How to get help with Credit Card Debt

March 3rd, 2011 | Posted in Credit Card Debt

Many of us are asking what will happen if i cannot pay my debts. Many more of us are too afraid of their debt and do nothing about it but doing nothing is no solution.

If we cannot pay our credit card bills then chances are that there are other bills not being paid either: mortgage, rent, utilities, car HP, loans, overdrafts and so on. However, let’s assume that all other bills are being paid and that only payments of credit card bills are falling behind. Let’s assume we have a number of credit cards, each with a fairly generous spending limit and that the cards are at various stages of being maxxed out.

There are various courses of action that people may adopt. Here is a list of some of them. Some of them have some merit and others are positively fraudulent.

1. You can Make minimum payments on some of the debts.

2. Stop using your credit cards and cut them up.

3. Obtain loans (at lower rates of interest than the cards) and with the proceeds pay off the credit cards.

4. Get a new card on a balance transfer/zero interest basis.

5. Max out all your credit cards cards and then petition for bankruptcy.

6. Re-mortgage a property releasing equity and clear some or all of the credit card debts.

7. Seek a financial solution for your debt, start by Contacting. an insolvency practitioner

Let’s have a look at the consequences of some of these actions or inactions:

1. If a credit card bill is not re-paid at all then the debt increases as the card provider adds penalties and interest on a monthly basis. The credit facility will be withdrawn in due course and the creditor will take steps to recover the debt by presenting a statutory demand for re-payment, obtaining a CCJ, petitioning for bankruptcy or other recovery action.

2. If you only make the minimum repayments the debt can still continue to grow even if spending on the card ceases. If you only make the minimum repayments this can lead to the creditor taking recovery action similar to the situation when payments cease completely.

3. An excellent first step. At least the bleeding will stop. However until we settle the credit card bills, interest and penalties will continue to be applied by the creditors. Cutting up credit cards can provide a temporary respite but it doesn’t tackle the problem of being unable to re-pay the debt. It just postpones the evil day, so to speak.

4. Obtaining a low (or lower) interest loan can be a partial solution, provided we have sufficient disposable income to service the loan and we stop using the credit cards altogether.

5. But again this is just a temporary fix to the problem and even if you could get such a card or loan, the debt still has to be paid off at some stage and after the interest free period, the interest rates and penalties on the new card can be higher than before.

6. Definitely a no-no. To borrow money – which is what using a credit card is – with no intention of repaying the debt is fraudulent and could lead to criminal prosecution.

7. This could be a solution or partial solution. You need to make sure that there is equity in the property to start with, and even if there is, a lender may limit the amount at which it will provide a re-mortgage to say 85% or less of the current property value. Because the value of property has reduced dramatically in the last few years, the amount of realisable equity may have also reduced sharply. It also could be the situation that no provider will offer a re-mortgage at all. Even if you do get a re-mortgage the interest rates may be unattractive and there may be additional costs, such as the cost of obtaining a valuation. The existing mortgage may also be subject to an early re-payment penalty, if moving from the current mortgage provider and the term of such a penalty has not yet elapsed.

8. Consulting an Insolvency Practitioner is the best initial course of action. A reputable IP will look at all of your finances and will advise you on what options are available to you. This advice should be free. Options for you may include entering into an IVA, entering into a Debt Management Plan or petitioning for Bankruptcy. You can look in detail at each of the options and choose the best option for yourself and you will have more control over your financial future than you would if you default on your credit card bills and do nothing or choose an inappropriate course of action. In the end you will make up your mind whats right for you and you decide what will happen to you.

If you are looking for more advice on credit card debt or debt help then visit National Debt Relief where you can get all the debt help you need.