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I’m Considering Letting Some of My Debt Go Delinquent. – Terrell

Terrell

“Dear Steve,

2 1/2 years ago my car broke and I made the mistake of charging car rentals to get back and forth to work on my credit card. A $1500 debt climbed to over $4000 within 2 months. Up until January of this year I was able to make the payments. At that point the payments climbed to $180 and I was unemployed and broke.

I have made a 2 or 3 $100 payments in the last few months on that card. Two other smaller credit cards in the amounts of $1200 and $500 respectively also have climbed in monthly payments. I just started a new job and have no doubt about making the payments on the two smaller cards but I’m sure the interest on the larger one is outrageous by now. It’s tied to my bank account and every time I make a deposit the credit card sucks it up.

I’m considering letting the big debt go delinquent. Will letting that one card go delinquent kill my credit? Should I get the debts consolidated? I’m at a loss of what to do at this point. Please help.

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Terrell”

Dear Terrell,

I’m not sure I can see any advantage to the plan you proposed. If you are late and delinquent on one debt it will drag your credit score down and probably lead to higher interest rates on your other cards.

But with the way your bank account is setup, it sounds like to go delinquent on that big balance card you’d need to change banks and open a new bank account so they stop draining you each time you make a deposit. Your current bank sounds like it might be a credit union.

With a total of about $6,000 in credit card debt, if you enrolled in a debt management or credit counseling program your monthly payment for all debts would be around $120 per month. If that sounds like something you can do and keep up, then contact a debt management company. They may also be able to reduce your interest rates as well.

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If that does not sound like a payment plan you can do then you’re probably looking at a more aggressive solution like bankruptcy. Talk to a debt management company and let me know, in the comments section, if what they propose to you sounds reasonable.

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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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