Q: I have a credit card with a store that is going out of business. I have read on the internet that I should stop paying my credit card. Is this true?
A: NO! Do not stop paying your credit card, unless you want your credit score to fall or you want to be sued – or both.
Store credit cards, such as Circuit City or Mervyns, are not owned by the store. Rather, a large bank, say Chase or Citibank, owns the card. Your payments are to that company. You do not pay Circuit City or Mervyns. So, when Circuit City shuts its doors, your credit card balance does not zero out. Rather, the money is still owed to Chase or Citibank.
If you stop paying your card, the bank will either send you to a collection agency, report you to the credit reporting agencies or sue you for the balance. And you still owe it. The store going out of business is not a defense to this case.
So, if you have a card with Circuit City, keep paying it until it is paid off!