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Top Five Things to Do If You May Not Be Able to Make Your Credit Card Payments

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First, run a budget.

What is your income and what are your core living expenses? How much have you been paying each month on general unsecured debt such as credit cards, medical bills, and unsecured loans. If you lost your job, assess whether you will be able to get a job in the near future. Many middle age and older people have a hard time getting another job in today’s economy. If you have a sudden loss in income, assess whether you can afford to make any interim payments on your general unsecured debt.

Second, avoid getting high interest loans like payday loans and internet loan companies.

Their interest rates are extremely high up to 400%.

Third, do not take money out of your retirement funds (401(K)s or IRAs).

Do not liquidate them. Do not take out a 401(K) loan. Private retirement accounts are exempt under California law. Creditors cannot go after them. IRAs are generally exempt too, with some exceptions.

Fourth, conserve your cash reserves.

If you default on credit card payments, they cannot immediately garnish your wages, levy your bank account or put a lien on your house. The credit card companies put the accounts in collection for approximately six months and then they could file a collection lawsuit against you. At that point they still cannot garnish wages, perform bank levies or place liens. They would have to obtain a judgment against you which would take them approximately 45-60 days after you are served with the summons and complaint.

Fifth, bankruptcy may or may not be an option.

It is wise though to pre-plan and look at all options. If you are thinking of filing for bankruptcy relief, you do not have to be current on all the accounts. There are ways to do some pre-bankruptcy planning to conserve cash and other assets.

Talking to a certified bankruptcy specialist like David A. Arietta is recommended. Call him at (925) 472-8000 to discuss your situation.