What Would Happen If You Just Stopped Paying Your Bills
This is What Would Happen If, a close examination of mundane hypothetical situations. Each week, we look at something that you could do but probably never would, and take it to its logical endpoint. This week: What would happen if you stopped paying your bills?
It's a cliché, but a true one at that: We all have bills to pay. Just existing in society requires you to pay a utility bill, a gas bill, an internet bill, a phone bill and if you've graduated college within the past decade, a student loan bill. They add up.
Previous editions of What Would Happen If have dealt in light-hearted improbabilities, like eating moldy bread or not wiping your butt. However, for many Americans — we're talking here about the 63 percent who would not be able to afford a $500 emergency — not paying your bills is anything but improbable. It's a crushing reality.
So what happens when you won't, or most likely can't pay your bills? We spoke to Dean Kaplan, president of collections agency The Kaplan Group, to get a better idea about what's going on the other side of the debt collections fence.
Obviously, the first consequence of not paying your bills depends on the service it's for. In most cases, it'll be for a utility — in which case after a month or two of being past due whatever it is you're not paying for will just be shut off. Other things like credit cards or student loan payments will just continue to rack up interest.
Eventually, the company will get tired of trying to get you to cough it up themselves, and they'll enlist the help of a debt collector: A professional whose sole purpose is to, well, collect on a debt.
Although the phrase "debt collector" is certainly a loaded one, you should know that legal protections exist to help protect you from these folks: The Fair Debt Collection Practices Act. "That is to govern the agencies so that it's at least illegal to do a lot of the abusive and harassing that used to be commonplace before the law," says Kaplan. "That restricts how often you can call, what time of day you can call, what you can say to people who aren't the actual person who owes the money."
Assuming that the collector is a fair, law-abiding agency they'll start sending you letters and calling you. This presents two possibilities.
The first is that you pick up phone. In that case, the nice debt collector will inform you how much you owe to a given company, and will ask if you can pay it now. Because you neglected to pay the bill in the first place, we'll assume you say you cannot. This will cause the debt collector to pursue other avenues for payment. They might say, 'Don't you have a credit card you can do this on?'," Kaplan explains. "If they pulled up your credit report — because they have a right to do that — they might be able to say 'Wait a second, you've got that Capital One card there, and yeah you owe them $2,000 but there's a $3,000 limit, you can give me that card right now to pay it off."
The mindset of a collector is fairly simple, says Kaplan. "From a collector's standpoint, you want payment in full, now," he says. "If I can't get payment in full, then I want 50 percent now. I want to try to get something now, and a firm commitment on a payment. That's what I'm trying to accomplish."
This brings us to our second possibility: Completely ignoring everything. Contrary to what you might think, and as scary as a debt collector may try to sound, they cannot just take your money. "At the end of the day, the collection agency cannot force anyone to pay," says Kaplan. "The more disreputable agencies will say things like 'Well I'm just going to take the money out of your checking account,' or 'I'm just going to charge it to your credit card.'"
You see, they need the court's help to be able to do that.
The only thing a collection agency can do with someone who refuses to pay is to sue the debtor. The agency will file a claim with a small claims court. This will either lead to a trial if the debtor responds, or result in a default judgement if they don't. In either case, if the collections agency is able to prove that the debtor owes the money, and the judge rules in their favor, then the debt moves to a fun process called judgment collection activities. If the collections agency knows where you bank, and is able to convince a judge that a given bank account belongs to you, then that judge can approve a bank levy, a court order that authorizes a collections agency to withdraw money from a bank account. If there's money in the account, then the bank issues a check and everyone moves on.
If there isn't enough money in the account, then the bank will pay out what's in there, and then the collections agency will repeat the bank levy process until the debt is paid off.
The debt collector might be taking every cent you own, but they won't usually go after every single thing you own. "For most consumers, they won't take all their possessions and auction them off and use the proceeds to pay off the debt," says Kaplan. "But that, theoretically, is technically possible."
Things get a little tricky if you own property. If you try to refinance a mortgage or sell your home, then you'll be obligated to deal with any outstanding debts before the transaction can go through.
There's also the issue of credit. Generally, having one delinquent utility account won't affect your score too much, but if you fail to pay a credit card bill or student loan payment, expect your score to take a ding. That said, if you're in a situation where you can't, or won't, pay your bills, then you're credit score is probably the last thing on your mind.
While one could fantasize about skipping town and leaving all their debts behind, the reality is that if you have a bank account, companies have a way of getting what's owed to them. Whether you can pay or not.
Further Reading
NerdWallet's Guide To Debt Consolidation
Lifehacker's Guide to Ditching Big Brother
Next Week
What would happen if you did not get a cavity filled?
Got a burning (hopefully not in an infected way) hypothetical question? Submit it to [email protected]. And for more, check out our What Would Happen If archive.
