Would We Be Better Off Not Paying Advanta? – Michelle

“Dear Steve,

We own our own business and have about $75,000 in credit card debt. The interest rates are at 29.99% We have called every single company and they all refuse to lower the interest rates. AND, as we pay them down, they lower the available balance, so even if we continue to pay them down, they available credit ratio is still miserable. One company, Advanta, is no longer in business but we continue to pay the monthly minimum in order to keep that balance at 9.99%. We are considering letting the payments go in order to save cash. As business owners, income fluctuates wildly and I would like to start saving emergency funds. My husband tried to apply for an SBA loan, and even with a credit score of over 700 at the time, he was denied. The credit card combined payments are over 2k a month. A consolidation program said they could do it around $1600 a month. We also noticed on the preliminary forms that Advanta was willing to settle the debt at 0%! I am leaning towards not paying them at all (since the majority of the payment is interest) and seeing what the companies would settle for in a charge off balance. Credit can’t buy us anything these days, but cash will??!!

Would I be better off letting the credit card payments go and pay the charge off balance or looking into a debt consolidation program?

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.


Dear Michelle,

Is it an option, sure it is, but you need to beware.

Stopping payment on your debts will increase the balances with higher interest rates, fees and penalties. It will also trash your credit. You also open yourself to maximum collection activity and lawsuits.

If you are going to go that route you’d be better off seeking legal protection under bankruptcy. In bankruptcy your debt with either be discharged in a Chapter 7 bankruptcy or an affordable monthly repayment plan will be created in a Chapter 13 bankruptcy. Bankruptcy also prevents collection activity and lawsuits. If you want to learn more about what bankruptcy would mean for you then click here to find a local bankruptcy attorney you like.

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Ultimately it seems like this might be a cash flow problem with the business not generating enough cash to support it’s borrowed obligations. I realize the interest rates were raised but as long as you are using bank money and carrying a balance they have that right to do that and you agreed to it in the terms and conditions.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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