Three days ago, my credit card bill just arrived and I was shocked when I tore the clean white mailing envelop that Mr. Postman handed to me. The bill says “Thirty Eight Thousand worth of extravagance and ultimate shopping sprees plus a Two Thousand worth of overpriced coffee”. Fortunately, this was the result of Holiday seasons which we can obviously justify since Holiday season is the most expensive season of the year. And since I was pretty bored that day, I ended up thinking “WHAT IF I DON’T PAY MY CREDIT CARD BILLS?”, what will happen to me? Will I go to court for not paying my debts? Will I run to the mountains and live there with donkeys and pigs so that credit card companies will forgive me with my debts? Will I change my entire identity so that credit card companies can’t find me? Or fake my own death? What will happen if I don’t pay my credit card bills?
In worst case scenarios, the simple and undisputable truth about your credit cards companies and not paying your debts are:
If you fail to pay your debts:
If you get in the situation that you missed or failed to pay your debt, the first thing that will happen to you is you’ll receive a call from the Credit Card Company’s Representative to remind you that you should pay your debts with them. After payment (If you already paid them), that incident will be reflected in your credit rating which has something to do with the credit limit given by your credit card company. Unfortunately, your credit limit will decrease enormously.
If you decided not to pay them, more calls from the Credit Card Company’s Collection Department demanding to settle your accounts. After you’ve reached a pre-determined number of non-payments of your unsettled debts, the Credit Card Company will give up on you and sell your accounts (unsettled debt) to a Collecting Agency. This is simply called Receivable Financing.
Receivable Financing in simple terms:
From the point of view of the Credit Card Company, Receivable Financing is the financial flexibility or capability of a business entity to raise money out of its receivable. Applying it to my current situation, the Credit Card Company will sell your unsettled debt worth 38,000 to a Collecting Agency for a lower price. For illustration purposes, both companies agreed that my account be valued for 15,000 only since this is a delinquent and very little probability to be paid. Credit Card Company will transfer their ownership of my unsettled debts to the Collecting Agency. Big Credit Card Companies do this to minimize their losses. Common sense, it’s better for them to earn 15,000 (income from the sale of my debt) and a minimized loss of 23,000 than nothing.
I have no more liability to my Credit Card Company, should I celebrate?
No, you’re still indebted to the Collecting Agency. This is the dirtiest part of the collection of debt. They will phone you more frequently and squeeze you to pay them. They will send you tons of demand letters. Don’t pay too much attention to this letter, just read it. Keep it or make an Origami out of it. (hahaha, Joking!) They also send you Collectors in your house and talk about the law (which you can easily contradict if you know “THE LAW”, I’ll talk about this later. Promise). Worst thing that a collector could do to you is to threaten you that you might be summoned to court, leave you with a high blood pressure and irritated.
The big story behind this is that the Collecting Agency is on the pressure to collect any amount of cash to you to avoid possible loss. Remember in my illustration, they bought my unsettled debts for 15,000. If I paid them the whole amount of 38,000 which is my actual debt, they’ll be looking at a 23,000 income. Simple as that. To add, the Credit Card Company – Collecting Agency transaction will not be disclosed to you, you will not be notified. This is an internal transaction and not communicated to you.
Article III Bill of Rights Section 20 states that “No person shall be imprisoned for debt or non-payment of poll tax”. It is clearly stated, right? You will not go to jail. Lucky for you, the collecting agency will not spend enormous amount of money to sue you in court. Organizing a court proceeding cost them money so unlikely, they will not pursue you. Not unless you have multimillion debts. If the stupid collector lectured you about Estafa, slap him hard in the face then tell him/her these words:
“Estafa is committed by a person who defrauds another causing him to suffer damage, by means of unfaithfulness or abuse of confidence, or of false pretense opt fraudulent acts. For the existence of the crime of estafa, two elements are indispensable: fraud and damage.2 In other words, the essential elements of estafa are: (1) The deceit employed to defraud another; and (2) the injury or damage caused thereby.”
Since there is no deceit, unfaithfulness or abuse of confidence added to your situation, they cannot inject the crime Estafa. Your situation is you’re unable to pay your debt. You don’t deceive anyone. Estafa can also be associated with bouncing checks.
To put emphasis, Nonpayment of your debt is not a criminal act. You cannot go to jail.
So what happened if I’m not able to pay my debts?
The worst thing that could happen to you is that you’ll not be able to have loans from financial institutions. You Credit Rating or Credit History will be badly hurt by the nonpayment of your debts. If you’re planning to loan from the bank, they will end up with you records for nonpayment of your debts. Instantly, they will decline your loan application.
Expect regular calls from the collecting agents, more demand letters and frequent visitations from the Collecting Agent in your house. Add the factor of stress and trauma brought by those four things and that’s it.
True Story 1:
We were having a lunch in the office when the conversation diverted to credit card debts. One of my told her story. She was like indebted to a credit card company amounting to 80,000, unfortunately, she was unable to pay them. Interest rates were so high. It made the original debt of 80,000 to 140,000. The usual things happened. Calls, Demand letters and Collecting Agents. Then after a year, the Collecting Agency got tired of her and totally forgot her. She was so happy. I think it was luck that striked her that she was able to raise extra 50,000 after 2-3 years. She contacted the Collecting agency and negotiated that she can pay them but not the whole amount. Both parties agreed with the 40,000 settlement and the Collecting Agency released her from any liability and promised to clean his credit rating. My officemate promised to herself that she will not use another credit card again. And they both live happily ever after…
True Story 2:
Still in the office, another senior manager told his story. It was the same scenario like True Story 1. Unsettled debts of 200,000 and the nonpayment of it. Then the time comes when He got married and tried to make a housing loan from a local bank. The bank declined him. The bank representative showed him his records. He was shocked that the bank was able to get to see his unsettled debts. The bank representative told him that all financial institutions are merely connected to each other. They maintain a database of those people who have to be in the “Black List Status”. Once a person run from his debts from them, the first thing they will do is to put his name to this database. My Senior Manager did not get the loan. He suffered from his delinquency.
Good energy and happiness to everyone!