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According to the Experian study, around 340 million Americans have various debt levels, from manageable credit card payments to struggling to pay their household bills. The average US debt has been on the rise recently. While the pandemic might have accelerated the phenomenon, debt was already crippling millions of households in the country.
In other words, it is uncommon in the US to face financial challenges that can lead to mounting debts. When the weight of those debts becomes too much, dodging creditors might feel appealing. While this may be a tempting escape, it is essential to understand that evading creditors can have severe consequences.
How can creditors find you?
When you owe money to creditors and consider disappearing, it is crucial to recognize that they have various tools to track you down. These methods are legally legitimate and highly effective in locating individuals attempting to evade their financial obligations.
Foremost among these tools are credit bureaus. These agencies are the primary repositories of your financial history, recording details of your debts and payment activities. Whenever creditors report your debt and payment history to these agencies, they create a comprehensive digital trail for your financial life. This information encompasses address changes, the opening of new financial accounts, and updates regarding your employment status. Creditors can meticulously analyze these records, which makes it difficult for you to remain hidden.
In addition to credit bureaus, creditors can look into services designed to trace people. These specialized investigative services are experts in locating individuals who have gone off the radar. They leave no stone unturned in their quest to find you. Tracing services employ many resources to uncover your whereabouts, including public records, extensive databases, and even information from social media platforms.
Public records can also serve as information for creditors seeking to locate you. Your name may be associated with court judgments, property records, tax liens, and other legal matters. These records can become essential breadcrumbs that creditors use to follow your trail!
Lastly, creditors may reach out to third parties, such as your friends, family, or colleagues, to gather information about your whereabouts. This will create a lot of discomfort for you and your relationships, especially as some people may inadvertently or intentionally reveal vital clues to your creditors.
How it affects your credit score
Disappearing on your creditors is not without consequences for your credit score. When you realize that the credit score measures your financial reliability, the last thing you need is to make it worse than it is. Your credit score plays a fundamental role in your financial life. It influences your ability to obtain loans credit cards, and secure housing or employment. So, when you evade your creditors, all the efforts you’ve put into building a good credit score will go in smoke.
First and foremost, your credit report will prominently display delinquent accounts, which can profoundly negatively affect your credit score. The presence of these accounts, which indicates unpaid debts, can cast a long shadow over your financial reputation. This kind of damage can linger on your credit report for years, even after you’ve managed to settle the debt.
Late payment notations are another critical factor you want to consider. These notations act as a red flag for future creditors and lenders, and they can stay on your credit report for up to 7 years. So, even if you get around to paying off your debt(s), future creditors will know that there was a time when you faced financial difficulties and could not pay it off.
Moreover, your credit utilization ratio, a crucial component of your credit score calculation, will be affected. Outstanding debts you fail to address will continue accumulating interest and fees, increasing the balance due. This leads to a higher credit utilization ratio, which indicates a heavier reliance on credit and can negatively impact your credit score.
Besides, a lower credit score, a direct consequence of evading creditors, can result in significantly higher interest rates on future loans. When you attempt to borrow money for significant purchases, like a home or a car, you will find it more expensive and less financially viable due to these elevated interest rates.
Lastly, the ability to access new credit or loans is severely hampered. Creditors are cautious about extending credit to individuals with a history of evading debts, which limits your capacity to make substantial investments. This can lead to challenges in securing funding for education, handling unforeseen financial emergencies, or improving your overall economic well-being.
Other life consequences
It isn’t just about the financial repercussions. Attempting to evade creditors has far-reaching consequences that can disrupt various aspects of your life.
One of the most immediate and distressing consequences is the potential for legal action. Creditors may take you to court, seeking judgments that can lead to wage garnishments, property liens, or even the seizure of assets. These legal actions can create substantial financial burdens and affect your life in many ways, potentially resulting in the loss of property or a portion of your income. When you are already struggling with debts, finding yourself homeless can worsen your situation.
The stress and anxiety associated with hiding from creditors can be overwhelming. The constant fear of being discovered and facing repercussions can lead to high-stress levels. The emotional toll of not just debts but debt evasion will considerably impact your mental well-being, affecting your relationships, work performance, and overall quality of life.
Disappearing on your creditors may also result in lost opportunities. Your ability to secure employment or housing may be compromised. Many employers and landlords conduct credit checks as part of their screening process. A poor credit history can lead to rejections, limiting your options and potentially hindering your career advancement and housing choices.
Strained relationships are another significant issue. The burden of evading creditors can lead to tension with friends and family. Creditors may contact your loved ones, seeking information about your whereabouts, leading to awkward conversations. This can also create distance between you and your loved ones.
Finally, you can’t run away from debts without affecting your financial stability and growth. Essentially, it becomes more challenging to make investments without access to credit, which means you can’t prepare for your future needs, including starting a business or planning for retirement. In other words, this limits your ability to grow financially, which would allow you to pay off your debts.
Impact on relatives and friends
You are not the only one whom creditors target. Your loved ones also bear the brunt of your debt evasion, and they can be affected in many ways.
Your loved ones may also experience emotional strain by proxy as they witness your stress and anxiety when dealing with creditors. The worry they feel for your well-being can impact their mental health.
In some cases, family members may become involved in your financial troubles by offering financial support or becoming co-signers on your loans, which puts their credit and finances at risk.
Aside from creditors turning to your family and friends to find you, your loved ones may fall into the hands of aggressive creditors, who can threaten or harass you for information. While this behavior is illegal, it isn’t exactly something someone in hiding should be able to complain about.
Finally, the loss of trust, whether due to financial entanglements or the emotional toll of your situation, can be challenging to rebuild and strain your bonds with those closest to you.
Why hiding doesn’t cancel the debt
By this point, you’re probably starting to realize that dodging creditors does not make your debt magically varnish. Instead, it only delays the inevitable and often compounds the problem. The debt remains legally valid and enforceable, and your creditors have several potent means to ensure they eventually collect what is owed.
One primary avenue for creditors who can’t find you is legal action. If you’ve defaulted on a debt and have gone into hiding, creditors can take you to court and obtain a judgment against you. This will enable them to legally seize your assets, garnish your wages, or place liens on your property, even if they never meet you face-to-face. In other words, legal actions can result in further financial burdens, regardless of your hiding location. Creditors may not need your intervention to collect what you owe them.
Similarly, connection agencies are specialists in the art of debt collection, and they can find your whereabouts and approach you regarding outstanding debts. Alternatively, depending on the debt criteria, they can also reach out to your family for repayment.
In conclusion, dodging creditors is never the correct answer. Not only does it not stop your debts from accumulating, but it can also give creditors the right to take action and legally collect their money.
So, if you are experiencing issues, you first want to communicate with your creditors and explore debt repayment options.
Jason Butler is the owner of My Money Chronicles, a website where he discusses personal finance, side hustles, travel, and more. Jason is from Atlanta, Georgia. He graduated from Savannah State University with his BA in Marketing. Jason has been featured in Forbes, Discover, and Investopedia.