I’m currently in a situation where I have a significant amount of debt, and I can’t make my credit card payments this month. Most of my cards are nearly maxed out. I’ve seen three main approaches to dealing with this problem:
- Stop paying and wait for collections, hoping the debt gets sold to junk debt buyers, who are easier to handle in court.
- Use a debt consolidation service to lower your payments and stop accruing interest.
- Negotiate directly with the creditors to try and reduce the balance.
I’m interested in knowing which of these methods is currently the most effective. I’m confident in my ability to negotiate myself and prefer not to pay for a service unless it offers a significant advantage in terms of outcomes.
As mentioned by others, filing for bankruptcy is the alternative. I declared bankruptcy in 2017 due to credit card debt of $20,000. I could hardly afford the minimum, much less more. Because I would pay it off within a month of filing, I was permitted to keep my automobile. Very simple procedure. Because it was in the 700s, I was able to restore my credit and purchase a home a year and a half ago. This choice has a lot of baggage, yet my only regret is that I did not file sooner.
I’ve noticed this a lot lately. Bankruptcies have increased by about 30% since I last checked.
You won’t be able to win in court, as they’ll easily prove you owe the debt. They’ll likely get a judgment and could garnish your wages. This isn’t an amount they’ll just forget about.
If you want to negotiate, you’ll need to save enough to pay about half of the card’s balance in one lump sum. For a $7k card, you’d need around $3.5k-$4k ready to offer. Make sure to get written confirmation that this amount will settle the debt in full. They may not accept your initial offer, so be prepared to call weekly, offering and hanging up if they refuse. You can also try requesting a reduction in your minimum payment by explaining you can’t afford it, though this may increase your overall cost as it extends the loan.
What are your income, payments, and balances like? Could you let all but one card go unpaid for 30 days to eliminate a minimum payment? This tactic is particularly effective for lower-balance cards with higher payments. Alternatively, could you work extra or donate plasma to cover a payment?
Unable to pay the minimum or the outstanding balances? If you go from paying them in full to suddenly not being able to make the minimal payment, you’ve dug yourself a fairly large hole.
Pay what you can if you are unable to pay the entire amount. If you can, transfer the balance to another card to avoid paying interest. Don’t fail to pay. You might as well consider filing for bankruptcy if you are truly thinking about not paying.
Call the issuer, describe the circumstances, and observe what kind of offer they have.
Some will allow you to make some payments and accrue some interest-free time to help you catch up.
It doesn’t hurt to enquire.
Engage in direct negotiation. similar outcome to consolidation firms. Unless you have thousands of dollars to throw at a lawyer which you obviously don’tcollectors aren’t any easier to beat in court. In any case, your credit will be damaged for years, so make every effort to pay off as much as you can.
Do BK; the sum is probably tiny compared to what you owe. I did it about 20 years ago, so it was incredibly inexpensive. The lawyer appears in court, you don’t, and everything is resolved in about two months. Make sure you can live without credit card debt for an extended period of time; my lawyer advised me to do so for a year, and everything worked out perfectly. Additionally, after you choose this course of action, don’t just charge something. I basically started over after putting everything, including all debts and the car loan, which required me to give up my automobile. However, if you obtain a free consultation, they will walk you through everything that needs to be done.