When people are unable to pay their payments that are due on credit cards, they think about bankruptcy. But this is not the best solution. It will ruin your credit and your chances of buying anything else for many years to come. Credit Counseling just might be the answer.
What are my options? The first thing you should do when you are unable to pay the payments on your credit cards or loans is to contact the creditor directly and see if a payment plan can be developed. This involves the creditor reducing the interest rate for a certain period, which in turn reduces the amount of your minimum payment. This will help keep your credit in tact.
If you have been unable to work anything out with the creditor, or if the plan that you worked out failed, you can consider talking to a Credit Counseling agency. A Credit Counseling agency will work with your creditors to eliminate late payments, reduce interest rates and essentially lock your account. You will no longer be able to use that particular credit card. But that is the whole purpose anyway, to eliminate your debt. On the other hand, a good Credit Counseling program can help you get your debt to a manageable level and help save your credit rating as well. Of course, if your debts are in serious condition, this may not work for you, but it’s certainly something that should be considered before bankruptcy.
If Credit Counseling services are not right for you a third alternative is to file for a Chapter 13. Although this still falls under the bankruptcy law, it allows you to repay your debt with the assistance of a trustee who will distribute the funds for you. In addition, this will only stay on your credit for seven years instead of ten like a bankruptcy liquidation (Chapter 7). Depending on your assets, you may not have to pay all of your creditors in full, but after the period expires, any unpaid bills are “forgiven.” For those who have a job and have failed at all other attempts to pay their debt, this may be the only workable solution. The problem is, unlike the other two alternatives, it’s not cheap. Depending on the lawyer, and you will need a lawyer; it can cost several hundred dollars. If, however, you’re about to lose your house or your car, it’s a reasonable alternative.