Credit Card Delinquencies Are Rising. Here’s What to Do If You’re at Risk

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Seriously overdue credit card debt has reached its highest levels in over a decade, and Americans ages 35 and under are having a tougher time than other age groups when it comes to paying regular bills. According to APNews, the portion of credit card debt that is severely delinquent, which is debt more than 90 days overdue, jumped to 10.7% in the first quarter of 2024, up from 8.2% a year ago. 

Several factors could be contributing to this alarming trend. One is that credit card interest rates remain incredibly high. Also, persistent inflation continues to put a strain on many household budgets. If you are experiencing credit delinquencies or are concerned you may be at risk, there are several things you can do to protect your financial well-being and future. 

Investigate Credit Card Forgiveness Programs

One of the first things you should do is investigate whether there are any credit card forgiveness programs that you might qualify for. These are often something a debt relief company will advertise. However, it seems rare that any credit card company would voluntarily wipe out a person’s debt without some consideration. If you do get any amount forgiven, it’s important to note that you may owe takes on that amount. 

Attempt to Settle Your Debt on Your Own

If you’re comfortable speaking with creditors and negotiating with debt collectors, you may be able to make a dent in your credit card delinquency problem on your own. Credit card companies know that they are better off negotiating debt than getting nothing at all. This puts you in a position of strength. 

You’ll want to do some extensive research about how to effectively handle these negotiations, but it can be done. For example, you should be prepared to explain your existing hardship and offer the company a realistic settlement to get rid of the debt. 

Enroll in a Debt Management Program

A debt management program is usually administered by a credit counseling agency. To enroll in one of these programs, you contact a reputable credit counseling agency that can help you consolidate your debt and make a single monthly payment, usually with a reduced interest rate that they will negotiate on your behalf. 

The obvious benefit of this option is that you can pay off your existing debt with a lower monthly payment, and usually faster than if you continued to pay the cards individually. However, if you can’t control your spending, you could end up in the same situation you were in before. 

Use a Credit Card Hardship Program

Some credit card companies have started offering hardship programs that are meant to help customers who are undergoing financial difficulties. These programs might include:

  • Lower minimum payments
  • Waived fees
  • Temporary interest rate reductions
  • Short-term payment deferrals

To get access to credit card hardship benefits, you should contact your card issuer’s customer service number and ask if they have this program available. These programs are designed to assist people facing temporary financial issues, though, so you can expect that the credit card company will ask for documentation of your current hardship. 

Consider a Debt Consolidation Loan

If you are struggling with credit card debt from many different lenders, it’s possible that a debt consolidation loan could offer some relief. This is particularly the case if you are only making minimum monthly payments on cards with high interest rates. 

A debt consolidation loan should have a lower interest rate than what you’re paying currently. For example, some people take out personal loans to consolidate debt or work with lenders who offer loans specifically for this purpose. However, if you’re seriously delinquent with your credit card payments, you may find it difficult to get approved for one of these loans. 

Wipe Out Debt Using Personal Bankruptcy

Another option you can consider if you’re truly struggling with overwhelming debt is personal bankruptcy. This can provide you with a fresh financial start and get the creditors off your back immediately. 

When you file for bankruptcy, you get an automatic stay, which prohibits creditors and debt collectors from harassing you about payments. Depending on which type of bankruptcy you choose, Chapter 7 or 11, your unsecured debt can either be wiped out or restructured to make your payments more affordable. 

Bottom line: If you are struggling with credit card delinquencies, you have several options. One of those is personal bankruptcy, which is not something you want to approach on your own. Gulf Coast Bankruptcy is dedicated to providing useful information to people struggling with their finances so they can make the most informed choices about their financial future. 

What Happens to My Credit Card Debt If I File for Bankruptcy?

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Credit card debt is a leading cause of unmanageable finances. According to Experian, the average credit card balance of Americans is $5,525, with some states having average credit card debt as high as $7,089.

Those are significant figures, but many families are able to pay down debt when it gets too high. But what if your credit card debt becomes so unmanageable that you consider filing for personal bankruptcy? Here is what happens to your credit card debt when you choose bankruptcy for debt relief.

The Risks Associated with Unmanageable Credit Card Debt

When you fall behind on your credit card payments, you can get into serious financial trouble quickly. Some of the consequences of unmanageable credit card debt include:

High Interest Rates and Fees

Credit card companies charge incredibly high interest rates to customers who don’t pay off their balances at the end of the month. And, if you get behind or miss a payment, you’ll begin to accumulate late fees. Even worse, some credit card companies will charge higher rates and fees if you become a credit risk.

Debt Collection Actions

If you stop paying your credit card debt, the creditor will eventually send you to collections. You’ll start to get harassing letters and phone calls from debt collectors. If you ignore them, the company might even file a lawsuit, and you can get a default judgment against you by the court.

Damaged Credit Rating

Unmanageable credit card debt will inevitably lead to a damaged credit rating. With a lower credit score, you will have trouble borrowing money to purchase a home or buy a car. Your credit rating might even impact your career prospects.

Credit Cards Are Generally Considered Unsecured Debt

It’s important to understand that most credit card debt is considered unsecured debt. Secured debt has assets backing it up, such as a car for a vehicle loan or a house for a mortgage. Credit card debt is unsecured because there is no collateral that the creditor can take if you fail to pay as promised.

While unsecured debt is based on your credit rating and promise to pay, creditors are able to take action if you don’t live up to your end of the bargain. Specifically, they can send you to collections, file a lawsuit against you, and even garnish your wages if the court allows them to do so.

What Happens to Credit Card Debt When You File for Bankruptcy?

Having out-of-control credit card debt is never enjoyable. People make mistakes with credit cards. But just as many people get into financial situations, such as job losses and unexpected medical crises, that they feel must be managed through credit card debt.

When bill collectors won’t leave you alone, and you are unable to pay on the debt, something has to give. It’s challenging to live with the anxiety of daily harassment by creditors. Fortunately, personal bankruptcy can stop the harassing phone calls and letters instantly.

When you file for bankruptcy, you get an automatic stay, which takes effect immediately. Credits are notified that they are no longer permitted to take any actions to recover debts until your case is resolved. The calls and letters will stop.

Bankruptcy Options for Credit Card Debt

There are several different types of personal bankruptcy that can address credit card debt.

Chapter 7 Bankruptcy and Credit Card Debt

Chapter 7 bankruptcy is referred to as a liquidation bankruptcy. In essence, some of your assets are sold to pay off a portion of your debts. Because of various exemptions, many people who file for Chapter 7 don’t have to give up any assets. For example, you can keep your home and vehicle as well as some personal items. Once your Chapter 7 bankruptcy is finalized, your credit card will be erased, and you will have a clean slate.

Chapter 13 Bankruptcy and Credit Card Debt

Chapter 13 bankruptcy is the other type of bankruptcy that addresses credit card debt. This is a repayment plan bankruptcy, requiring you to repay a portion of your debt over three to five years. Once you complete the repayment period, any remaining debt will be fully discharged.

Credit Card Debt That Can’t Be Erased Through Bankruptcy

Most unsecured credit card debt can be addressed through personal bankruptcy. But, if you used your credit cards to pay for certain items that are not dischargeable in bankruptcy, those expenses could be disallowed. Examples include alimony, child support, student loans, and back taxes.

Gulf Coast Bankruptcy Attorney works diligently to provide the most up-to-date and accurate information about debt relief and bankruptcy for residents of the Gulf Coast region. Our resources are meant to help readers make informed decisions about their financial wellbeing and the possibility of personal bankruptcy.