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What Happens When You Stop Paying Your Bills

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Claire Matthews

Financial Advisor, DCL

Your inability to pay your bills on time can have an impact on your credit rating. This is a fact that everyone must deal with. After all, everyone has some bills to pay – no matter how big or small. Bad credit can create a ripple effect on your life, so it is best to avoid it whenever possible. Unfortunately, life gets in the way and you’d be confronted with all kinds of bills, such as student, car, or home loans. There comes a point in your life when your debt or bills exceed your income. While it is a situation that most people do not want to be in, it is a reality that most people live in.

Page Contents

Introduction

So, what happens when you stop paying your bills? You might have considered this question a few times. There are consequences to this action, especially when done voluntarily. You need to learn about these potential consequences if you want to avoid being penalized.

What Happens When You Stop Paying Your Bills

Consequences of NOT Paying Your Bills

If you receive your bill, you will notice that the billing statement clearly indicates the payment due date. If you want to avoid being charged with a late fee, settle your bills on or before said due date. If you are late on your payments, especially on a habitual basis, your lender might report this to the credit bureaus. Each company varies in their procedures when it comes to handling delinquent accounts. It pays to know a lender’s policies beforehand, if you do not want to hurt your credit score.

If being late on your payments can tarnish your credit report, just imagine what missing payments could do. The consequences of late or missed payments would also vary according to what service you are subscribed to. For example, if you do not pay your bills for the internet or your mobile phone plan, the actions placed against you will depend on the policies of the concerned service providers. Most of these companies would terminate the services they provide to you as soon as you are unable to pay. Some will have grace period while most of them do not.

As soon as it becomes evident to the lender that you have no intention to pay your bills, your information will be turned over to a debt collection agency. This is a third-party agency that is hired by the company to which you owe your unpaid bills to.

Debt collection agents are known for their aggressive tactics. They will call you at home, work, and at any time of the day. They will constantly reach out to you in an effort to make you pay. To some extent, they would harass debtors. In the event that the debt collection agency is unable to resolve the matter, they can elevate it to the court. While you cannot be sent to jail for the money that you owe, your fate could be determined by the judgment given by the court. This will give your creditor the legal capacity to do any (or all) of the following:

  • Wage garnishment (up to 50%)
  • Repossessing your personal properties of value, such as home, car, or jewelry
  • Place a lien on your savings account on the bank

There are different policies imposed on this from one state to another. It is important to educate yourself on what these regulations are so you are aware of your right. At the same time, you can protect yourself against the harassment of debt collection agents. It is also important that you are aware of the Fair Debt Collection Practices Act. This was created by the government to protect consumers from agencies that might try to abuse or harass borrowers during the debt collection process.

Impact on Credit Score

When your unpaid bills are forwarded to debt collectors, this incidence is also reflected on your credit report. This negative item (although it might seem small) can affect your credit score for months, or up to years. This is especially true if your unpaid bills are for a loan or credit card. This could result in a serious dent on your credit score. Even when you manage to make payments during the collection process, there is no way to reverse the damage it has caused on your credit score.

Knowing the negative impact of not paying your bills on your credit score, there are still some rewards to be gained when you pay off your delinquent bills. This will get the debt collectors to stop hounding you. On top of that, a paid collection will somewhat improve how your credit looks (especially when compared against unpaid collection) when you apply for a new credit.

Not Pay Bills vs. Filing Bankruptcy

If the primary reason for not being able to pay your bills is due to financial difficulty, you are faced with a potential alternative: bankruptcy. It is the ultimate catch 22 when it comes to your finances: when you are unable to pay your bills but not wanting to file a bankruptcy. It makes you feel helpless and out of options.

During the debt collection process, the debt collection agency will probably sue you to get you to pay those bills. You will also be put on judgment to coerce you to pay in full or make a partial payment. In the process, some judgment creditors will compel you to file for involuntary bankruptcy. This is done in an effort to liquidate your assets and recoup the bills you owe. The net proceeds from your liquidated assets will be divided among your creditors. In this situation, any assets of some form are at risk – it could be your home, car, etc.

Some experts therefore agree that filing for bankruptcy can be a good way to restore your financial health, if you are struggling with debt payments. Using a debt repayment calculator may help you in assessing your unique situation to make this decision. The first thing you need to assess is this: do you have something that creditors can take? If you do not have any asset, you are considered “judgment proof”. The best thing you can do at this point is to wait it out. Do not file for bankruptcy. Do note that this is only a temporary situation. But if you are fine with debt collectors hounding you and if there is no substantial improvement to your finances anytime soon, filing for bankruptcy is not recommended.

You must note that bankruptcy will not discharge all debts. If you still have to deal with a significant amount of bills after filing for bankruptcy, it isn’t a good idea. But if you can eliminate substantial amount of debt during bankruptcy filing, you can use the remainder of your money to paying off non-dischargeable debt. Deciding on the best option of the two is a matter of assessing your current and foreseeable financial situation.

What Happens When You Stop Paying Your Bills

FAQ

Bills Payment Basics

Do you have any questions about the impact of not paying your bills to your personal finances? This section provides a list of questions with their corresponding answers to provide the insight you need.

What happens if you stop paying your cable bill?

A delinquent utility bill such as your cable subscription bill does not have a huge impact on your credit score. If you fail to pay your cable bill, your cable provider can cut off the service, depending on their grace period.

What happens if you stop paying your phone bill?

While you cannot go to prison for refusing to pay your phone bills, your mobile phone provider can cut your account so you are unable to make or receive phone calls. In addition to this, they can also take action to pursue your outstanding bill (plus any other charges) using the standard debt collection process.

What happens if you stop paying your contract phone bill?

If you are unable to stay updated with your mobile phone contract bill, this will cause your account to go into arrears. When this happens, your mobile phone provider will cut your line, which eliminates your ability to make or receive phone calls. The mobile phone service provider can take further steps in an effort to get you to pay any late bills using the debt collection process.

How can I stop paying high electric bills?

If you have high electric bills and you decide not to pay them, your electric service at home will most likely be cut off by the electric provider. If you need electricity at home, it is recommended that you update your electric bill payments to avoid losing your electrical connection at home. If you think that your high electric bill is unusual, you can contact your electric company to fix the problem. Make sure that they check your connections at home to determine what is causing the unusual spike of electricity consumption.

What happens if you stop paying hospital bills?

Unpaid medical bills will show on your credit report for up to 7 years (in some cases, even up to 10 years). But even if the item is deleted from your credit report when the above span of time has passed, you will still be obliged to make your payments. Thus, you can either choose one of two things: 1) let your unpaid medical bills drop your credit score, or 2) make payments now as you will eventually be pursued after for those unpaid bills.

What if you stop pay bill for internet?

Depending on your internet provider, there are a few consequences that could arise from your failure to pay your bills. One of them is that your internet provider will disconnect your internet, which immediately disables your ability to use their service. Another is that you will be pursued for your unpaid bill. If you miss your payment for one schedule, you will be sent a reminder about your missed payment. But if you consecutively miss your payments, your account will be terminated permanently. Your account will also be sent to a collecting agent, who will be tasked at pursuing payment for your unpaid internet bills.

What happens if I stop paying my debt management plan?

If you are unhappy with your debt management plan, you can cancel it at any time you want. This is a voluntary agreement and there is no way for the debt management company to prevent you from doing so, if you wish to stop paying.

What happens if I stop paying my car loan?

If you miss or unable to make payments on your car loan, the bank or credit institution where you got your car loan from will repossess your car. You no longer have legal possession of the vehicle and it is now under the ownership of the bank.

What happens if you stop paying a home equity loan?

If you default payment on your home equity loan, it does not mean that your home will be automatically foreclosed. But when you have equity on your loan, the lender will attempt to initiate foreclosure. This is their best bet at making sure that they can recover the money tied to the home equity.

What happens if I stop paying my private student loans?

If you choose not to pay your private student loans, it could have serious repercussions on your personal and financial life. The obvious consequence is that your balance will grow and incur more interest. When you fail to make any payments even after initial attempt by the student loan provider to contact you, the account will be forwarded to collections.

This item will also be reflected on your credit report. And the worst case scenario is that you will be sued and you could be subject to wage garnishment.

What happens when you stop paying federal student loans?

If within a period of 270 days you are unable to pay your federal student loans, the loan will automatically default. When this happens, the government has the right to garnish your wages, intercept with government benefits, and seize tax refunds. This is possible even without a court order.

What happens if I stop paying my payday loans?

If you stop paying your payday loans, the payday loan provider will continue to make effort to collect the amount you owe – even if it takes a while to recover the entire amount. If you think you are having trouble making payments, it is best to talk to the lender about restructuring your payments. Otherwise, it could cause your credit score to plummet. You might also consider reading the Dave Ramsey baby steps here to gain control of your finances.

What happens if I stop paying my personal loan?

In the event that you are no longer meeting your monthly payments on a personal loan, this will result in the loan being defaulted. As a result, you will owe more money because you must take into account the late fees, penalties, and other charges.

Can I stop paying my student loans after 20 years?

There is no such thing as student loans expiring. But when your loan is 20 years old or more, you can seek out loan forgiveness on the remaining balance of your student loan. Those who are eligible will be placed under the Pay As You Earn program, which is an income-based repayment plan.

What happens if you stop paying your school loans?

It is not uncommon to experience trouble paying off school loans. But if you voluntarily stopped making payments, there could be serious consequences. Not only could your credit score take hit, but when your loan goes into default, wage garnishment could happen or your government benefits could be intercepted.

What happens if I stop paying a used car loan?

If you fail to make your payments on a used car loan without reaching an agreement with the lender, your car will most likely be repossessed. In the event that the lender sells your car for less than the original amount you owed, you owe the lender the difference for that.

Is it illegal to stop paying on a loan?

While not all types of unpaid debt can be pursued legally, some loan providers will send out debt collectors to harass you about making payments. If you want to eliminate this stress from your life, it is best to discuss with your loan provider about restructuring your payment plan or consider getting a consolidation loan.

What happens if I don’t pay my title loan back?

If you obtained a title loan and you are unable to make payments for that loan, it gives the lender the right to repossess the item (such as house or vehicle) that the title is attached to.

What happens if I stop paying an unsecured loan?

Unlike secured loans wherein the lender can repossess any items listed as your loan collateral, the same cannot be said with unsecured loans. For this reason, the lender will charge penalty fees and higher interest rate on your loan, if you default. Your account could also be turned over to a collection agency to handle the collection of debt payments.

What happens if I stop paying my 401k loan?

If you are unable to make payments towards your 401k loan, it will go into default. When this happens, you will be taxed on your outstanding loan balance. You will also be charged with an early withdrawal penalty if you took out the loan before the age of 60.

What happens when you stop paying on a flex loan?

If you are unable to pay flex loan, the lender could take legal actions against you as they have the right to implement the terms of your loan contract. You can get in touch with them to see if you have the option to cure the default on your flex loan.

What happens if I stop paying my bank loan?

The most basic step when you fail to pay your bank loan is for the bank to forward your debt to a collection agency. For this reason, the tactics employed to collect payments for your loan is aggressive (especially if your loan amount is significant). This usually happens when your payment is late for 30 days. In this event, your credit score will plummet.

What Happens When You Stop Paying Your Bills

Credit Card Bills and Debts

Credit card debt is one of the leading forms of debts in the US alone. If you are dealing with massive credit card debt or unpaid bills, get insight into what you can do about your situation with this list of commonly asked questions.

What happens if you stop paying your credit card bills?

Depending on how long since you have stopped paying your credit card, you will be contacted by the credit card company about missed payments. If you do not pay for three consecutive payment schedules, you will be forwarded to a collecting agency to handle your bills payment. This contact will continue after payment has been made. On top of the payments of your bills, you might be charged with penalties such as late fees or increased interest rates. This could also cause negative impact on your credit score.

Should I stop paying my credit card bills?

While your unpaid credit card bill can be charged off after 7 years, there are serious consequences that you have to deal with for doing so. When you miss your credit card bills payment, the credit card company can report those to the credit reporting agencies. The longer your credit card bill remains unpaid, the more serious the consequences are to your credit score. Consider bill consolidation either with a balance transfer or consolidation loan..

Can you stop paying credit card bills temporary?

If you are struggling to make your credit card payments, your initial instinct is to ask the credit card company to let you skip payments. There are some credit card companies that allow you to ‘skip a payment’ so you can get relief, especially when your budget won’t allow credit card payments to be made. But while it might sound enticing, it will only accrue more interest on your balance when you skip payment. This extra interest could add more months needed to repay your balance.

Should I stop paying my credit card debt?

If you want to skip payment for your credit card debt, it will create a snowball of problems financially. The first consequence is that you will be charged with late fees and penalties. This will be added to your credit card account, on top of your existing credit card debt. As a result, it will also cause your minimum monthly payments to go up. All of the missed payments will be added to your total, also increasing your monthly minimum payments.

These things can add up to hurt your financial situation and your credit score. The impact on the credit score is far more significant as it will affect other aspects of your life, such as your ability to buy a house, car, or get approved for any type of loan.

What happens when you stop paying your corporate credit card?

Failing to pay your corporate credit card will have serious consequences to your finances. The most obvious consequence is that it will be reflected on your credit report. When you avoid your credit card bill, it acts like a sledgehammer to your credit score. The effects of a lowered credit score because of unpaid credit card bills creates a ripple to other aspects of your life linked to your finances.

How to protect your house when you stop paying credit cards?

While credit card companies cannot automatically seize your home or any other property, most of them would file a lawsuit against you – the debtor. If they win the lawsuit, they have the legal capacity to seize your personal belongings, which includes your home or car. The aim is for them to recoup the losses from your unpaid credit card debts in exchange for these personal items or properties.

How to stop using credit cards and pay them off?

If you want to stop acquiring new credit card debt, the most basic step is to stop using it. If you want to pay off your existing credit card debt, first you need to evaluate your spending. If you can identify the items that you are buying with your credit card that are not considered “necessities”, you need to proactively eliminate them from your shopping list. Writing down a budget is a good way to make this happen.

It is also a good idea to hide your credit card (or don’t bring it with you), so you are not tempted to use it. From there, you can consistently pay as much as you can towards your credit card. Try to pay more than your minimum monthly payments so you can pay off credit card debt sooner.

Can an elderly person stop paying on credit cards debts?

Seniors are not exempt from making payments on their credit card debt. This is a real issue facing many seniors these days as the rate of inflation means that their pension payments or savings might not be sufficient to support their lifestyle post-retirement. If possible, seniors should seek the help and support of their families to deal with credit card debt, or seek the help of debt relief programs.

Can you stop paying credit card bills?

If you stop paying your credit card bills, you will only make your situation worse. Not only are you unable to eliminate your debt, but you are adding to it. Credit card companies are notorious for charging late fees on accounts that miss their payment schedule. Any incident of missed payment is reported by your credit card company to the credit bureaus. The long-term impact on your credit score can therefore be devastating.

How can the elderly stop paying credit cards debts?

If a senior or elderly person is unable to pay their credit card debts, there is really not much that creditors can do. The worst thing that creditors can do is to sue the elderly person who owes them in credit card debt. They wait for the judgment but beyond that, there is nothing that they can do.

Can an elderly person stop paying on credit cards debts?

Depending on an elderly’s financial situation, they might be declared as “judgment proof”. If this is the case, the creditors have no legal recourse to perform on an elderly person, so they cannot take any legal action to pursue the credit card debt. To make sure about this, it is best to consult legal advise on the matter.

Do I have to stop paying credit cards during debt settlement?

Yes. When you have entered into a debt settlement program, you are trying to negotiate a lower payment amount on your credit card. The idea is to lower your monthly payments to make it easier to manage payments. Hence, you should stop paying until you are ready to accept the lower payment scheme.

What Happens When You Stop Paying Your Bills

Bills Payment Specifics

When it comes to managing your bills payment, the policies are different for each company. This section will look into the specific ways to handle bills payment (or non-payment) according to which company you are dealing with.

What happens if you stop paying your sprint bill?

If you are unable to pay your Sprint bill, you will be fined with late fee charges (on balances that are 30 days or more past the original billing cycle). A Sprint representative will call you about your late payments. Eventually, if you are still unable to pay, they will cut your line so you won’t be able to use their service.

What happens if I stop paying my Verizon bill?

If you are past due bill and still have not paid them, Verizon will contact you in an effort to bring your account up to date. You can also make a payment arrangement with them to suit what is most convenient to you. If you still refuse to pay your Verizon bill, your account could be suspended while they pursue your existing debts.

What happens if I stop paying my T-Mobile bill?

If you do not pay your T-Mobile bill, the first step that the company does is to contact you. They will remind you about missed payments and how you can keep the payments updated. If you still choose not to pay your bill, they can do one of two things: 1) terminate your T-mobile services instantly, or 2) hire a debt collection agency to contact you on their behalf.

In most instances though, if you miss payments for a certain number of due bill, the services on your phone will be cut off.

What will happen if I stop paying my Comcast bill?

If you stop paying your Comcast bill, the company will immediately disconnect your service. If, even with attempts from Comcast to contact you about your unpaid bills, you refuse to pay your bill, your contract will be officially terminated. But this does not mean that you will be exempted from making payments. Instead, your Comcast bill will be turned over to a collecting agency, which will be the one responsible to pursue your unpaid bills. You will be asked to pay your unpaid bills and any other equipment part of your contract.

What will happen if I stop paying my ADT bill?

If you want to stop paying your ADT bill, it is best to terminate the contract instead. This won’t be difficult if you take the necessary steps. You can cancel your contract without any payments to be made if you are on trial period or when you move to an unserviceable area. If you are not qualified for the trial period situation, the contract states that you must make 75% payment on your contract agreement. If you choose not to pay their bills (instead of paying 75% of your contract as ‘buy out’), you can avoid their payments collection but it will take a hit on your credit score.

Is your phone deactivated when you stop paying bill at Cspire?

Yes. If you are unable to pay your bills at Cspire or keep your balance at zero within a 60-day consecutive period, this will automatically close your account. You can still re-instate your service but you will be assigned a new account. A reactivation fee will also apply, if you wish to reactivate your account.

What happens if you stop paying your Vodafone bill?

When you are unable to pay your Vodafone bills for 3 straight months, your service will be deactivated permanently. When this happens, Vodafone will forward your outstanding amount to a collecting team. They will be the one to get in touch with you about your unpaid bills. You will also receive a legal notice from Vodafone, compelling you to pay your bills to the collecting agency. Otherwise, you will be pursued legally.

What happens if I stop paying my Amazon card?

If you stop paying your Amazon card, your card will be temporarily disabled – meaning you won’t be able to use your card. Depending on how many payments you’ve missed, your card could be permanently deactivated. You will still be asked to pay off your outstanding balances on your card.

What happens if I stop paying my BestBuy credit card?

When you stop paying your BestBuy credit card, one of two things could happen. The first one is that the company will pursue you for your unpaid debts. Depending on how long it’s been since you last made payment, the other consequence of not paying your BestBuy credit card is for it to be deactivated.

Claire Matthews

Claire Matthews

Financial Advisor, DCL

Claire is a noted financial writer and author of hundreds of articles about personal and business finance. Before getting her MBA, she graduated with a BS in Economics. Her coursework focused on the different ways that debt, debt structure, and debt restructuring affect micro and macro-economic issues.

Upon graduation, she took a job at an investment bank that worked with municipal and county governments to help them reorganize and structure their debt so they could continue to provide essential city services.

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