Can You Legally Stop Paying Credit Cards

Written on May 28, 2010 – 4:39 pm | by Nicole Gutierrez

In the 1800s and prior, if you stopped making payments on your debt you could be thrown into debtor’s prison. Today, this is no longer a punishable crime. However, because you agreed to a contract when you accepted the Terms and Conditions of the credit card, lenders can sue you in civil court. If that occurs, the court can rule that you must repay your debt.

The legal process a lender can take to force you to legally repay your credit card debt is called obtaining a judgment. This judgment is a legal case in which the lender shows evidence that you agreed to the terms of that credit card offer and that you used the credit card. To show this, the terms of service of the credit card are presented as are the documents showing the purchases you made using the card. The court then determines if you should be required to repay the debt. If so, legal action may be used to collect on the debt.

The two main methods utilized to force you to repay your debt are quite effective.

Garnishments: The lender may request that the court garnish your wages. A garnishment occurs when the court contacts your employer directly and requires your employer to withdraw funds from each of your paychecks to pay to the lender directly. Garnishments are commonly used because they are highly effective.
Liens: A second method that lenders may use through the courts is placing a lien on the assets you own. If you own a house, for example, the lender may request that the courts allow them to place a security lien on the home. If you fail to repay your debt, the courts may force the sale of your home to repay your debt.

Although these methods seem drastic, credit card lenders do not generally use them. They can be costly to lenders since the lender must pay attorney fees, court costs and other costs to establish the process. Further, they can take time to pursue. In many cases, consumers will simply file bankruptcy if they are facing any of these legal scenarios which would effectively stop the legal judgments.

Your Circumstances Matter

Repayment of debt is often dependent on your ability to repay your debts. Lenders cannot come after you, for example, if your only source of income is unemployment, disability payments or Social Security payments. Further, lenders cannot garnish your wages if your income is below the minimum federal income limits which are imposed for these court sanctions.

On the other hand, if you have the means to repay your debt, and lenders can prove this, the courts may side with the lender and continue the garnishment or lien process. This may happen if you do not respond to lenders to inform them of your financial problems or you simply stop paying your debt without financial difficulty. Past tax returns may be one way that lenders can determine if you have the means to repay the debt.

Threats and Concerns

Many people ask, “Can you legally stop paying credit cards” after they have been harassed by creditors and collection agencies. Federal law prohibits creditors or collection agencies from threatening you with arrest if you don’t pay your debt. They also are prohibited from saying that they will garnish your wages or put a lien again your assets unless they are legally able to do so and have plans to take these actions. The Federal Trade Commission of the United States has clear guidelines in place that prevent lenders from threatening you for repayment. You can view these requirements at the FTC’s website.

Keep in mind, if you do stop paying your credit card debt, your credit rating will fall. It may be best to consider debt counseling services or bankruptcy if you cannot afford to repay your debt. In the end, these services may be the best route to get out of debt quickly.

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