The Consequences of Not Paying Debt

To purchase some big ticket items, such as cars and houses a certain amount of debt is acquired by the average consumer. This is in addition to unsecured debt, such as credit cards and personal loans. If the amount of debt becomes overwhelming, it is tempting to not repay your creditors. However, not repaying your debt can have serious financial consequences that can affect many areas of your life.

Credit Score

Your credit score is directly affected by the amount of debt you have and the timely repayment of said debt. If you fail to make payments on your debt it will have a negative effect on your credit score. Creditors report delinquent payments to the credit bureaus who in turn lower your credit score accordingly. A low score can impact your ability to get housing, buy a car and in some cases gain employment.

Interest Rate Increase

Most creditors issue penalties and additional fees for not making timely payments. In addition to a monetary charge, the creditor will often raise the current interest rate on your outstanding debt at their discretion. The result is a balance that increases with each passing month. It is possible for the debt to increase to a level that you may not be able to repay. In that case, both the new balance and the higher interest rate will be reported to the credit bureaus.


Once you stop paying your debts, the creditors may sue you to get the money you owe them. Once a court of law finds that you are liable for the debt, the creditor can then have your paychecks garnished until the debt is repaid. This means a certain percentage of your paycheck will be applied to the debt you owe the creditor, lowering your take home pay.


If you stop paying your debt, the outstanding balances may balloon to the point that you may have to file for bankruptcy to get relief. Although bankruptcy does stop collection agency calls, garnishment and erases most debt, there are also negative consequences to filing for bankruptcy. A bankruptcy can remain on your credit report for up to 10 years after filing, and will reduce your ability to acquire new credit and financing for many years.