People Have Stopped Paying Their Bills - Here’s What Happens Next

In the American economy you are seeing more and more people who are unable to pay their bills and now it is starting to come back to haunt them because we are seeing an avalanche of bankruptcy filings as well as debt collections and people getting sued over not paying their bills. A recent Wall Street Journal story just highlighted how bad this is. According to the most recent data, debt collection lawsuits have now climbed to their highest level in years, surpassing where they were pre-pandemic. Now we're seeing a lot of things kind of return to normal, so to speak, right? Like when it comes to foreclosures, for example, there has been a massive uptick in foreclosures, but when you look at the long-term data, it's coming back to where it was before the pandemic. So things are just returning to normal. But bankruptcies and the debt collections are surging past what was considered normal before we had the pandemic and that is a big problem. We all know that inflation and the cost of living have absolutely surged over the past six years and people have been trying to keep up with it, but the wages just simply haven't kept up in most instances for most people. So people are relying on debt to get by, but that is about to run out. You can only borrow for so long and you can only not pay for so long. Guys, this stuff does come back to bite people because unlike just having a late payment, a collection call or a lawsuit means the situation has now reached an entirely new stage for you. By the time a lawsuit gets filed against you, you haven't been paying for months at this point and you're not able to just move balances between credit cards and borrow from savings anymore. You've already done all of that, so you are kind of out of gas. Court records from eight different states show that lawsuits have continued to climb all throughout 2025 and seven out of those eight states now report having above historical averages when it comes to personal bankruptcy and collection suits. Missouri is one of those states. They experienced the largest increase since 2019 with lawsuits doubling to more than 121,000 cases and Texas recorded approximately 515,000 debt collection lawsuits after experiencing a 77% increase over the same time frame. In the past seven years, debt collection lawsuits have exploded 77% in just Texas alone. That should start giving you an idea of the scale of this issue. These are just a couple of the worst states, but every state is going through this on some level. The interesting part about this is the size of the debts that people are getting sued over. You would think it would be $20,000, $30,000 or more, these big numbers in order for these debt collectors to file a lawsuit against you. Nope. In fact, about 75% of these lawsuits involve balances that are less than $4,000. These collection firms are getting very aggressive at pursuing even small balances for people. On the one hand, that's good news because it's not going to ruin your life so to speak over $4,000, but on the other hand, it shows you just how broke the average person is when $4,000 can't even be paid back and now you are in collections over this amount. It's pretty wild. You hear all those financial statistics all the time, how the average person doesn't have $1,000 for a financial emergency. These debt collection lawsuits back up that claim if you ask me. I mean, all you need is a couple of these emergencies and next thing you know, you already have that $4,000 or less in unpaid debts and now you're in collections. We also continue to see credit card debt hitting new record highs quarter after quarter. This is something that the New York Federal Reserve began tracking back in 1999. The most recent figure hit $1.25 trillion with no signs of it slowing down. We're going to talk a lot about credit cards later in this video, but first I just want to acknowledge that credit cards have essentially become America's emergency fund, guys. That's what it is now. People don't have actual emergency funds anymore. They have plastic in their wallet and they go into debt when they're not doing well. And even people who have done things right might have seen their emergency savings absolutely disappear over the past six years because of how much the cost of living has gone up. A lot of people have had to dip into that money just to be able to survive right now. So what do people do after that money's gone? They borrow more using the credit cards. They borrow using home equity loans and home equity lines of credit if that's available to you and you just keep borrowing. But the big problem with credit cards is they are definitely not designed to be a long-term emergency fund, guys. They work okay for a short-term borrowing. Say if you need to borrow 1,000 or 2,000 bucks against a credit card and you'll pay a little bit of interest, but you know for sure you're going to come into the money and you'll be able to pay that balance off to keep your amount of interest you pay at the minimum, then it's probably okay if you're in a bind. I've done that in the past. But if you're taking that money and you know that there's no way you're going to be able to pay it back, now that's a much different situation. And so a lot of people now are reaching the point where they can no longer even afford the minimum payments. And what happens next? You get sent to collections. And today, I'm in Terralinda, California, walking down Woodbine Drive. So what happens after you stop paying some of these debts? Well, when you stop paying and you've missed enough payments, essentially what happens is your debt usually will get sold to a collections agency. And when they sell that debt to the collections agency for a fraction of what's actually owed, that's when the collection calls start coming in and then eventually the lawsuits if you don't pay. I know one of my viewers, I think his name is Alan, who's reached out to me several times over the years who works for one of these debt collections agencies. And every single time I hear from him, he's always saying that we are busier than ever. Our offices are expanding. We're hiring people right now because the industry is growing so fast, guys. And that just goes to show you how much of a problem this is becoming. But because these collection agencies are able to buy debts at such a discount, even if they can recover a portion of what consumers owe, they can still generate substantial profits. So that's why these companies are being so aggressive because they don't have to get a whole lot from you in order to make it worth it for them. And so that's why the collections agencies are so aggressive at collecting the debts because they don't have to collect a whole lot in order to make a big profit. And there's still profits to be made even after dragging you through a court case and a lawsuit. And one thing that has made things absolutely worse for people who are in this situation is the rise of all the scams that we've been exposed to. Because what happens to a lot of people is when people start getting collections calls, it's not from the same company that they owe the money to. So say you have a Chase credit card, you stop paying, and you know that you owe Chase $3,000, but now you got ABC Credit Collections calling you, then it can be confusing. And it causes a lot of people to ignore the notices because they think it might be a scam or they think it might be a mistake. And ignoring those notices has serious consequences like a lot of people are finding out right now the hard way. And these lawsuits usually don't end in your favor, guys. About 70% result in what's called a default judgment, which means the creditor wins automatically because the borrower never responded to the lawsuit or never appeared in court. And in many cases, people don't even realize they've been sued until after the judgment has already been entered against them. So if you don't want to get sued and have a judgment issued against you, it's probably in your best interest to figure out a payment plan with these debt collectors before it gets even worse for you. But this can happen for all sorts of reasons, not just because people refuse to pay. Sometimes people move and they never receive the court papers. Other people don't understand who's suing them because the debt has been sold so many times over. And a lot of people simply cannot win. They can't afford an attorney or they don't know what steps they're supposed to take after receiving the legal paperwork. And you really don't want one of these default judgments to happen against you because now all sorts of bad things can happen. You can see wage garnishments happen. That's totally legal at this point. You can see liens against your property, or you can see other collection methods that are far more serious than collection calls or letters. We're talking like frozen bank accounts and different assets being seized. You don't want it to get to this point. And this isn't just happening to low income Americans. Half of the people being sued earn at least 300% of the federal poverty level, which would be about $100,000 a year for a family of four. And we all know that $100,000 a year for a family of four is nowhere near what it used to be just a few years ago. But I had this other video idea that I figured I would just combine straight into this one because they're so related to each other, which is that the average person will never pay off their credit card debt, guys, ever. We're talking never, ever, ever. And I'm not saying everybody, I'm saying the average person. A lot of this has to do with how much credit card debt people are taking on. It also has to do with how much it has become normalized. And when you look at the average credit card balance now being close to $7,000 per person, or even more than that, almost $11,000 when measured by household, it's no wonder people can't get out of this. People have become so accustomed to carrying balances and making minimum payments or just above the minimum payments just to be able to afford things they can't really afford, or to be able to get by that this is just how people operate now. And when you keep paying that minimum payment, it gives people the illusion that they're making progress because you're not getting collection notices. You're not getting anything like that in the mail. But most of that payment goes towards paying just the interest that you owe. You're hardly paying down the balance at all. And even when people can afford to pay more, sometimes they still just focus on the minimum payment because it's like, well, if I pay the minimum, which is only 200 bucks rather than pay 400 because I have that extra 200 bucks, that gives me an extra $200 in my pocket I can spend, and I can still keep using the credit card. So that's kind of the mindset of people who fall into this trap. But here's why people will never pay it off, guys. If you look at someone who's carrying a $10,000 balance on a credit card, which is not even crazy today, that's pretty normal, 22% APR, if they only make the minimum required payments, it can take 20 years or more to eliminate the balance while costing well over $10,000, their original balance, in interest. So you end up paying more than double what you charged, and it will take 20 years of your life to pay it off. And that's assuming you never swipe that card again over those next 20 years. And we know how realistic that is. That basically doesn't happen. But just like so many other problems that people have financially right now, the core issue is inflation and incomes not keeping up fast enough with it. A lot of households are reporting having a hard time saving even 10% of their take-home pay, which is just horrible. And a lot of people, they just never reach a zero balance, guys. One of the biggest misconceptions about credit card debt is that people eventually pay it off. But in reality, a lot of people simply replace old balances with new balances. They reduce the balance a little bit after receiving a tax refund or a bonus or overtime at work. And then they just re-spend the money on new debt and just build the balance back up or when another unexpected expense occurs. The only way you're going to get out of credit card debt is if you are 100% intentional about it. You have to have a plan. You have to use a proven method like the snowball method, for example. So that way you keep eliminating and eliminating, and then you start to see progress and it gives you more encouragement to continue making that progress. If you don't do something like that, you will never get out. And you basically have two different types of credit card users, guys. You have the people who pay off their balances in full each month, which is what I have done ever since I got out of credit card debt at 27 years old. And then you have everybody else who carries a balance, whether the balance is $100 or $10,000, doesn't matter, but it's people who carry a balance and never truly pay it off. And only 37% of credit card accounts as of this year in 2026 were paid in full each month, which shows you that the vast majority of people are not doing this, over 60%. Here's an entirely separate issue going on with credit cards right now, is the amount of chargebacks is at record highs right now. And in case you don't know what a chargeback is, it's essentially when someone thinks there's fraud happening on their credit card. They see a charge they don't recognize, or you buy a product or service that you claim you didn't actually receive. And then you call your bank or your credit card issuer and say, Hey, I never received this, or that's not what I bought. This is false advertising, or the product never showed up. This has happened to me before as well. And then you essentially submit what's called a dispute. And the lender calls this a chargeback. But what they do is they temporarily suspend that part of your balance and you don't have to pay it until some kind of resolution is met. And I've had to do this many times over the years, guys, from companies trying to rip me off and charge me for services that were never rendered. I've also had products not show up or products arrive damaged, and there's literally no customer service to be had. You cannot reach out to the company and contact them. So I've had to do many disputes over the years with my credit cards. In fact, there was 158 million transaction disputes in 2025, which represented a 29% increase just since 2021. And worldwide transaction disputes increased even faster, rising 46% over the same period. But the thing is, not every chargeback is actually fraud. A significant portion of the disputes are being driven by consumer confusion, rather than just outright fraud. Online shopping has become so fragmented that some people simply don't recognize the names appearing on the credit card statements or can't remember purchases they made several weeks earlier. I've had that happen to me before as well. I've almost disputed certain charges because I just couldn't remember that I bought this. And when you look at certain names on the credit card statement, it doesn't line up at all with the brand or product you bought, which makes it even more confusing. You also sometimes have subscription renewals, or like maybe you signed up for a free trial with something that you don't remember you signed up for, and now you're starting to get charged for it. A lot of parents have kids that accidentally make charges on things that were not supposed to be authorized. All sorts of different things happen. But also you have a lot of people out there who have started gaming the system. There's a bunch of videos on TikTok teaching people how to dispute legitimate purchases in order to receive things for free or avoid paying for services they knowingly received. And just like everything else, guys, when you have bad actors that do things like this, it ends up ruining it for everyone. These chargebacks are an important tool and protections that we have as consumers to make sure we don't end up paying for something that we never actually received or worse. But yet when people start taking advantage of this stuff, that might all come to an end. So this is becoming a way that people who are broke and are spending and living beyond their means are essentially using in order to get different products and services for free. And what they're going to do is they're going to end up ruining it for all of us, guys. What I think should happen instead of it being ruined for all of us is people who are known repeat offenders and are committing this credit card fraud should just be banned from having credit cards. You're cut off completely. Put people on a blacklist just like insurance companies do. The whole insurance industry knows you've made that claim and you are now blacklisted. Not saying you can't get insurance, but your insurance rate will be higher no matter who you decide to go with. So they should have something like that in place with all of these credit issuers because when you have repeat offenders, people who have been caught lying and essentially stealing, they're the ones who should be punished, not everybody who uses a credit card. And get this, when it comes to the weak economy, weak consumer confidence has historically been associated with increases in property crime. When people believe the economy is working against them and corporations are taking advantage of consumers, you start seeing an uptick in this type of crime. So you know things are getting bad out there when people are being sued for the amount of money that they owe. People are fraudulently using credit cards to gain access to services or products they knowingly cannot afford. And when you see more and more people drowning in credit card debt that they're just never going to get out of. Guys, I talk about these things not to just let you know how bad it is, but to give people real world examples of how people end up in these situations so that way you don't end up there. So let me know if this video helped you in any way or what you enjoyed about it down in the comments below. And if you don't want to wait for my next video to come out, check out this one on the screen right over here and I'll see you in the next one.