Please help me understand what happens if I cannot pay a debt?
I have a personal loan less than $5000 and I am having a hard time financially. They told me today they are taking me to court for being months behind and I have to return all my collateral (basically electronics) and that they are putting a judgment on me. What does this mean? Will I go to jail? Will I lose my home? I live in NC. What could happen?
- n2mamaLv 72 months ago
You return the collateral, they sell it and apply the amount they get to the debt you owe. You still are responsible for the remaining balance. If they get a judgement against you, they can get a wage garnishment put into effect, which means a percentage of your paycheck gets sent to them directly every time you get paid. There are no debtors prisons in the U.S., so you will not go to jail. Do you own your home? If so, they could place a lien against your home, which would force you to pay them when you sell your home. (This is pretty unlikely to happen given the amount of the loan and the fact they have to wait until you sell the property to collect, which could be years and years away). If you are a renter, no, they can’t take your rented home away from you.
Your credit will be trashed and take years to recover. In that period of time you will have a very difficult time borrowing additional money for any reason (mortgage, at loan, personal loan, financing for a purchase like an appliance). If you rent and decide to move, your credit may disqualify you from getting the apartment or home you would like. And when you are finally able to start to secure financing again, you will pay higher interest rates to borrow that money.
- A HunchLv 72 months ago
It means that you will have a judgement against you.
if you do not pay it, it may continue for 20 years (depending on the state).
You will not get another loan during that time.
If they take the collateral back, they will sell it cheaply and that money will be used to pay the debt. But they will also charge you for their time selling the items.
You are better off selling them on your own and using that money to pay the debt.
You need to figure out how to pay the debt... It's not going to go away.