Default

• Your credit account goes into default following 90 days of missed payments. It takes about 180 consecutive days of nonpayment before a credit card lender writes off the loan as a loss, referred to as a charge-off. In the interim, the card lender will do everything in its power to prevent you from defaulting on the loan. The credit card lender may sell your account to a third party to continue the collections effort.
  
  

Judgment

• A charge-offed credit card doesn't let you off the hook. The creditor has the option of pursuing a default judgment. To do this, it must file a lawsuit in court. If a creditor intends to sue you, it must serve you with a summons regarding the impending lawsuit which gives you the opportunity to respond. If you fail to respond to the summons, the creditor automatically wins a court-issued default judgment.
  
  

Consequences

• State laws vary, but winning a default judgment allows the creditor to garnish part of your paycheck or have the funds lifted from your bank account until the debt is satisfied. It can also freeze your bank account. A judgment appears on your credit report as a negative item and remains on file for seven years. Your credit report also shows the credit card charge-off and whether the debt was sold to a third party. This information also stays on your credit report for seven years. Your credit score takes a hit, making it more expensive to borrow money. Other lenders may deny you credit altogether. A negative credit report can also limit your employment opportunities. Many employers review credit reports before making hiring decisions.
  
  

Insight

• You have the right to an attorney when you receive a summons. Make a case to have the judgment vacated or thrown out if the creditor failed to serve you a summons. Or, if you can prove that the debt is not yours, you can win the lawsuit. However, defending yourself is costly, particularly if you hire an attorney. More than likely, the creditor asks for reimbursement of its own legal expenses. It's far cheaper to arrange an out-of-court settlement, an option available to you even if you do receive a court summons.