What If I Can’t Pay Credit Card Debt?

Whenever you apply for an account – whether by mail, telephone, Internet, or in-person – you are signing a legally binding contract. Thus, if you are unable to pay the bill for any reason the lender can legally sue you and also pursue garnishment of a portion of your wages. In some states, a credit card company can levy part of your bank account or demand a lien against your assets such as real estate equity. Thus, many people these days ask the question of, “what if I can’t pay credit card debt?” What follows are several options that will hopefully get you back on the road to financial recovery sooner rather than later.

1. Communicate with your credit card company and be honest. Simply say “I can’t pay credit card debt” and go from there. Yes, it is very tempting to avoid those collection calls and letters. However, you have a better chance of renegotiating the debt if you get in touch with your lender. While not every financial institution will cooperate, if you have a provable emergency such as a serious illness you potentially qualify for a “hardship plan.” You still have to pay the debt and will lose the right to use the credit card. But hardship programs usually eliminate late fees, over-the-limit charges, and reduce or completely eliminate your interest rate so you can pay off your debt.

2. Seek credit counseling, but not just with any company. Some people believe the only answer to the question of, “what if I can’t pay credit card debt?” is to file bankruptcy. In some cases bankruptcy as the “answer” is indeed an accurate conclusion. But you might not need to take such a dramatic step. Besides, under new bankruptcy laws you must get credit counseling with a federally-approved company before filing a case. A qualified credit counseling service can help you better budget your money. Also, lenders are more likely to create a debt settlement plan with you if you are working with a reputable credit counseling company.

3. File bankruptcy if you keep asking yourself the question of, “what if I can’t pay credit card debt?” Some people do what is called “unofficial bankruptcy” and simply stop paying credit card bills. If you don’t have a job or assets, you probably can’t be sued. But this is a risky proposition so if you are this desperate you might need to file bankruptcy. Chapter 7 allows income-eligible people to permanently eliminate most of the bills; Chapter 13 creates a manageable partial debt repayment plan. However, be mindful that bankruptcy will further damage your credit score for 7 to 10 years.