Problems you face when defaulting on credit card debt.
Credit card or cash advance debt is a problem for many people, whether it stems from necessary expenses or excessive spending, either intentionally or unintentionally. A lack of planning and monitoring of expenses leads to credit card debt.
Some people even accumulate debt on multiple credit cards, starting with overspending, then using one card to pay off another, causing the debt to spiral out of control. Ultimately, when they can no longer pay, they choose to default – not to run away, but to avoid paying. But did you know that this behavior can create unforeseen and significant problems?
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1. Stress from debt collection attempts
When you have credit card debt and fail to pay on time, the credit card company will begin collecting the debt, asking for reasons for non-payment and the date you can make the payment, through various contact channels, including house and/or work phone numbers.
If the debt is still not paid after collection attempts, the credit card company will send a letter outlining the next steps, such as changing from a temporary suspension of the credit card to a permanent closure. For large amounts of debt, there may even be a warning letter stating that legal action will be taken if payment continues. This also damages the reputation of those being pursued for debt collection.
Of course, being pursued for debt and the various measures taken by creditors can cause stress, pressure, and distraction, affecting personal life and work.
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2. Having a negative credit rating, leading to a loss of financial credibility.
A credit bureau report contains information about the history of individual and corporate clients in paying debts to financial institutions that provide credit cards, cash advance cards, insurance, and various loans. This includes approved credit limits, spending patterns, debt repayment, and the status of the service.
In the case of credit cards, if credit card debt is not paid for more than 3 months, the individual's account status will be downgraded to a poor credit history, resulting in the inability to obtain loans for real estate and other types of loans.
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3. Obstacles in obtaining real estate loans.
One of the things financial institutions often consider when considering a house or other real estate loan is credit card and cash advance debt. They calculate 10% of the outstanding credit card debt and 5% for cash advance cards to reduce the loan amount.
The reduced loan amount may not be enough to cover the mortgage payments, forcing borrowers to find additional funds from other sources. And if you can't find the money in time, you may lose the reservation fee and contract fee already paid to the developer for new houses, or the deposit paid to the houseowner for second-hand houses.
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4. Asset Seizure
Defaulting on credit card debt is a civil case. Financial institutions that are creditor creditors can file a lawsuit. Many people wonder how much credit card debt leads to a lawsuit. The law doesn't specify a minimum debt amount, so it depends on the creditor whether or not to sue. Generally, banks will pursue the debt for a period of time. If they cannot contact the credit card debtor, or if they can contact them but still don't receive payment according to the schedule given during the collection process, the financial institution will file a lawsuit.
What is the statute of limitations for credit card debt? The answer is 2 years from the first day of default. The court usually rules in favor of the creditor because there is clear evidence of the debt and default. If the debtor does not pay within 30 days after the judgment is announced, the creditor has the right to seize assets and marital property, such as money in bank accounts, valuables, jewelry, vehicles not used for business, and in some cases, even houses and land are seized due to credit card debt.
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5. Salary Garnishment
This only happens when a credit card debtor evades, ignores, fails to contact creditors, defaults on payments, or fails to reach a payment agreement. The Department of Legal Execution will then request to garnish the debtor's salary, which is only possible for private company or state enterprise employees, but not exceeding 30% of their salary, and the amount must be more than 20,000 baht. Bonuses, performance bonuses, overtime pay, and severance pay can also be garnished.
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6. Bankruptcy
Most credit card debt cases end with negotiation instead of bankruptcy proceedings, except when the court determines that the debtor has more than 1 million baht in credit card debt that is impossible to repay. Once declared bankrupt, the individual will be unable to conduct any financial transactions, including opening a bank account, and wills. They will also be unable to enter into any legal agreements such as sales contracts, employment contracts, or wills.
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Furthermore, it impacts their employment, as they will be unable to hold any positions in a company and cannot travel abroad. For the latter two, permission must be obtained from the court if absolutely necessary.
In reality, you should have no more than three credit cards or only as many as you need, because having too many can be detrimental. The higher your spending limit, the higher the chance of overspending and falling into debt.
If you encounter credit card debt problems, it can be easily resolved by starting with building financial discipline, creating a clear income and expense plan, reducing unnecessary expenses, and calculating your debt to create a systematic repayment plan. With these steps, your large credit card debt will soon disappear.
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Thank you for the valuable information from DD-Property.
