If you’re one of the tens of thousands of Britons who have racked up credit card debt over the last few years and are now struggling to keep up with your repayments, you might now be looking at the consequences of not paying your bill. This would be a drastic measure to take, and simply not paying is the last thing you should do. But what could actually happen if you stop your repayments?
Firstly, let’s get a fairly common misconception out of the way: unpaid credit card debt can NOT cost you your home, nor can it land you in jail. The only debts which can result in criminal prosecution and therefor the possibility of prison are those owed to the government (i.e. tax of one kind or another) and which you have chosen not to pay rather than not been able to afford to.
If you don’t pay your card repayments, you’ll be charged a ‘default fee’ of around £12 for every payment you miss or make late. If you get into a second month of missed payments, you will almost certainly end up being called (repeatedly) by the card issuer asking for a payment.
These calls can quickly get annoying and worrying, and you can tell your card issuer in writing that all further communication should be done by mail rather than by telephone. If they continue to call you after that, they are breaking the law.
If you still don’t pay, you may find your next letters will be from a debt collection agency. While worrying, these agencies have no formal powers of collection. They are not bailiffs, and cannot enter your home, seize your possessions or force you to pay in any other way. You do not even to respond to their letters or phone calls.
If you still don’t pay, you could be taken to court where a County Court Judgement may be granted against you. This means that your unpaid debt is officially recorded and will stay on your credit file for 7 years.
The court may also grant a charging order against your home, which means that should you come to sell your home the credit card debt will be repaid in full before you receive any proceeeds from the sale. The court may also grant a warrant for bailiff action, but this is rare in practice.
The upshot is, as credit card debt is unsecured, there is little the card issuer can do to claw back debt immediately, and while technically a card company could try and make you bankrupt if you refuse to pay, this is more or less unheard of.
Having said this, if you go down this route of simple non-payment you’ll find you credit rating will be completely shattered, and you’ll be in for a long period of stress and worry as the card company chases you for repayment.
A far better option is to contact your card issuer, either yourself or through a debt counselling service, and explain that you’re unable to keep up with your current repayments.
In almost all cases you’ll be able to agree on a more affordable payment plan, especially if you’ve missed several payments and the card issuer can plainly see that the alternative to agreeing a payment plan would be for them to have to spend years chasing a debt that may never be fully repaid in any case.
One of the free debt advice charities such as the Consumer Credit Counselling Service might be a good place to get further advice on arranging lower repayments and relieving the pressure unpaid credit card debt inflicts on those dealing with it.