Most Kent area residents have at least one credit card. In fact, it is estimated that the average American has at least 4 credit cards. Most of the time a person is able to pay their credit card bills each month. But sometimes an unexpected event occurs that greatly affects a person’s finances. Whether it be unexpected medical bills, a job loss, an injury or any other situation, paying the credit card bill may go on the back burner. So what happens if a person does not pay their credit card bill?
The first month
When a person misses a credit card payment, they will have to pay a late fee. A credit score may also drop because there wasn’t an on-time payment made.
Two to three months
If a payment is more than 30 days late then it will be reported to the credit bureaus. The missed payments can remain on a person’s credit report for up to 7 years. The card issuer will also block the person from making any new purchases. There will be late fees for each month of missed payments and the interest rate will increase.
Four months or more
If a credit card bill hasn’t been paid for several months the debt will be charged off by the credit card company. This means the debt will be sent to a collection agency and the person will have to deal with them. The collection agency will aggressively try and collect the debt and a person’s credit score will be greatly affected. They will also receive a notice from the IRS saying that they will need to pay taxes on the cancelled debt.
A legal professional who is skilled in bankruptcy can help their client if their financial situation is precarious. They can advise their client on what their options may be and if bankruptcy can be a good way to make a fresh financial start.