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Don't Panic Over Credit Card DebtJan 25 '00 (Updated Feb 20 '00) Write an essay on this topic.I have learned a few things about credit after helping my mother resolve her credit problems. She came to me Easter Sunday last year and told me she was in trouble. She owed almost $90,000 in credit card debt. She had thought about bankruptcy, but I told her that it wasn't an option for her, since she had inherited stock from my grandmother. She was lucky. I was able to get some of her stock holdings sold and get her debt paid off. I also learned several things about credit card debt in the process and what can be done to get out of debt. The first thing I did was make my mother hand over her credit cards. I also took her checkbook, ATM card, debit card and the bills she had not been able to pay. I was already a co-signer on her checking account, so I was able to write checks for her. I was also able to get my grandfather to give my mother enough money to get her bills caught up. Most importantly, after I paid the credit cards off, I wrote letters to the credit card companies, got my mother to sign the letters and had the accounts closed. Here is what I have learned: First, don't panic. You are not the first person to get in over their head in debt and not be able to get out from under it. Second, talk to someone. Find a friend or a family member whom you trust. Let them know what is going on. They may be able to help, but DON'T ask them for money. If you can't pay your bills, how can you pay them back? Third, there are other alternatives to bankruptcy. Check your local telephone book. Most cities have a consumer credit counseling service. Call them. They won't think badly of you. You are not the first person this has happened to, and you certainly won't be the last. They will help you, only if you are willing to help yourself. You do have to give them ALL your credit cards, and promise that you will not use credit cards or apply for new accounts. They will get in touch with the companies you owe money to, and set up a payment plan that fits within your budget. You can also get in touch with some of the places you owe money yourself. Most of the time they will work with you. They would rather get a few dollars a month, instead of you declaring bankruptcy and not getting anything at all. Fourth, if you have any assets that you can convert to cash, do it. This includes stocks, savings accounts, insurance policies and certificates of deposit, just to name a few. Ask your employer if you can borrow against your retirement account. Fifth, if all else fails, declare bankruptcy. There are two kinds of bankruptcy. Chapter 7 is straight bankruptcy. Chapter 13 is extended time payments, kind of like the creditors giving you a chance to catch your breath and get yourself organized. Don't feel bad. Like I said earlier, you are not the first and you will not be the last. Hopefully, you will have come out of the experience much wiser about credit and how, if you let it, it can run your life. One thing you should know is that in most states, bankruptcy stays on your credit record for ten years. My mother was lucky. She was able to convert her stocks to cash and get her debt paid off. One bad thing is that her stock holdings have gone down and she will have to report and pay capital gains taxes on the money she received when she does her federal income taxes. I also have a good friend who came to me with his problems with credit card debt. He was also newly married. He didn't have any assets except for his car. He ended up declaring straight bankruptcy. He said it was a humbling experience, and he learned a lot from it. I hope this has been informational to you and if you do get in dire straits, just remember the first thing on the list. Don't panic and you will be all right.  |
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