Your credit score drops immediately, your account goes to collections, and you may face a lawsuit

When you stop paying a credit card, the card issuer reports the missed payment to the three credit bureaus (Equifax, Experian, and TransUnion) after 30 days. Your credit score begins falling right away — typically by 100 points or more depending on your current score and payment history. After 180 days of non-payment, the card issuer usually closes the account and sells the debt to a collection agency, which then contacts you to recover the money. If you owe enough, the collection agency or the original card issuer may file a lawsuit against you in civil court, potentially leading to a wage garnishment or bank account levy.

The timeline and consequences vary based on your state's laws, the card issuer's policies, and the amount owed. Some issuers are more aggressive about suing; others focus on settlement offers. Understanding what happens at each stage helps you decide whether to negotiate, seek legal advice, or explore other options before the debt reaches collections.

Key Takeaways

  • A missed payment is reported to credit bureaus after 30 days, and your credit score drops before the account goes to collections.
  • After 180 days without payment, the card issuer typically closes the account and sells the debt to a collection agency.
  • A collection agency or the original card issuer can sue you in civil court, and if they win, they can garnish your wages or levy your bank account.
  • Your state's statute of limitations determines how long a creditor can sue you; this ranges from three to ten years depending on where you live and the type of debt.
  • Stopping payment does not erase the debt — you remain legally responsible unless you reach a settlement, the debt is discharged in bankruptcy, or the statute of limitations expires.

How your credit report is affected in the first six months

The first 30 days after a missed payment are critical. If you miss your payment by even one day, the card issuer may charge a late fee (typically $25 to $40 for the first late payment). After 30 days, the issuer reports the late payment to Equifax, Experian, and TransUnion. This single report can lower your credit score by 50 to 100 points or more, depending on your current score and credit history.

At 60 days late, the issuer reports again, and the damage compounds. At 90 days late, the account is typically marked as "seriously delinquent." By 120 days, most issuers have stopped accepting payments on the account and are preparing to charge off the debt. A charge-off means the issuer writes the debt off as a loss on their books — but you still legally owe it. The charge-off appears on your credit report and remains there for seven years from the date of first delinquency (the date of the first missed payment), even if you later pay it.

Throughout this period, your credit score continues to fall. A score in the 700s can drop to the 500s or lower. This affects your ability to borrow money, rent an apartment, or sometimes even get a job, since many employers check credit reports.

When the debt moves to a collection agency

After 180 days (roughly six months) of non-payment, the card issuer usually closes the account and sells the debt to a third-party collection agency for a fraction of what you owe — often 5 to 15 cents on the dollar. The collection agency then owns the right to collect from you and becomes the creditor. You will receive a letter or phone call from the collection agency notifying you of the debt.

Collection agencies are regulated by the Fair Debt Collection Practices Act (FDCPA), a federal law that prohibits harassment, false statements, and contact outside certain hours. They cannot call before 8 a.m. or after 9 p.m., cannot contact you at work if your employer objects, and cannot threaten you with arrest or wage garnishment unless they actually intend to pursue it. If a collector violates these rules, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or sue the agency for damages.

The collection agency will attempt to contact you by phone, mail, or email to negotiate a settlement or payment plan. Many people settle for less than the full amount owed — sometimes 30 to 50 percent of the original debt. If you do settle, get the agreement in writing before paying anything, and specify that the settlement satisfies the debt in full. Without that language, the collector may claim you still owe the remainder.

Lawsuits and judgments in your state

If you do not pay or settle, the collection agency or the original card issuer may file a civil lawsuit against you. The lawsuit is filed in small claims court (for smaller debts, usually under $5,000 to $10,000 depending on your state) or district court (for larger amounts). You will receive a summons and complaint, which legally notifies you of the case. If you ignore it or fail to appear, the court may enter a default judgment against you, meaning the creditor wins automatically.

If you appear in court or respond to the lawsuit, the creditor must prove you owe the debt. They typically present your account statements, payment history, and the contract you signed when you opened the card. If you dispute the debt or believe the amount is wrong, you can present evidence in your defense. Many people win or reduce the judgment by showing errors in the creditor's records or proving they already paid part of the debt.

If the court enters a judgment against you, the creditor can then use that judgment to garnish your wages (taking money directly from your paycheck) or levy your bank account (freezing and withdrawing funds). The amount varies by state — some states protect a portion of your wages or bank account, while others allow creditors to take more. Certain income sources, like Social Security and disability benefits, are generally protected from garnishment even after a judgment, though the rules differ by state and situation.

How long a creditor can sue you

Every state has a statute of limitations that sets a deadline for creditors to file a lawsuit. This period ranges from three to ten years depending on your state and the type of debt. For credit card debt, most states allow creditors to sue within three to six years. After the statute of limitations expires, a creditor cannot file a new lawsuit, though the debt itself does not disappear from your credit report for seven years.

The statute of limitations clock starts on the date of your first missed payment, not the date you opened the account. If you make a payment or acknowledge the debt in writing after the deadline has passed, you may restart the clock in some states, so be careful about what you say to collectors. If a collector sues you after the statute of limitations has expired, you can raise this as a defense in court, and the judge should dismiss the case.

The statute of limitations does not stop collection calls or letters — collectors can contact you even after the deadline to sue has passed. However, if they sue after the deadline, you have a legal defense. Keep records of when you stopped paying and when any payments or communications occurred, as this helps prove the statute of limitations has expired if you end up in court.

Options before the debt reaches collections

If you are behind on payments but the account has not yet been charged off, you have more negotiating power. Card issuers prefer to recover money directly rather than sell the debt to a collector. Contact the card issuer's hardship department (not the regular customer service line) and explain your situation. Many issuers offer hardship programs that temporarily lower your interest rate, reduce your monthly payment, or pause interest accrual while you catch up.

You can also negotiate a settlement — an agreement to pay a lump sum less than the full balance in exchange for the issuer closing the account and reporting it as settled. Settlements typically range from 40 to 70 percent of the balance. Get any settlement offer in writing before you pay, and make sure it states the debt will be marked as "settled in full" rather than "settled for less than owed," which looks slightly better on your credit report.

If you cannot afford to pay even a reduced amount, you may consider bankruptcy. Chapter 7 bankruptcy can discharge credit card debt entirely, while Chapter 13 creates a repayment plan over three to five years. Bankruptcy has serious long-term credit consequences, but it stops collection calls, lawsuits, and wage garnishment immediately through an automatic stay. Consult a bankruptcy attorney to understand whether this option makes sense for your situation.

What happens to the debt if you never pay

Stopping payment does not erase the debt. You remain legally responsible for the full amount unless one of three things happens: you reach a settlement agreement, the debt is discharged in bankruptcy, or the statute of limitations expires and the creditor does not sue before the deadline.

If the statute of limitations expires without a lawsuit, the creditor can no longer force you to pay through the court system. However, the debt still appears on your credit report for seven years from the date of first delinquency, and the creditor can still contact you to collect (though they cannot sue). After seven years, the debt falls off your credit report entirely, and your credit score begins to recover.

Some people choose to wait out the statute of limitations rather than settle or file bankruptcy, accepting the credit damage for seven years in exchange for avoiding payment. This is a personal decision that depends on your financial situation, whether you own assets that could be garnished, and your state's laws. If you have significant income or assets, waiting may not be practical because a judgment can follow you for years.

Frequently Asked Questions

Can a credit card company sue me if I stop paying?

Yes. If you do not pay or settle, the card issuer or a collection agency can file a civil lawsuit against you. They must do so before the statute of limitations expires, which is typically three to six years depending on your state. If they win the lawsuit, they can garnish your wages or levy your bank account.

Will my wages be garnished automatically?

No. A creditor must first win a judgment in court before they can garnish your wages. They cannot garnish you simply because you stopped paying. After a judgment, they file a separate garnishment order with your employer. Some states protect a portion of your wages from garnishment, and certain income like Social Security is generally protected.

How long does a late payment stay on my credit report?

A late payment stays on your credit report for seven years from the date of your first missed payment. A charge-off also remains for seven years. After seven years, both fall off your report, though the debt itself may still be legally collectable if the statute of limitations has not expired.

Can I settle a credit card debt for less than I owe?

Yes. Creditors often accept settlements for 40 to 70 percent of the balance, especially if the account is already charged off or in collections. Always get the settlement agreement in writing before you pay, and make sure it specifies the debt will be marked as "settled in full" on your credit report.

What is the difference between a charge-off and a collection account?

A charge-off is when the original card issuer writes off the debt as a loss on their books after 180 days of non-payment. A collection account is created when the issuer sells the debt to a third-party collector. Both appear on your credit report and damage your score, but a collection account means a different company now owns the right to collect from you.