Credit Card Default – Life after Debt

They say that unless financially prepared, financial disaster strikes every family an average of once every 10 years. In the current economic times, it seems like that once every 10 years has increased.

If disaster has stricken and you have defaulted on credit cards and other credit related obligations it can seem like you are stuck in quicksand with no possibility of escape and no hope. Have no fear. Nothing could be further from the truth. I often tell people that just because you feel like you don’t have any options, doesn’t mean you don’t. It simply means that you don’t know what your options are and the first key to recovery is exploring and understanding your options. The second key is to take swift action.

So, if you find yourself in credit card default with collectors calling every two minutes like a guy desperate for a date, it is time to understand your options and take swift action.

Here’s what you do:

  1. Send all harassing collectors a certified return receipt letter informing them that all communication going forward MUST be in writing (this will stop the phone calls)
  2. Get a copy of your credit report from all three credit bureaus
  3. Dispute all of the derogatory accounts-this is a necessary first step before you can embark on some of the advanced strategies
  4. After the 30 day period required for the dispute, if the accounts remain active, send the debt validation letter (to collection agencies) or the debt investigation letter (to the original creditor). This will normally put an end to things, get the derogatory accounts completely removed and legally eliminate the debt.
  5. If the debt validation or debt investigation letters don’t work satisfactorily, you might feel compelled to work with a credit card debt settlement company. Don’t do it. While it may reduce the total amount of debt that is owed, it will also have the negative effect of placing a statement on each account indicating that an amount less than what was owed was accepted AND continue reporting as derogatory for 7 years FROM the final date you actually pay the account off. Check out the statute of limitations and the licensing of the collecting party.
  6. If all else fails, you can work to negotiate a pay for delete. Using this method, you actually pay the full amount of what is owed in exchange for the account begin completely deleted from your credit report. It is important to document this in writing and have a letter from the creditor or collector with all of the relevant account info and terms BEFORE you pay anything.