What Is Bad Credit Debt?

Bad credit debt is credit given to a person who has bad credit. It is often given with very low limits and extremely high interest rates. After one missed credit card payment, companies slap on late fees. Interest rates increase and add to the amount you owe. If that rises over your limit, over-the-limit-fees increase that amount even more.

Unpaid Credit Card Debt

Credit card companies will spend the next 180 days contacting you repeatedly to get payment. They’ll demand the full amount owed to bring your account current.

During that 180 day period, the credit card debt is considered late or unpaid. The fees keep increasing every day until you pay what is due. This amount is usually the payments you’ve missed, plus interest, plus late and over-the-limit fees. Your one late payment can quickly triple making it harder to catch up on your bills.

The Switch To Bad Credit Debt

After 180 days, the credit card company feels you’ll never pay what is owed to them. They mark your account as bad credit debt. Bad credit debt looks risky to investors and stockholders, so companies want to get it off their books. Taking it as a business loss, reduces their income tax burden.

Instead, they sell to a debt collection agency. That company will contact you repeatedly or even take you to court to get what you owe.

Ridding Yourself Of Bad Credit Debt

Once your accounts are moved to a bad credit department, you can seek the help of debt settlement or debt consolidation services. Some collection agencies will agree to accept a portion of what you owe just to get the account cleared, but they’ll expect the payment in full.

Often, the accounts are sold without any supporting paperwork. You can ask the debt collection agency to prove you owe that debt. If they are unable, they’ll have a hard time proving their case. If they do take you to court, there is the risk that the judge will garnish your wages. To prevent this, it’s always best to work out a solution before it reaches that point.

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1. Should I Default On My Credit Card Debt?
2. What Do Credit Card Companies Do On Default?
3. Who Can Help With Credit Card Debt Consolidation?
4. What Happens If I Am Not Paying Credit Card Debt?
5. How To Stop Creditors From Freezing Your Bank Accounts?