Credit Card Debt Help: What Steps You Should Take

Posted by William Kain on August 27, 2015 at 9:30 AM
William Kain

credit_card_debt_helpThe following story may sound similar because many American struggling with credit card debt did not incur that debt by purchasing luxury items, taking expensive vacations, or buying unnecessary personal items. In many cases, a person struggling to pay credit card debt incurred that debt because of a financial crisis.

A Personal Story of Dealing with Credit Card Debt

Martha is a single mother working full time to provide for herself and her daughter.  Even though Martha has to work hard and live within a budget, she is able to pay her bills and provide a good life for her daughter. Martha works in a large company that provides low-cost health insurance for its employees; however, the deductible is very expensive.  Martha never needed to use her health insurance coverage other than to pay for well-child visits or to pay for minor health problems such as the flu. Martha was thankful she had health insurance coverage when she received a call at work from her daughter's school informing Martha that her daughter was on the way to the hospital because she had been injured in gym class. 

The injury was not life-threatening; however, Martha's daughter did need surgery to repair a broken bone in her leg. Insurance paid for most of the bill, but Martha was still responsible for paying thousands of dollars in co-pays and deductibles.  The hospital and physicians demanded Martha go on a payment plan or they would turn the accounts over to a collection agency. Martha felt she had no choice but to pay the medical providers; therefore, she began using her credit cards to pay other bills and living expenses.  She assumed she would be able to get the credit card debt paid after the medical debt was paid.

Unfortunately, after Martha paid off the medical debt, she struggled with her credit card debt.  The interest charges on the credit card accounts made it much more difficult to pay off the credit card debt because most of her monthly payments were applied to the interest rather than the actual debt. The balance of her credit card debt never seemed to decrease no matter how hard she tried. For Martha, it is a never-ending cycle of paying the minimum payment and then having more interest added onto the balance.

What are Some Ways Martha Can Deal with Credit Card Debt?

Trim Your Budget

If you are struggling to pay off your credit card debt, cut out unnecessary spending (i.e. buying coffee on the way to work each morning, eating lunch out, etc.).  Review your budget to see where you can cut costs such as reducing cable service, cutting out data on your cell phone service, shopping around for cheaper automobile insurance, etc. Use the money you save to apply to your credit card debt. 

Focus on Highest Interest Rate

Focus your extra payments on the credit card accounts with the highest interest rates.  Pay those off first to save money on interest and then apply that monthly payment to the account with the next highest interest rate. Continue this process until all credit card accounts are paid in full.

What If Nothing I Do Gets Rid Of My Credit Card Debt?

If neither of these options work and you are still falling behind on your credit card debt, talk to an experienced bankruptcy attorney. Before you withdraw money from your retirement accounts or savings, use your tax refunds, or use bonuses to pay off credit card debt, contact our office to discuss your bankruptcy options. In most cases, your retirement accounts, tax refunds, and future income are protected in a bankruptcy filing. If you use those funds to pay down your credit card debt, you will still be struggling with the remaining credit card debt and you will have risked your financial stability in the future.

Filing bankruptcy may not be the first thing you think of when trying to deal with overwhelming credit card debt; however, bankruptcy is an affordable solution to debt problems.  Bankruptcy provides individuals like Martha a fresh start to rebuild their finances and recover after a financial crisis. Without bankruptcy Martha would not have been able to pay her credit card debt while providing for herself and her daughter.  Creditors would eventually begin taking legal action to collect the debt. Filing a bankruptcy case ended Martha's debt problem and gave her the chance to get back on her feet. Bankruptcy will do the same for you.

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Topics: Personal Experiences, Credit

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