Question: A few years ago, we found ourselves in a very tough financial situation. So we made the decision to prioritize our bills.
Unfortunately, we fell behind in our credit cards. As time passed, we were able to settle with a few of the cards, but there are a few left that are in limbo somewhere. I know of one that received a judgement against me, and I think there are two more.
The thing is, I haven’t heard from them and I’m not sure what to do. File bankruptcy? Hire a debt settlement company? Or contact the creditors directly?
— Ullisses in Illinois
[Debt.com founder Howard Dvorkin]
This letter is REALLY revealing. Not for what the writer says, but because of what he doesn’t know.
It’s very common for smart Americans to forget to ask basic questions. Like: How much debt do I owe? Who do I owe it to? And what’s the deadline before bad things start to happen?
Look, I get it. Figuring out your finances is way down the list of fun activities. I’ve been a financial counselor and author for more than two decades, and even though this stuff fascinates me, I know other people look at budgeting like they look at flossing: It’s important, but it’s boring.
Here’s the thing: No one will help you floss your teeth, but there are professionals who can help you with your finances. It is important to get a debt analysis so you can learn what you need to do. And it’s even easier than flossing, because all you do is call Debt.com.
If you want to get out of debt, knowledge is powerful.
Howard Dvorkin answers…
My answer is going to be general because your question is general. In other words, I can’t be specific because you’re not completely sure how many credit cards you still have open, and which ones have judgments against you.
That said, I can offer you one specific and urgent piece of advice: Pull your credit report. Learn how here: Where and How to Get Your Free Yearly Credit Report. However, I’ll tell you to ignore one part of the advice in that report.
Because there are three credit bureaus — Equifax, Experian, and TransUnion — the law says you’re entitled to one free report from each bureau every 12 months. Debt.com and other experts advise you to pull a report from one bureau every four months. That lets you notice any irregularities in a timely fashion, then repair your credit either by yourself or with the help of others.
In your case, I’m advising you to pull all three reports right away. Your priority is finding out exactly what you owe and to who — and soon.
In my experience, if a credit card company went to the trouble to take you to court and get a judgment against you for unpaid bills, you owe at least $5,000. Any less, and it’s not really worth the trouble. (Although don’t misjudge what I just wrote: Your card issuer still wants and expects to be paid back. They have other options.)
I’m concerned that you “think” you might have more judgments against you. So I also urge you to contact your creditors right after you pull your credit reports. Rest assured, if you owe them, they’ll be able to tell you.
In these cases, I sometimes hear this faulty logic: “Howard, they haven’t contacted me, so if I ignore it, I don’t have to pay!” While it’s true that there’s a statute of limitations on credit card debt, playing that waiting game is dangerous. First, each state has its own rules, which you can see on this map.
Right now, I’d recommend against debt settlement, which has its own set of drawbacks. While you need to pursue bankruptcy at some point, that’s the very last step. Your first ones are to simply gather all your facts. Once you do that, I’d consult a certified credit counselor for a free debt analysis. You can reach one by calling Debt.com at 855-996-9980.
Have a debt question?
Email your question to email@example.com and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.
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The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the opinions and/or policies of Debt.com.