What Happens If You Don't Pay Your Debt?

When you don't pay your debt, debt collectors and collection agencies can both report your debt to credit bureaus and also pursue legal options. These legal remedies can include filing a lawsuit in either state or federal court; obtaining a judgment; and any attempts to collect on judgments. These attempts to collect after a judgment has been entered can include garnishments, citations, attachments, and bank garnishments.

Furthermore, secured property may be repossessed and later sold at an auction. The two most common examples of this are a home that goes into foreclosure and a vehicle that is repossessed. This process can occur to any property that is secured by a loan. In these situations, a creditor can also choose not to repossess the property and sue you instead for the full amount owed. Often, property that is repossessed is sold at an auction for less than what was remaining on the loan balance. The difference between what the property was sold for and what was actually owed on the loan is called the deficiency balance. You are still responsible for this amount, but the deficiency balance is no longer a secured debt.