While smaller debts are less likely to result in legal action, there are no guarantees. In many cases, though, debt collectors will prioritize larger debts, as they offer a higher return on the time and legal fees associated with a lawsuit.
If all attempts to collect the debt fail, the lender or collection agency may decide to take legal action. This is typically the last resort, but it can happen if the debt remains unpaid for an extended period. Legal action can result in court proceedings, where a judgment may be made in favor of the lender.
Though there's no standard timeline, you may be most at risk of a debt collection lawsuit after six months of not paying your debt. If you stop making timely payments on a debt, your creditor will first attempt to collect it by sending you notices of nonpayment.
Specifically, the rule states that a debt collector cannot: Make more than seven calls within a seven-day period to a consumer regarding a specific debt. Call a consumer within seven days after having a telephone conversation about that debt.
Under Article 1144 of the Civil Code, actions based on written contracts, such as credit card agreements, must be filed within 10 years from the time the obligation becomes due. This means that credit card companies or collectors have 10 years to file a case against the debtor to collect the outstanding balance.
Most states or jurisdictions have statutes of limitations between three and six years for debts, but some may be longer. This may also vary depending, for instance, on the: Type of debt. State where you live.
If you continue not to pay, you'll hurt your credit score and you risk losing your property or having your wages or bank account garnished.
While agencies typically pursue the full amount owed, debt buyers may accept reduced payments. The decision to sue often depends on the debt's size (usually a minimum of $1,000), age, and original agreements. Debt collection practices for unpaid credit card balances frequently lead to court cases.
You're not obligated to pay, though, and in most cases, time-barred debts no longer appear on your credit report, as credit reporting agencies generally drop unpaid debts after seven years from the date of the original delinquency.
If you get a summons notifying you that a debt collector is suing you, do not ignore it—if you do, the collector may be able to get a default judgment against you (that is, the court enters judgment in the collector's favor because you didn't respond to defend yourself).
Under Philippine law, failing to pay credit card debt, even when it is sent to collections, does not automatically lead to imprisonment. However, this does not mean that the debt can be ignored, as creditors have legal remedies to recover what is owed.
Fortunately, you can't be jailed in the Philippines for not repaying loans, as stated in the Philippine Constitution. Instead, creditors may file civil cases to enforce repayment, including interest or penalties if applicable.
If you're being sued, you'll receive official court papers
If you are being sued, you'll receive at least two documents. One is called a Summons and the other a Complaint. These documents are typically handed to you or might be left with someone 18 years or older at your home, work, or mailing address.
Debt collection thresholds vary widely and depend on several factors. While there's no legal minimum, practical limitations often determine the smallest debt amount collection agencies will pursue.
If the debt collector is contacting you for payment on a debt and you have concerns about the debt, the amount they are claiming, or the company contacting you, you might want to speak to an attorney or a credit counseling organization. Before speaking with a debt collector, consider working up a plan.
Debt collectors are not permitted to try to publicly shame you into paying money that you may or may not owe. In fact, they're not even allowed to contact you by postcard. They cannot publish the names of people who owe money. They can't even discuss the matter with anyone other than you, your spouse, or your attorney.
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
The Fair Debt Collection Practices Act (FDCPA) is the main federal law that governs debt collection practices. The FDCPA prohibits debt collection companies from using abusive, unfair, or deceptive practices to collect debts from you.
Here's the good news — you can't go to jail for credit card debt, and if a debt collector implies that you might end up in jail, they are breaking the law as established by the Fair Debt Collection Practices Act.
Under the Fair Credit Reporting Act (FCRA), most negative information, including unpaid credit card debt, must be removed from your credit report after seven years. This seven-year period typically begins 180 days after the account first becomes delinquent.
Debt collection efforts can be relentless at times, and even debts that seem minor may end up haunting you for years if ignored. Luckily, while debt collectors may never give up on a debt, your responsibility to repay a debt is rarely eternal.