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The consequences of not paying your debts

Aside from the people in your life, your car, your home, your education and your health are likely among the things you cherish most. They are also probably the things that cost you the most money. In fact, as much as you need these things, paying for them may be the reason you can't sleep at night.

The most recent data shows that you are among the many in Tennessee and across the country struggling with debt to the tune of $12.73 trillion. This is the highest level of debt Americans have held since 2008. The temptation for many — and maybe you have felt this too — is to simply pretend it isn't there and see what happens. You may stop opening your mail, answering your phone or seeing who's at the door because you just know it will be someone harassing you for payment.

So, what happens if I don't pay?

Student loans, medical bills, mortgages and car payments typically come from a variety of lenders, and each has its own way of dealing with borrowers who don't pay. The most common actions a creditor may take against you include:

  • Charging you penalties and late fees
  • Turning over your account to a collections agency
  • Reporting you to the credit bureaus
  • Garnishing your wages

If you have a federal student loan which is in default, the government may also garnish your Social Security check and any federal tax refund to which you are entitled. Creditors also have the right to sue you, and since private lenders of student loans don't have the same liberties the government does in collecting debts, these private lenders typically resort to lawsuits.

Medical bills, mortgages and car loans

The two good things about receiving a huge medical bill are that they often contain mistakes (some say about 80 percent of the time), and medical providers are usually willing to work with you on paying them back. Sometimes they will even negotiate a lower balance. Financial advisors always recommend double-checking the accuracy of your bill before paying any portion of it.

Mortgage companies don't want to foreclose on you, so they typically give you many warnings, most often with penalties attached. Eventually — usually after four missed payments — the lender will begin the foreclosure process. This process can take many months during which time you will be able to remain in the home while you seek a remedy. Then the bank will put your house on the auction block.

The consequences of missing a car payment are typically much swifter. Some lending contracts allow a lender to repossess the vehicle or deactivate its ignition system within a few weeks of a missed payment. Repossession can be humiliating, and reclaiming your car is expensive and complicated.

Another option

Ignoring your bills or refusing to pay may not hurt the lenders. One way or the other, they will get what they say you owe. Your credit score will suffer, your life will be disrupted and you will probably end up paying more in fees, fines and penalties.

Another option is to eliminate the debt altogether. Speaking with an attorney will provide you with information about the options available to help you deal with overwhelming debt. One of those options may be bankruptcy, and your attorney will help you determine if this is the best step for your circumstances.

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
Fax: 423-877-0363
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