Credit Card Defaults Philippines
The Basics of Credit Card Debt
Under Philippine law, credit card debt is classified as an unsecured debt, meaning that there is no collateral attached to the debt. This differentiates it from secured debts like mortgages or car loans. Nevertheless, non-payment can lead to a series of legal consequences.
Collection Process
Initially, the credit card company will send reminders and make calls to prompt payment. If these efforts are unsuccessful, the company may pass the debt to a collection agency. Collection agencies are third-party companies that specialize in recovering debts, and their methods can include persistent calls and demand letters.
Legal Repercussions
If the debt remains unpaid, the credit card issuer or the collection agency may file a civil case for collection of sum of money. A legal judgment against you could result in the garnishment of your wages or assets to settle the debt. Filing for insolvency is an option but has its own set of repercussions, including a tarnished credit history.
Criminal Charges
Although it's rare, criminal charges can be filed in extreme cases, particularly under the "Access Devices Regulation Act of 1998." This could occur if there is evidence of fraud or deceitful intent associated with non-payment or misuse of the credit card.
Impact on Credit Score
Regardless of legal outcomes, defaulting on a credit card will negatively affect your credit score. A low credit score will make it difficult to secure loans or use financial services in the future.
Alternative Options
Debt consolidation and restructuring programs are available for individuals who find themselves unable to meet their credit obligations. These programs can provide more manageable payment schemes, though they usually require a demonstration of financial hardship.
Conclusion
Ignoring credit card debt can result in severe financial and legal repercussions, including a negative impact on your credit rating, legal action from creditors, and even criminal charges in extreme cases. It is advisable to address such issues proactively, through communication with creditors or seeking legal advice, to mitigate these consequences.