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What Happens If I Can’t Pay My Debt?

Falling behind on debt payments can feel scary and overwhelming. But you have options. Understanding the debt collection process can help you make informed choices to resolve your situation.

Getting Behind on Payments

Life happens. Medical bills, job loss, divorce—any number of factors can make it difficult to keep up with debt payments. If you miss one or two payments, your creditor may give you some leeway. But if you continually fall behind, your accounts will likely go into default eventually.Default means you have failed to meet the legal obligations of your loan or credit agreement. Exactly when default occurs depends on the type of debt:

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  • Credit cards: Most issuers will declare an account in default if you are 180 days (about 6 months) late on payments.
  • Auto loans: Default typically occurs after 3 months of missed payments.
  • Mortgages: Foreclosure proceedings usually start after 90 to 120 days of delinquency.
  • Student loans: Federal loans go into default after 270 days without payment. Private loans may default sooner.

Let’s break down what happens at each stage of delinquency.

30 Days Late

Creditors start contacting you almost immediately after a missed payment. Expect phone calls, emails, and letters urging you to pay the past-due amount as soon as possible.Stay in communication with your lenders during this initial stage. Explain your situation honestly and ask about hardship options, like reduced payments or temporarily waived fees. This shows good faith and can prevent further delinquency down the road.

60-90 Days Late

If you are 60 to 90 days late, creditors step up collection efforts significantly:

  • Your credit score takes a hit, making it harder to qualify for loans and credit cards in the future. Missed payments can ding your score by as much as 110 points.
  • You’ll get more frequent calls and notices, which must disclose that the communication is from a debt collector.
  • Your account gets sent to a collection agency. The original creditor essentially sells your debt for pennies on the dollar hoping the agency can recover something.
  • You may face legal action like wage garnishment or asset seizure if you still don’t arrange repayment.

This is the time to very seriously consider your options, which we’ll outline below.

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120+ Days Late

Letting an account stay 120 days past due has major consequences:

  • Mortgage and auto loans usually get sent into foreclosure and repossession proceedings around this stage. You risk losing your home or vehicle.
  • Most other debt gets charged off by the creditor as unlikely to be repaid, but the collection agency will keep pursuing you.
  • Your credit score can plummet below 500, labeling you “very high risk” to lenders. This makes it extremely hard and expensive to get any kind of financing.
  • You may face lawsuits, property liens, bank account levies, or wage garnishment without further notice. These legal actions allow collectors to seize assets and money to satisfy the debt.

Essentially, the later you go without addressing delinquent accounts, the fewer rights and options you have. Acting quickly gives you more control.

Options for Resolving Debt

If you default on obligations, you still have ways to resolve what you owe and repair financial damage. It takes time and dedication, but people recover from debt all the time.

Payment Plans

Creditors often agree to customized repayment plans based on what you can afford monthly. This helps you get current gradually without further hurting your credit. Payment plans may have settlement offers built in too.

Debt Consolidation

Borrowing money to roll multiple balances into one lower monthly payment can make debt more manageable. Consolidation loans come from credit counseling agencies or online lenders.

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Debt Settlement

In exchange for lump sum payments, collectors/creditors may settle accounts for less than the full amount owed. Each party takes a loss in order to resolve the debt. Settlements require disciplined saving but let you pay off debt faster.


Declaring bankruptcy eliminates or restructures financial obligations after your assets get used to repay creditors. Chapter 7 bankruptcy discharges most unsecured debt. Chapter 13 bankruptcy allows a 3-5 year repayment plan for debts like medical bills. Bankruptcy damages credit for years but prevents collections and lawsuits. Reaching out for help takes courage but is so important. A credit counseling agency can assess your situation, explain all your choices, and even negotiate plans with creditors on your behalf.There are also excellent online tools like Trim that analyze financial accounts to detect savings opportunities and disputed charges. Over time, diligently monitoring expenses this way helps ease budget strain so you can allocate more money toward debt repayment goals.And don’t hesitate to consult an attorney if you feel overwhelmed navigating the debt resolution process alone. Nolo has a lawyer directory and educational resources to help you understand your rights as a consumer. The most important thing is taking that first step to face the problem and chart a new path forward. You have power over your financial situation, even when events feel out of your control. There are people in your corner who want to help. So breathe deep, make the call, and start resolving debt today.

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