What recourse does a credit card company have if a customer defaulted and stopped making payments in the U.S.? For example, can they:

  • Legally force him to liquidate his assets (like his home or vehicle)?
  • Force him into bankruptcy?
  • Legally make him pay if they determine he has money in a bank account?
  • Or is all they can really do is to report him to a credit bureau, which would lower his credit score?

Essentially, what are the repercussions of defaulting on a credit card?


Typically, the CC company itself won't follow the customer very far upon a default (though it certainly can act as its own debt collector, or hire an agency for a fee to do the collection). What most often happens:

  1. CC company pesters you for a few months.
  2. CC company sells debt to a debt collection agency.
  3. Debt collection agency pesters you for a while, typically offering a settlement at a reduced rate (which is still greater than they paid the CC company for the loan).
  4. Eventually, the debt collection agency sues you for the amount of the loan.

Once they do that, assuming they win the lawsuit, they can do the following:

  • Seize the amount from bank accounts by court order (if that amount exists)
  • Seize property you own (other than your primary residence, furniture, and other protected items)
  • Garnish your wages (if they are not protected from garnishment - for example, SSD income is protected)
  • Put a lien on your non-seizable property (such as your primary residence) so if you sell it, they take their cut from the proceeds

They cannot "force" you into bankruptcy, but they might make it so you have no better options (if bankruptcy is less painful than the above, which it often is).

They certainly can (and will) report to the credit bureaus, of course.

For more information, Nolo has a decent help site on this subject.

Different jurisdictions have slightly different rules, so look up yours. Here is an example (this is from Massachusetts).

Not every debt is sued for, of course; particularly, pay attention to the statute of limitations in your state. (In mine, it's seven years, for example.) And it's probably worth contacting someone locally (a legitimate non-profit debt relief agency, or your state's help agency if they have one) to find local rules and regulations.

  • so, if you are prepared to take a hit on your credit score and have some cash, you can push it to your 3. and settle it for less – amphibient Jul 8 '15 at 22:56
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    There is no guarantee of that, but often that is the case because the collection agency buys the debt for a fraction of the original amount. So if they buy a $100 debt for $50 and collect $75 they consider it a win. It will still destroy your credit rating for years to come though. – JohnFx Jul 9 '15 at 0:05
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    Indeed. They could just sue you directly - and if they know you have lots of money they may just do that. The low credit rating would in most cases cost you far more than the savings. If you want to do something close but not AS bad, even without defaulting you can usually get a 'debt relief agency' to proactively get settlement deals (still at a ding to your rating but not as bad as a full default). – Joe Jul 9 '15 at 0:41
  • Apart from the value of (3) and (4), the sequence of events and other advice here applies in the United Kingdom too. In the UK, debts which are recovered by debt collection agencies often cost more than the original sum, presumably because the discount is less and they want to recover their own costs on top of that. – Andrew Leach Jul 9 '15 at 6:38
  • Technically, creditors in the United States can force someone into involuntary bankruptcy, but it almost never happens for individuals and wouldn't really be helpful to collect a credit card debt anyway. But it can happen. Of course, your ability to discharge credit card debt in bankruptcy is limited as well. – Zach Lipton Jul 9 '15 at 6:56

Note that this kind of entry on your credit record may also affect your ability to get a job. Basically, you're going on record as not honoring your commitments... and unless you have a darned good reason for having gotten into that situation and being completely unable to get back out, it's going to reflect on your general trustworthiness.

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    While true, note that I've never had a job require a credit check on me. I have had jobs that required enhanced criminal record checks. But Keshlam is correct, some jobs will require credit checks. – ChrisInEdmonton Jul 9 '15 at 13:51

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