Delinquent debt: do I have to pay in full immediately?

I’m behind in my credit card payments. Now they are demanding immediate payment in full. Can they do this?

When you obtain a credit card, you agree to be bound by certain terms. You will receive a written statement of those terms from the credit card company. Many agreements with credit card companies permit the company to seek immediate payment of all credit card charges if a customer gets behind in payments.

When the agreement provides for this, a company can seek immediate payment for an account in default, meaning one in which one or more payments are missed.

However, from a practical standpoint, most credit card companies will not demand payment in full, because they make money off the interest we pay," said Johns, Flaherty & Collins attorney Brian Weber.

While a company could go after a customer for missing just one payment, it is much more likely to take action for multiple missed payments. The type of action depends on how much is owed on the card.

In Wisconsin, debt of less than $5,000 goes to small claims court, which is faster and less complicated. A higher debt goes to Circuit Court in a civil lawsuit, which can take 18 months or longer. Increasingly, credit card contracts contain arbitration provisions that provide for arbitration to resolve the issue.

"Generally, small claims court is quicker than arbitration, and arbitration is quicker and less expensive than a civil lawsuit," Weber said.

In all of these cases, debtors can give their side of the dispute in court or to the arbitrator. Many credit card agreements provide that the law that is applied is from the state in which the credit card company is incorporated, rather than the customer’s home state.

With legal and court costs, growing interest and penalties, it can be very costly to ignore credit card payments, according to Weber.

"If you get in a situation where you are in over your head and it appears that you will never pay off your credit card balance, it may be best to consult a debt consolidation advisor or an attorney," he said.

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