Q: Recently, I received letters from my credit card companies stating this is my last chance to work with them before being written off as bad debt. At this point, I still do not have enough income to pay them even the slightest amount. Should I contact the credit card companies, or continue to ignore there calls and letters? If I speak to them, what can I accomplish? How does this affect my credit over the long term?
A: The debt to concentrate on is “essential” debt–things like the mortgage, utilities, food, medicine, and car payments.
As to your question about contacting the creditors, that has to be your decision. However, I feel it is always a good idea to communicate with your creditors whether by phone or in writing to explain your situation. You should include why you are unable to pay your debts at this time and state your plan for the future. Creditors will, of course, want you to make your monthly payments. They may be willing to work out “hardship” arrangements with you for a period of time but this would obviously only work if you had some money to spare
Your credit has been damaged over the last several months due to the lack of payments and it will be damaged more once the accounts go into collections. Credit, however, can be rebuilt over a period of time, if your financial situation improves.
It sounds as though you could benefit from talking with a certified counselor who can analyze your financial situation and work with you on setting financial goals and making a realistic budget. Your counselor will be able to discuss with your various options that might be of help to resolve your current financial crisis.
By Steve Axtell - Certified Credit Counselor