Imagine for a moment that life throws you a curveball, and as a result your finances are thrown into turmoil. In response, you seek out new lines of credit or you start relying on your credit card far more than you ever have. As a couple of months go by, the life event that was causing you problems resolves and you’re ready to get back to the way things were.
But you look at your credit card debt and it’s far higher than you would have thought. It’s so high you don’t know how you’ll pay it off. So you decide, like many people do, to ignore the problem and just hope it goes away.
Many people respond to debt in this way. They bury their head in the sand, so to speak, and they ignore creditors who call them or reach out to them. This doesn’t fix the problem and, in fact, will only make things worse for you as time goes on. Granted, just because you ignore creditors doesn’t mean they can harass you or pursue your debt in illegal ways. But they are going to try to get in touch with you on a regular basis. Eventually, they may take legal action if you don’t pay.
So what is someone in this situation to do? Well, there are two things to learn from this: be proactive with your communication, and don’t forget that bankruptcy could help you.
To the former: if you get in touch with your creditors you may find that a solution can be reached. Maybe a restructuring of the debt is possible.
To the latter: if you file for bankruptcy, credit card debt is an unsecured debt, which means that the bankruptcy process allows for that unsecured debt to be eliminated in the “debt discharge” process.
Source: Michigan State University, “Communicating with creditors,” William V. Hendrian, Aug. 29, 2014