Your credit card account enters default, then collections, then may be sued — each stage has real consequences for your finances and options to stop it

If you stop paying a credit card bill, the card issuer will first mark your account as delinquent after 30 days. After 180 days of non-payment, they typically charge off the account — meaning they write it off as a loss on their books and sell the debt to a collection agency or debt buyer. Once that happens, you may be sued for the full balance, your wages may be garnished, and the debt stays on your credit report for seven years. The timeline and severity depend on your state's laws, the card issuer's practices, and whether you take action to stop it.

Key Takeaways

  • Your account becomes delinquent at 30 days past due, and the card issuer can raise your interest rate and add late fees at each stage.
  • After 180 days of non-payment, the card issuer typically charges off the account and sells the debt to a collection agency.
  • A collection agency can sue you in court, and if they win, they can garnish your wages or freeze your bank account depending on your state's laws.
  • Stopping payment does not erase the debt — it only changes who owns it and what tools they can use to collect.
  • Some states protect a portion of your wages or bank account from garnishment, and some debts have shorter time limits for lawsuits.

What happens in the first 30 to 180 days

Your credit card issuer reports you as delinquent to the three credit bureaus (Equifax, Experian, and TransUnion) once you are 30 days late. This appears on your credit report immediately and damages your credit score. At the same time, the card issuer can raise your interest rate — often to a penalty rate of 25% or higher — and add late fees to your balance, usually $25 to $40 per missed payment.

The card issuer will contact you by phone, email, and mail to collect. They may offer a payment plan or settlement, or they may simply demand the full balance. If you do not respond or pay, they continue to report you as delinquent each month. After 120 to 180 days of non-payment, they charge off the account.

Charge-off and the sale to a collection agency

A charge-off means the card issuer has given up trying to collect and has written the debt off as a loss for tax purposes. This does not erase the debt — it only changes who owns it. The card issuer typically sells the debt to a third-party collection agency or debt buyer for pennies on the dollar, often 5 to 10 cents per dollar owed.

Once the debt is sold, the collection agency takes over. They contact you by phone, mail, and sometimes email, demanding payment. They may offer to settle for less than the full balance — often 30 to 60 percent of what you owe — or they may pursue a lawsuit. The charge-off itself stays on your credit report for seven years from the date of first delinquency, not from the date of charge-off.

Lawsuits and wage garnishment

A collection agency can sue you in small claims court (if the debt is small) or civil court (if it is larger). If they win, they get a judgment against you. With a judgment in hand, they can garnish your wages, meaning they can order your employer to send a portion of your paycheck directly to them. They can also freeze your bank account and take money from it.

The amount they can take varies by state. Some states protect a portion of your wages — for example, North Carolina protects 75% of your disposable earnings, while Texas protects 25%. Some states protect a minimum amount in your bank account (called an exemption), while others do not. If you live in a state with strong protections, garnishment may be limited or impossible even if the collection agency wins.

The collection agency must file the lawsuit in the correct court and serve you with papers. If you do not respond or appear in court, they can win by default. If you do appear, you can challenge whether the debt is actually yours, whether the amount is correct, or whether they have the legal right to collect.

How long a collection agency can sue you

Collection agencies have a time limit to sue, called the statute of limitations. This varies by state and ranges from three to ten years, depending on whether the debt is written (like a credit card) or oral. In most states, the statute of limitations for credit card debt is four to six years from the date of your last payment or last charge to the account.

Once the statute of limitations expires, the collection agency can no longer sue you. However, they can still contact you to collect, and the debt still appears on your credit report until seven years have passed. If a collection agency sues you after the statute of limitations has expired, you can raise that as a defense in court, and the judge should dismiss the case.

Your options before and after charge-off

Before charge-off, contact the card issuer directly to discuss a payment plan, hardship program, or settlement. Many card issuers have programs for people facing financial hardship and may lower your interest rate, waive fees, or accept a reduced lump-sum payment. These options are usually only available before charge-off.

After charge-off, you can still negotiate with the collection agency. They often prefer a settlement to a lawsuit because litigation is expensive and time-consuming. You can offer a lump sum (usually 30 to 60 percent of the balance) or a payment plan. Get any settlement offer in writing before you pay, and make sure it states that the debt will be marked as "settled" or "paid in full" on your credit report.

If you cannot pay, you can also wait out the statute of limitations. This does not erase the debt or stop collection calls, but it does prevent a lawsuit and wage garnishment. Your credit report will still show the debt as unpaid, which affects your ability to borrow for seven years.

How non-payment affects your credit and future borrowing

A charge-off and collection account severely damage your credit score. The impact is largest in the first year or two after the charge-off, then gradually lessens. Even after you pay the debt, it remains on your credit report for seven years, though its impact on your score decreases over time.

With a damaged credit report, you will find it harder and more expensive to borrow. Credit card issuers may deny you or offer only high-interest cards. Mortgage lenders and auto lenders may require a larger down payment or charge a higher interest rate. Some employers and landlords also check credit reports, though they cannot see the same details as lenders.

Frequently Asked Questions

Can a collection agency keep calling me if I tell them to stop?

No. Under the Fair Debt Collection Practices Act (FDCPA), if you send a written request to stop contact, the collection agency must stop calling, emailing, and mailing you — with limited exceptions like notifying you of a lawsuit. Send the request by certified mail so you have proof. The debt itself does not go away, but the calls must stop.

What if the collection agency is suing me and I cannot afford a lawyer?

You can represent yourself in court, though it is risky. Ask the court clerk for information about your state's rules and what documents you need to file. Some legal aid organizations offer free or low-cost help to people with low incomes. You can also ask the judge for a payment plan if you lose, though the judge is not required to grant one.

Does paying off a collection account remove it from my credit report?

No. Paying a collection account stops new collection activity and may slightly improve your credit score, but the account stays on your report for seven years from the original delinquency date. However, paying it may help you when you apply for a mortgage or other major loan, because lenders often view a paid collection more favorably than an unpaid one.

Can I be arrested for not paying credit card debt?

No. Debtors' prisons do not exist in the United States, and you cannot be jailed for owing credit card debt. However, if you ignore a court order or fail to appear in court after being sued, you could face contempt of court charges, which can result in jail time. Always respond to court papers.

What if I think the collection agency is wrong about the amount I owe?

Send a written dispute to the collection agency within 30 days of their first contact. Under the Fair Debt Collection Practices Act, they must stop collection efforts until they send you proof that the debt is valid. Keep copies of everything you send and receive. If you are sued, you can raise the dispute in court as a defense.