What to Do If You Can't Afford Your Credit Card Bills

If you simply have a short-term cash flow problem, call your credit card company to ask for a payment holiday. This is an agreement by your card company that allows you to skip your minimum required payment for a month or more. Although interest will still accrue on your debt, you won't get dinged with a late payment fee or a note on your credit report.

If your credit card problems are more substantial, you may have to work out a deal with your creditor. Call to ask if you can change your payment terms, reduce your interest rate or make a settlement arrangement. You may not have a lot of leverage in your negotiation until you fall behind on your payments. If a creditor believes you aren't able to make your payments, it may be more willing to take what it can get from you. If you haven't made payments for a few months, a creditor might be willing to reduce your balance by 50 percent or more if you can pay the remaining balance in full in a relatively short period.

Although cutting your debt in half might save you the most money in the long run, if you don't have the cash available, a negotiated settlement won't do you much good. A reputable debt management company might be able to negotiate a longer-term payment plan with your creditors on your behalf. Under the terms of most debt management plans, your creditors agree to waive penalties and possibly lower interest rates as you make monthly payments. You may have restrictions about taking on more debt during the duration of the plan, which may last four or more years.

Filing bankruptcy may be your last option if you can't afford to make your credit card payments. Bankruptcy will generally eliminate all of your credit card debt, but you will have financial consequences. If you can afford to make payments, you will have to file Chapter 13 and make payments for up to five years. If you cannot afford these payments and otherwise qualify, you can file Chapter 7 and get a discharge in about three months. However, a Chapter 7 bankruptcy will stain your credit report for 10 years, temporarily reducing or eliminating your chances of getting future credit at affordable rates. Chapter 13 remains on your report for seven years.