Here is a video with Senator Elizabeth Warren explaining The tricks and traps of minimum monthly payments and other credit card bank rip-offs.
If you are considering permanent non-payment of credit card debt as the best solution for credit card debt you cannot afford to pay, you need to educate yourself and understand how to easily analyze your finances the way a debt collector, who was evaluating you, would.
You need to do that NOW. Doing it before you stop payment is the best time. That will give you the most control of your situation. But, doing it at any time during your indebtedness is better that not doing it at all.
The big fear about non-payment of credit card debt is a court judgment. You owe credit card debt, therefore you assume when (not if) you get sued for it, the creditor will win a judgment against you. The reality is you may not get sued, and if you do get sued, the creditor probably will not win if you or your attorney know how to legally force them to properly document your debt.
Initially I thought I would eventually get a judgment against me. So the first thing I did was investigate bankruptcy. But, I had a lot of home equity that my state’s Homestead Act could not protect due a divorce. [Depending on how they are written, state Homestead Acts can prevent creditors from seizing your primary residence.]
I started my haphazard discovery of what to do about the non-payment of credit card debt with an erroneous assumption about credit card lawsuits and a knee jerk reaction to think about bankruptcy first.
Relief From Credit Card Debt
As I learned more, I soon realized how important it was to educate myself through trustworthy information sources and to develop a plan for my particular situation. There is a lot of information out there about credit card debt that we do not realize applies to different consumers in different ways given their particular set of variables;
- How much they owe?
- To how many different banks?
- Which particular banks?
- How old are the debts?
- Who has been trying to collect on them?
- Have any of them been sold to junk debt buyers?
- In what state?
- What are that state’s rules of civil procedure?
- What is its statute of limitations on credit card debt?
- What are its consumer protection laws?
- Does the consumer have assets and a job?
- Or, are they living in retirement on a fixed income?
- Or, are they unemployed?
This more general information is very important because you cannot understand your own situation until you have grasped the basics first. My problem was this general information was not in one place, but rather spread all over the Internet. And, when you are dealing with those kinds of information sources, the question becomes, who can you believe, and who should you not believe? Who has sufficient credibility? I needed to check everything with two or three sources before I was confident it was accurate or became convinced I should ignore it.
Based on what I learned, I have organized this general information; general as in not specific to any one credit card account, but true for most. Those of you who read my program first can then focus confidently on your individual set of variables, and if you so choose, I can advise you like I have many others on those particulars. Being able to intelligently focus on your particular situation will give you the best chance of avoiding or defeating a credit card lawsuit.
First You Must Consider Your Financial Situation
A debt collector wants to know; do you have assets? Do you own a house with equity in it? Do you have a job? Are you paying your other bills as indicated on your credit report?
Or, are you judgment proof? Do you have few assets and live on a fixed income that a judgment cannot touch?
If you just stopped making the monthly minimum payments on your credit cards, would you be able to pay for monthly necessities and perhaps save a little to have a cushion should you need it for unexpected expenses or an attorney? Hopefully through the selective non-payment of your unsecured credit card debt you will be able to right your financial ship and get on with the rest of your life.
What Protections Do the Laws of Your State Afford You?
The National Consumer Law Center did a recent study on how individual states protect their residents against the debt collection abuses. From the NCLC’s perspective few states do an adequate job of protecting debtors and many states do a poor job of providing protection against aggressive creditors.
You should check to see if your state does any of the following;
- Preserve the debtor’s ability to work by protecting a working car, work tools and equipment, and money for commuting and other daily work expenses.
- Protect the family’s housing, necessary household goods, and means of transportation.
- Protect a living wage for working debtors that will meet basic needs and maintain a safe, decent standard of living within the community. [For example, some states do not allow garnishment of wages.]
- Protect at least $1200 in a bank account so that debtors can pay commuting costs as well as upcoming rent and utility bills.
- Protect retirees from destitution by restricting creditors’ ability to seize retirement funds.
Research it, do not file for it. Learn how its effects might apply to your finances. It should be your last option. Yes, it will negate any financial judgment against you. That is the time for you to use it; When (and if) a judgment has been filed against you, and you are out of options.
What would formal bankruptcy be like for you? Would it simply clear the slate of past debts and give you a fresh start. On the other hand, if you have a good-paying job, you will be forced into a stringent five-year payment plan with bankruptcy, and that bankruptcy could ruin your prospects for finding a new job, now that more and more employers check credit scores on potential new hires.
By stopping payment on your credit cards out of necessity you will essentially be committing informal bankruptcy without the protections of formal bankruptcy. Your protection will come from learning how to fight of debt collectors and collection attorneys and finding the right attorney.
Your Credit Score
How badly do you need an improved credit rating? Bankruptcy ruins your credit for 10 years. And, most employers run credit checks that will reveal you filed for bankruptcy in the last ten years. Non-payment of credit card debt WILL hurt your credit rating. But, over two or three years the monthly debt payments (auto loan, etc.) you do make will begin to outweigh your credit-card-debt bad marks, so your credit rating will be serviceable, perhaps average, rather than poor. Something a future employer will probably not use to screen you out of consideration for a new job.
Finding an Attorney
Can you afford to hire an attorney at a reasonable cost of $2000-$3000?
If you can afford an attorney, then you must spend your time finding a local consumer rights attorney, or failing that, you need to find an attorney who is willing to defend you or at least advise you on what do defending yourself. There is a glut of attorneys in right now in the U.S. More and more attorneys are defending consumers who owe credit card debt and now understand how easily credit card banks and junk debt buyers can be defeated in court.
If you cannot afford an attorney . . .
. . . then you must do your homework ahead of time while you are sending letters to debt collectors and collection attorneys, so you are prepared should you receive a credit card debt summons. Remember, many junk debt buyers go no further in a credit card lawsuit with any consumer who competently answers their summons.
And, you should still look for an attorney who could advise you on a limited basis. [I paid a young attorney, who had just hung out his shingle, for a few hours of his time to review my court filings.]
You may also need to reconsider whether you can or cannot afford a reasonably priced, experienced consumer rights attorney.
This new information will give you the control, confidence and emotional peace of mind to put your credit card debt problem behind you and to get on with your life. In my experience if you cannot afford to pay, then a non-payment plan is best for you.