Individuals cannot be sent to prison for failing to pay their credit card bills. Just because prison is not a consequence of overdue debt, however, that does not mean that refusing to pay credit card bills won't have significant legal implications. Credit card companies have the right to take legal action when attempting to collect overdue debt.
When a consumer applies for a credit card, the credit card company requires him to sign his application before approving the new account. By signing the application, the individual agrees to the terms and conditions of owning the card--including the repayment schedule he must uphold. The credit card company then supplies the card and a full disclosure agreement containing the "fine print" credit card companies are famous for. The credit card company considers use of the card acceptance of its contract. By leaving his credit card bills unpaid, the consumer is violating the credit card contract he agreed to and leaving himself open to legal action.
A credit card company may attempt to collect a debt a variety of ways. The most common ways credit card companies collect debt are through telephone calls and letters to consumers whose payments are late. If the company cannot collect using these collection methods, however, it has the option to sue the debtor for her unpaid credit card bills or turn her debt over to a collection agency which may sue her. In addition to the bills themselves, the creditor may add late fees, interest charges and its attorney fees to the amount requested in the lawsuit.
The court will notify the debtor of the impending lawsuit via a summons. The debtor has the right to either attend a hearing and defend himself or ignore the summons. If the individual ignores the summons, the creditor wins the lawsuit by default. Once a creditor wins a debt lawsuit against an individual, it may request a writ of garnishment from the court. Through a writ of garnishment, the creditor can force the individual's employer to garnish his wages or force his bank to seize the full amount of the debt from his bank accounts.
Although a creditor has the right to legally enforce unpaid credit card bills, it has a limited amount of time to do so in each state before the state's statute of limitations for debt collection goes into effect. Once the statute of limitations passes, the debtor may use the fact that the debt is "time-barred" as a defence against future lawsuits. If an individual does not know the statute of limitations in his state and is not aware of the fact that his unpaid credit card debt is time barred, the creditor may still obtain a judgment against him and take legal action to recover the debt.
If a debtor is unemployed and lives on a limited income, a creditor's lawsuit may not be effective in forcing the debtor to pay. Title III of the Consumer Credit Protection Act limits wage garnishments to 25% of a debtor's disposable income. If the individual only works part time or is living below the poverty level, he may not have any disposable income for the creditor to legally seize. In addition, unpaid credit card debts cannot be garnished from exempt funds such as Social Security payments, child support, retirement funds and unemployment benefits.