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Like an acrobat “without” a large enough net, many people have pushed their monthly minimum payments on credit cards far beyond their ability to pay. January and February are cold months and they can be particularly harsh for those who overspent at the holidays.  Many are now faced with the reality of how far out of balance they have gotten.

What to do next is not an easy or an obvious decision and many people reflexively make the wrong decisions. Here are a few rules to follow when these credit card issues are staring you in the face:

  1. Never withdraw your exempt retirement savings to pay down or pay off debt. Once these savings are gone, you will not get them back.
  2. Don’t take out a consolidation loan unless the refinance offer is for a much lower interest rate than you are paying. Plus, you are willing to cut up your credit cards and not use them again until the loan is repaid.
  3. Know your rights. If a credit card company or any other creditor calls about a delinquent account, extracting money is their only goal. They’ll use psychological weapons, threats, coercion or whatever it takes.

As the debtor you may feel like your options are limited. The fact of the matter is you have a lot more power than you realize. They’re calling you because you have something they want: Money.  Use that knowledge to your advantage.

If you don’t have the money right now to pay them, tell them that. Ask what options are available. Do not be surprised if the only option they give you is a check by phone transaction. Whatever you do, don’t authorize one. If you give them electronic access to your checking account, they could potentially clean your account out. Instead, send it by mail and pay them with a money order. Do not send a check drawn on your personal checking account, because checks are routinely being converted to electronic transactions.

As a matter of law, once you have hired an attorney, the harassing phone calls must stop. The creditor must now deal only with the attorney, or be in violation of state and federal law. The attorney will now do negotiating, and any settlement will be in writing. If the creditor threatens suit, your attorney will respond appropriately so that all your rights are protected.  Be Educated! Be Proactive!

Take it for what it is…it’s just AS I SEE IT.

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