Some companies (like say gym membership) have internal collections departments that can be quite aggressive. They would certainly be able to back up any lawsuit.
In general, you really want to try to avoid being sued.
4 states prohibit wage garnishments at all, and other states set the maximum at between 15-25% of your disposable income: http://www.walkawayfromdebt.com/worksheets&charts/wage-garni... (Disclaimer: Colorado SUCKS. They permit up to 75% of disposable income to be collected).
I've helped negotiate away quite a bit of unsecured debt for close friends. Its easier than you think.
Debt is a contractual issue, not a moral one. As HackerNews entrepreneurs should keep in mind, its the ability to easily shed debt (and not be shackled to those debts for decades) in the US that creates the environment for startups to take the risks they do.
If you borrow money for any reason with the understanding that you'll pay it back, but you secretly intend to keep it all along, then you are doing something wrong (morally if not legally).
We are in complete agreement then. To do otherwise would be, in my opinion, fraud.
Keeping one's word is always a moral issue. The bad practices of others (businesses or individuals) do not change the value of my word.
Changing terms after the fact, dark patterns, charging for things the customer didn't agree to, over billing for cable services in the hope the customer just doesn't notice or gets worn down by trying to fight it.
There are a lot of times the corporation is unequivocally in the wrong, but they already billed your card and you have to fight to get it back. Being able to cancel the card first and force the corporation to take you to court and prove their case could help put the consumer on a more level playing field.
"At the end of every seven years you must cancel debts. This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother, because the LORD's time for canceling debts has been proclaimed."
(http://www.biblestudytools.com/deuteronomy/passage.aspx?q=de...)
It's interesting to imagine a world where there was no legal recourse to someone not paying back debt: easy to imagine some first-order consequences, harder to see how it'd change the grand scheme of things. I suspect it would end up being a much better world, but I come from a very anti-debt perspective.
I think it sounds scary. If I enter into a contract that says I have to do something in exchange for something else, I'd like a court to honor that contract, and not -- somewhat arbitrarily I'd say -- declare debts in the contract invalid after seven years.
Imagine no one being able to issue debt with a maturity of more than 7 years. That would be the consequence of such an interference into the market. This means our economy as a whole would become even more sensitive to interest rate volatility, as you can't secure the interest on a loan for more than 7 years at a time.
I'm not saying that having a bunch of debt is good. But imagine where you'd be right now if you couldn't get a student loan for an education. Or finance a car or a house. I'm pretty sure I would not be where I am now if I hadn't gone to school... which I would not have been able to do without a student loan. And I never would have been able to get a house without a loan.
I think it's also easy to overstate how much loaning would decrease. The widespread use of credit scores when issuing loans belies the idea that it's only state violence that ensures people pay back debts.
Maybe it'd make sense in a totally anonymous world, but why not just do business with people or entities you can trust? Think web of trust. That's what consumers and businesses de facto do nowadays anyway.
You could still issue debt; it's just you can't expect to have violence to back it up. Past decisions and alignment of lender and borrower self-interest determine the likelihood of it being paid back.
The interest rate is set by the fact that money-NOW is worth more than money-in-a-few-months-or-years. This is also the case if it's certain you will get the money.
I never considered that risk would also be a factor in interest rates. It makes sense, but I really doubt it's a very big factor. Since in most cases debt means you will eventually get the money back, the risk is very little (depending on economic health, I guess). But the "money now vs money then" factor is always present.
Can anyone with a little more insight into these matters inform us whether risk of not being paid back actually represents a substantial amount of the interest rate? Cause I doubt it.
> There's nothing at all immoral about choosing to suffer the hit on your credit rather than repay as both options are expected possible outcomes in the original deal.
Is that how it works in America? Because as an outsider, this sounds very weird to me.
Say you have a debt with me, you fail to repay me but instead you opt to "take a hit on your credit score", which is, I presume, some sort of abstract "score" number kept by agreements between cc-corporations, banks and such? (or is it a government thing? probably not)
So this credit score determines whether you can get certain loans at banks, interest rates for your credit cards, stuff like that yes?
In the mean time there's me. What do I care about your credit score? Do I get to think, "hey I didn't get my money, but at least that guy is going to have a shitty time securing loans from now on and having a stable financial future". How does that help me? You still screwed me over by not paying me back, and the simple fact that, in the process, you also screwed yourself over doesn't help me at all. I'm not the vindictive kind, and some abstract revenge credit score "punishment" you suffer in your standing with other institutions won't get me my money back.
See, this doesn't make it moral, at all.
The fact that we both know, if you don't pay me back, you'll be screwing yourself over by means of credit score, just means that I might be more likely to believe you that you'd rather pay back your debt than suffer that hit. Meaning less risk for me. But if it turns out that not paying and suffering the hit is in fact a serious alternative option for you (instead of a deterrent), you may as well say "I'll pay you back or I stab myself in the eye"--what do I care? (well in fact I would prefer if you didn't, because in my personal ethical framework, such deals themselves are immoral)
Spoiler Alert:
You can't.
Put yourself in the shoes of a lender. On one hand is a doctor, $300k salary, looking to borrow $30k for a new boat. 780 fico. On the other is Trevor, a bartender who makes $25k a year, has a 680 fico with some late payments and a cable bill collection from 2 years ago and wants $30k for a new car.
Would you lend to them both at the same rate? Both will have the same time value effects....
No, interest rates are a measure of risk; the bigger the risk of default the higher the interest rate. Bad credit score equals very high interest rate.
Secondly, stop pretending you're the lender, we're talking about banks here, not personal loans from friends.
When you take out a loan with a bank, it's a business deal with explicit exit strategies baked in: pay off loan, or default loan. Both options are valid exits according to the contract. Morality simply isn't a factor in this equation.
Also, I don't like paying for stuff.
Unless you take things from people. People are different. Then you should pay for those things by bleeding all over the snow or whatever. (I don't know how money works in your country. In the US we usually just use dollars. There's not much snow right now and having everyone's blood everywhere can lead to public health problems. See also: Ebola.)
Anyway. Thank god there are no people at corporations. And thank god all corporations are the size of Walmart and can easily withstand financial losses due to non-payment.
Well, you should care, because they factor it in by increasing prices for consumers. You're just getting everyone else that shops at Walmart to cover your debt. That's irresponsible, and I see no difference between owing Walmart $10 and owing your friend $10.
This[1] is the type of situation where I believe the victims(yes, I'm using that word) deserve to have their debt removed.
1. http://www.npr.org/2014/09/15/347957729/when-consumer-debts-...
If you borrow money, and you agree to pay it back, there should be a good faith effort to do so.
But that is only one type of debt.
In the US, where I live, Apartments are incredibly bad about charging fees after you move out, and give you very little recourse before sending you to collections.
Parking tickets, and red light camera tickets are huge sources of revenue for the city, and Seattle uses them when they need to increase city coffers.
I look at it this way, if they're not going to play by the rules, I won't either.
It is really a fabulous book, and can help explain why many people in many cultures feel as you do, who benefits from that belief, but also how debt has never historically been about moral obligations but has always been a contract between two parties, with limitations on both party's obligations.
In reality, companies will do almost anything to avoid suing you for small amounts of money. The financials don't make sense. E.g. how much gym debt would it take to justify a lawyer's fees to pursue you? Not less than several thousand dollars, probably much more.
I'm pretty sure the big gyms that have in-house collections. I would imagine people signing a year contract and then changing their mind and trying to get out of it happens quite often.
In any case, if you're wilfully and knowingly taking on debts you can't repay and using a card like this to CYA, your bigger risk in some places might be getting arrested for criminal fraud. Good luck ever getting credit again whatever the CRAs say about you if you've also got a criminal record for a fraud-related offence.