What Happens If You Don’t Pay A Bill?

Not paying a bill on time can have serious consequences. Ignoring bills and debt won’t make them go away. In fact, avoiding and not paying your bills can make the situation much worse. Here’s what can happen if you don’t pay a bill.

Collection Calls

If you miss a payment, the creditor or service provider will likely start calling you. They’ll remind you that your payment is late and ask when you plan to pay. As you continue to miss payments, the calls may increase in frequency. Debt collectors could also start calling on behalf of the original creditor to get you to pay up. These collection calls will continue until you settle the debt.

Late Fees

Most creditors charge late fees when you miss a payment. This extra cost is typically a percentage of your monthly payment. For example, your credit card company may charge a $35 late fee on top of your $200 minimum payment. Late fees can add up quickly if you’re habitually late with payments.

Penalty Interest Rates

Some creditors will increase your account’s interest rate if you’re more than 30 days late on a payment. This penalty APR makes your existing balance even more expensive. For credit cards, the penalty rate may be near 30%. Mortgages and auto loans also commonly have higher default rates for those who are late on payments.

Lower Credit Scores

Payment history is the biggest factor in your credit scores If you have late payments, your credit score will go down. A single 30-day late payment could drop your scores by as much as 110 points The more severe and recent the delinquency, the bigger the impact on your credit. Damaged credit makes it harder to get approved for loans and credit cards. You’ll also pay higher interest rates due to the perceived risk.

Debt Collection

After a few months of non-payment, the creditor will likely write off the account as uncollectable and sell it to a debt collector. Debt collectors buy old accounts for pennies on the dollar hoping to collect a portion of the balance. As a debt buyer, collectors can sue you, garnish your wages, put liens on your property, and continue making collection calls.

Lawsuits & Wage Garnishment

If you don’t work with collectors or stick to alternate payment arrangements, you may face a lawsuit for the unpaid debt. If the collector sues and wins a judgment against you, the court can order your employer to garnish your wages. A portion of each paycheck will be paid to the collector until the judgment is satisfied. Lawsuits are more common with larger debts.

Property Liens

For secured debts like mortgages and auto loans, not making payments gives the lender the right to repossess the property. They can foreclose on your home or repossess your car. For other debts, collectors may put a lien on your property, so if you sell, they get paid first. State laws vary on what property creditors can place liens against.

Utility Shut Off

If you fall behind on utility bills, the service provider can shut off service after proper notice. This includes having your electricity, water, gas, cable, internet, or phone disconnected. Most states regulate utility shut offs, including restrictions on winter shut offs. But going without basic utilities can make your living situation difficult.

Bank Account & Asset Seizure

A collector with a court judgment against you has powerful collection tools at their disposal. They can seize money from your bank accounts through bank levies, as well as seize other non-exempt assets. Collectors must leave a certain amount of money in consumer accounts. Your car, work tools, and basic household items are usually protected.

Bankruptcy

For those facing numerous collection lawsuits and garnishments, bankruptcy may be an option. Under bankruptcy law, you can eliminate most unsecured debts while keeping protected assets. But bankruptcy damages your credit for years and isn’t always the best solution if you have assets. Meet with a bankruptcy attorney regarding your specific situation.

Jail Time

Being sent to jail for unpaid debt is rare and only happens with certain types of debts. Most civil debts cannot be enforced with jail time. But things like criminal fines, child support, and alimony can result in jail time for non-payment through contempt of court charges. Taxes and student loans also have some exceptional enforcement policies tied to them.

Tips for Managing Bill Payments

Here are some tips to help avoid missed payments and navigate financial hardship:

• Prioritize essential expenses – Pay necessities like housing, utilities, food, insurance first.

• Contact creditors early – If you anticipate missing a payment, call right away to discuss options. Don’t wait until you’re past due.

• Request due date changes – See if any creditors can align payment dates with your pay schedule.

• Look into hardship programs – Ask about delayed payment plans or reduced payment arrangements.

• Avoid payday & title loans – These trap consumers in cycles of ultra high-interest debt.

• Consider debt relief options – Debt management plans, debt settlement, and bankruptcy are options for those overwhelmed by debt.

• Get free credit counseling – Nonprofit counselors can help you budget, negotiate with creditors, and develop a plan.

• Prioritize medical bills carefully – Make sure you actually owe the bill and negotiate costs before paying.

• Know your rights – Federal and state laws provide some protections regarding debt collection and erroneous medical bills. Don’t hesitate to exercise your rights when defending yourself against collectors.

Falling behind financially and struggling with debt can happen to anyone. Job loss, medical issues, divorce, and many other factors can disrupt even the most stable budgets. If you proactively communicate with creditors, prioritize essentials, and use credit counseling resources, you can minimize the damage when money gets tight. While ignoring the issue seems easier in the moment, it will only amplify your problems down the road.