Whenever you say things can't get any worse, that's when they usually do. If you and your significant other are sliding down that slippery slope into insolvency, put on the brakes now. Take positive steps to get out from underneath your debt load. Don't take the path of least resistance. It could be the worst thing you can do.
Sticking your head in the sand and doing nothing won't make the problem go away. While you're pretending nothing is happening, your creditors are planning their next course of action.
Take Out More Debt
Jumping from the frying pan into the fire is what happens when you decide to take out more debt. You might think that you'll transfer the balance on that high-interest credit card to the introductory, low-rate credit card and then close the old account. What happens in reality is you keep the account open and start racking up more charges.
Make Minimum Payments
Each account has a minimum payment based on 2 to 4 percent of the total amount owed. If you only make the minimum payments, the debt will take years to pay off and you'll pay two to three times the balance in interest. For example, a $10,000 balance at 14.9 percent interest rate, which is the average interest rate on credit cards, and a 3 percent pay off rate -- 3 percent of the balance every month -- will take you nearly 18 years to pay off.
Don't be late on your payments. That's the first step in a downward spiral of drowning in debt. It's a challenge to get back on track.
Once you miss a payment, it starts several actions in motion. The creditor who doesn't receive the payment may limit the account to the balance owing and raise the interest rate. Other creditors see you've missed a payment on your credit report and limit those accounts as well.
Write Checks You Stretch to Cover
Don't write a check you don't have the funds in your account to cover. Writing a check in the hopes that somehow you can cover it could be considered fraud if the check is returned. If the bank honors the check, you'll be hit with a hefty fee.
Ignore Phone Calls
No one likes to feel like a loser, and many collection efforts try to bully you into paying. Keeping creditors informed as to what's going on may help in getting cooperation in coming up with a debt repayment program. Suck it up and answer the phone.
Even the captain of the Titanic knew the ship was sinking. Keep spending levels at the rate that got you in trouble just means you'll sink faster.
Throw Out Collection Notices
When it gets to the point that your creditors have sold your accounts to collection agencies or junk debt buyers, you'll start receiving letters. Throw out the collection notices, and you give up the opportunity to challenge the debt. Don't assume the debt is yours. The original creditors sell these accounts for pennies on the dollar and with no guarantees the debt, debtor, account or amount is correct.
Don't Show Up
If you've been served with legal documents that say a suit has been filed against you, you must respond to that suit and show up in court -- not one or the other, but both. The creditor will receive a default judgment automatically if you don't respond. Your wages are then garnished, and liens placed against your house and car. If that's not bad enough, your bank account could be wiped clean.
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