I’m Struggling With High Interest Rates on my Credit Cards From Universal Default – Eric

“Dear Steve,

Six years ago – had a unplanned child with my wife (still married). A Pediatrician put a $50.00 collection on my credit report (not my bill – total mistake). This triggered universal default 29% interest rates on me and my wife’s credit cards. I got it removed but could not get the card companys to reduce the interest rates.Thought I could get cards paid down but have been fighting a losing battle. Could I have taken legal action against the doctor?? It has been 5 years of Universal Default Hell. In Chapter 13 bankruptcy – What % of unsecured debt are you liable for?


Dear Eric,

It is very unfortunate that you had to live through this episode with the credit report error. I am not a lawyer but I think it would be very hard to go after the doctor that may have placed a comment on your credit report in error. There was nothing intentional about it and the error was corrected.

The real issue seems to be the actions of the credit card companies in response to the error. While stranger things have happened, I find it hard to believe that the error alone triggered rate increases on all your cards and your wife’s cards.

Experience tells me that when things like that happen that it typically involves the convergence of other events at the same time. For example, a rising debt to income ratio, late on a credit card account, etc. The $50 collection account all by itself is generally not enough to make all your cards explode.

Typically after 6 months you can reapply for a rate reduction but that sounds like a moot point now since you are in a Chapter 13 bankruptcy and all the interest is frozen on those cards.

You asked about the percentage of unsecured debt you would be responsible for in your Chapter 13 bankruptcy and that is really a question for your bankruptcy lawyer. They can tell you what they estimate you will have to repay with your filing. It really depends on your confirmed plan and you stated income.

For everyone else, if you are faced with a small bill that is going to go to collections, it is better to pay the bill under protest and then fight for a refund than risk having it appear on your credit report and then have to deal with the consequences it can create.


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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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