What Happens If You Don’T Pay A Bill

Not being able to pay your bills can be a stressful and concerning situation. However, it’s important to understand the potential consequences of unpaid bills so you can take steps to resolve the issue This article explains what can happen if you miss bill payments, including impacts to your credit, debt collection, and legal action

Your Credit Score Will Be Damaged

One of the most immediate effects of not paying bills is damage to your credit score Creditors report late and missed payments to the credit bureaus, which causes your score to go down

According to credit experts, a single missed payment can cause your credit score to drop by up to 100 points. Consistently missing payments on several accounts will cause even more dramatic drops. A low credit score makes it difficult to get approved for loans, mortgages, apartments, and other services.

Even if you eventually pay the overdue amount the late payment will remain on your credit report for 7 years. This means the damage to your credit can be long-lasting if you continue to miss payments.

You’ll Owe Late Fees and Penalties

In addition to credit damage, not paying bills typically results in late fees, interest charges, and other penalties. Creditors will start tacking on fees after your due date passes. The later you pay, the higher the fees.

For example, your credit card company may charge a $25 late fee if your payment is just a few days late. This might climb to $35 or more if you go 30 days past due. Mortgage lenders, utilities, cell phone companies, and other service providers also charge late fees.

If you have a credit card or loan, not making payments will likely cause the interest rate to shoot up. Your card or loan agreement likely allows the creditor to raise your rate significantly when you default. This results in owing much more interest.

The Debt Will Go To Collections

After a couple of months of non-payment, creditors will pass your account to a debt collection agency. The original creditor essentially writes off your debt and sells it to collectors for pennies on the dollar.

When your debt goes to collections, this will show up on your credit report. Collection accounts are major red flags that drag down your score.

Debt collectors will also start contacting you demanding payment through phone calls and letters. Under the Fair Debt Collection Practices Act, collectors cannot harass you, but they will be persistent. Ignoring collectors will cause them to ramp up their efforts.

You May Be Sued

If polite requests for payment don’t work, a debt collection agency may decide to take legal action. It’s estimated that collectors file millions of debt collection lawsuits every year against consumers.

If you are sued for a debt and lose the case, the court can enter a judgment against you. This gives the collector significant power to collect what you owe. Your wages can be garnished, a lien placed on your bank account or property, or your assets seized and sold.

Judgments on your record also appear on credit reports and can stay there for up to 7 years. This makes judgments extremely damaging.

Services Get Disconnected

Being past due on bills like utilities, phone/internet, insurance, and other ongoing services may result in disconnection. Since these are required ongoing expenses, having them cut off creates major headaches.

Utility companies, phone/internet providers, and insurance companies can legally suspend service if you fail to pay after a certain time period. This leaves you without vital services until you get caught up on what you owe.

Secured Property Is At Risk

Not paying bills that are tied to property, like a home or car loan, means the lender can repossess that property. These are known as secured debts.

If you become delinquent on auto loan payments, the lender can take back your car. With a mortgage, the lender will begin foreclosure proceedings if you are 90+ days late, which may result in losing your home.

Losing an asset like a home or car that you rely on because you missed loan payments can be catastrophic. This is why it’s critical to take action if you fall behind on secured debts.

You Could Face Legal Consequences

Though rare, not paying certain types of bills can potentially lead to legal trouble. For example, consistently failing to pay child support can result in contempt charges and even jail time in some cases.

Not paying taxes is another area where legal consequences can come into play. If you owe back taxes and do not make payment arrangements, you may face IRS enforcement including asset seizures and criminal prosecution for tax evasion in extreme cases.

Tips for Dealing With Unpaid Bills

• Contact creditors immediately if you will miss a payment and explain your situation – they may grant some leeway.

• Prioritize secured debts (home, auto, etc.) and essential utilities first.

• Explore assistance programs that may be able to help pay bills.

• Work on a payment plan that allows you to pay back what you owe over time.

• Consider credit counseling or debt consolidation services to negotiate with creditors.

• Be proactive and take action – ignoring the issue makes it worse.

• Protect your credit by making at least minimum payments if possible.

• Know your rights under consumer protection laws like the FDCPA if dealing with collectors.

While missing bill payments can spiral into a stressful situation, being proactive and understanding the potential consequences allows you to minimize the damage as much as possible. Communicating with creditors and seeking assistance early on provides the best chance of getting back on track financially. Though it takes time to rebuild credit and pay off debt, taking ownership of the issue and creating a plan puts you on the path to eventually resolving unpaid bills.