Dear Let's Talk Credit, I have nine credit cards, have always paid on time for the past seven or more years and now recently lost hours at work. As a result, I will be unable to make all the minimum payments on the cards. I had a payment due yesterday and was not able to pay anything. What do I do?
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First you need to develop a budget to map out your spending, based on your reduced income. Start with your mandatory bills such as rent/mortgage, car payment, utilities, insurance and medicine. Then list food and gas at the minimal amount, which means combining trips in the car and limited eating out. Once you have established what you need to spend for those items in your budget, you will have a better idea of how much you have left to pay your credit cards.
If you are still short of what you need to make minimum payments on all your accounts, take another look to see if you can cut expenses anywhere. You might consider temporarily cutting cable television. Another option is to look for ways to increase your income, such as selling something of value that you don't need any more like a recreational vehicle or jewelry, or seeking part-time employment.
If you need help developing a budget, consider contacting a nonprofit credit counseling member agency of either the Association of Independent Consumer Credit Counseling Agencies, or the National Foundation for Credit Counseling. Your certified credit counselor will work with you free of charge to determine where you can cut expenses.
If you find yourself short, even after cutting your spending to the bare minimum, you might consider contacting your card issuers and requesting a hardship program. Explain your situation and determine if the reduced payment that is offered on the program is affordable based on your new budget.
A credit counseling agency can also help determine if a debt management plan makes sense for you. A debt management plan typically lowers credit card interest rates, stops collection activity, and waives late fees and over-limit fees.
Do your best to continue making minimum payments on your cards. For any cards that you are not able to pay, communicate regularly with the card issuer to let them know the status of your situation. Credit card debt is unsecured, so you do not have to worry about foreclosure or anything being repossessed. However, if you are unable to pay for more than 180 days and owe large amounts, the creditor may decide to take legal action to collect.
If you get to the point of no payments for more than 180 days, you may need to evaluate your legal options to avoid being sued for payment.
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