Writ of Summons
When you have not paid your credit card companies for six months they must write off your account as a bad debt. This information is then reported to the credit reporting agencies. Most credit card companies will then forward your account to a third party debt collector commonly known as a collection agency. This agency will start further collection activities. If the credit card company decides to sue you, the court will send you a writ of summons that tells you the court date, time and location.
Once you receive a writ of summons, you can avoid going to court by contacting the collection agency or attorney handling the account for the credit card company and make payment arrangements. Set up payment arrangements that are comfortable for your budget. Offer to pay the balance by settling the account. A settlement is when you offer to pay a reduced balance in the form of a lump sum. These settlements can be significantly lower than your current balance. Some creditors are willing to accept as little as 40 to 50 percent of the current balance. Sometimes you can make a settlement offer and still make monthly payments, instead of a lump sum, on the settlement amount.
If you reach a settlement offer with the credit card company or collection agency, make sure they provide written documentation of the settlement before you send the funds. There have been cases where debts were settled but a collection agency continued to pursue the remaining balance. Without documentation, you will find it difficult to prove you had reached a settlement agreement.
Consumer Credit Counseling
You may want to contact consumer credit counseling and enroll in a debt management program. You pay a lump sum into the program, and the counseling agency will disburse funds to your creditors. This program is partially funded by creditors, so your creditors may be willing to participate and accept the arrangements through a consumer credit counseling service.
As a last-ditch effort, you may want to file bankruptcy. Whenever you file a petition for bankruptcy, whether a chapter 7 or 13, your creditors receive a notice called an "automatic stay." This prohibits creditors from continuing to contact you by phone, mail or other methods. More important, creditors must stop any legal proceedings against you. A bankruptcy will negatively impact your credit score and remains on your credit file for 10 years. Bankruptcy will typically prevent you from future credit approval, but after several years, you will be able to reestablish credit.
Statute of Limitations
Each state has rules and regulations regarding debt collection. Once the statute of limitations has run out, debt collectors can no longer pursue legal action. Credit cards are considered open-ended accounts, or revolving accounts, and they have different timeframes for the statute of limitations, which can range from three to eight years. Usually, the statute begins as soon you miss a payment on your account. Some things, though, can cause a statute to reset, such as making a payment or negotiating new payments with a creditor. This does not hold true for every state. Check your state laws to see if the statute of limitations has run out.