in chapter 7 or chapter 13 bankruptcy. Contact professionals like Charles J Schneider PC for more information about your options, or for advice on how best to handle your debts.