Pay CC or Not?? WWYD?

[Sprag63]

I have a Citi Visa card with a $15,000 balance. Making the $400 a month payments (mostly interest) would be extremely difficult causing severe stress and possibly late payments on more important needs (rent, food, car ins, ect...). In December of this year, 9 months from now, I will have the funds to pay this debt off in full plus interest and penalties. If I chose not to pay now, how hard will they come down on me with the exception of phone calls, letters and lowering my credit rating? Will they come after my assets and wages in those 9 months?

[Baby_nurse]

I don't get what you are waiting for. Are you expecting some type of windfall in December? If so, that day may or may not occur.

Maybe I'm in the minority here, but I view the credit card bills as just as important as rent/food/utilities. I also view those credit card payments as a moral obligation.

Before you stop paying, I would call the company and ask if you can temporarily renegotiate payments or get your interest rate lowered (provided you've been a good customer up to this point).

[jpg7n16]

Where did the $15k debt come from? What did you buy with it?

What does the rest of your budget look like? Can you post a full listing of monthly income and expenses?


I really don't think skipping out on your obligation will be worth it, since you'll have the cash within a year to pay it off. Why do damage to your credit for years because of a few months??

Therefore, it shouldn't matter what would happen if you decided not to pay. You should still pay on your debt and adjust your budget to make it until then. Keep paying and you won't have to worry about it.


WWID? Keep paying the CC debt. Pay it off in Dec. Use the monthly payment to instead build up retirement savings.

[disneysteve]

Baby nurse and jpg, I think you may be missing the point. If OP doesn't have the money right now to pay the CC and also stay current on rent, food, and other necessities, whether or not he/she should make the payments is irrelevant. I agree that one should pay one's debts both morally and legally but there are times when it simply isn't possible because there isn't enough money to go around which sounds like the situation here.

OP, if you monthly bills exceed your monthly income you need to do a few things. First, you need to take a look at your entire budget and slash every possible thing that can be slashed. No cable TV. No cell phone (unless it is your only phone and then the most basic plan you can get). No dining out. No new clothing. No vacations. No shopping for anything except necessities. No gym membership. No charitable giving. No retirement savings. No gift giving. You get the idea. If you do all of that and still don't have enough to pay everything, look for ways to boost income. Extra hours at work or a second job or selling things you can live without. Something to bring in extra money.

After doing all of that if you are still coming up short then you need to prioritize your bills. Food, utilities, shelter, transportation, health care, etc. Secured debt (mortgage, car loan) should come before unsecured debt (credit cards, personal loans) since the creditors for the unsecured debt can't come reposess anything.

So to answer your question, if you truly have cut everything to the bare minimum (and I'd suggest posting your budget for others to weigh in on that) and are working as many hours as you possibly can, then yes, stopping payments on the cards may be the next step. Yes it will wreck your credit. Yes the collection calls will be endless. I don't think they'd sue you that soon but I'm not sure about that. I would definitely call them and try to explain your situation but keep in mind that you aren't dealing with reasonable people when you do that. It might help to keep making payments even if they are less than the minimum. If the min. is $400 and you can afford to send $200, do that. At least it shows intent to repay. You'll rack up added fees but I would think that is better than not paying at all.

[Baby_nurse]

DisneySteve- what point did I miss? He said making the payments would be extremely difficult and MIGHT cause other things to be late. I also suggested he call the company and try to negotiate lower payments, which in turn would not hurt his credit ratings to the same degree sending less than the minimums or not paying at all would.

[disneysteve]

I view the credit card bills as just as important as rent/food/utilities.

DisneySteve- what point did I miss?

Sorry if that came out wrong. I don't think paying your CC bill is as important as keeping a roof over your head or food on your table. I agree that there is an obligation to pay the debt, but if OP truly can't do it all, the CC drops to the bottom of the list.

[Wino]

If the OP is worried about trashing his credit rating, it assumes the credit rating is sufficiently high to be trashed. If he has a 480 rating, not paying yet another bill won't have much effect. I worked out some loan scenarios, and there's not even room to get a signature loan for this amount. A five year loan at 10% has payments of $320, so that's only slightly below his minimum payments now.

I agree with others. Lack of a budget is probably the problem, and OP wants to take the easy way out by not paying an obligation while waiting for the December windfall. I don't put credit card debt financially up with rent or food, but morally it might even be higher. Too bad not enough people still see their word as their bond. OP promised to repay a loan, so OP needs to do everything necessary to repay it.

[Sprag63]

Thank you for the replies. To answer a few questions, my windfall is a 26 yr volunteer firefighters pension worth $65,000 that will be paid in one lump sum when I turn 50 yrs old at the end of November. State law forbids any disbursements before that age. I am willing to pay the taxes to cash out enough to pay this debt because I know it is my obligation and it bothers me greatly that I am not able to make the required payments now.
The reason for this debt is a combination of unexpected health issues and yes, a few bad life decisions. I have already cashed in a $20,000 retirement account to pay down these debts as far as possible but I am now at a point where the income does not meet the debt obligation.

Again, I thank you for the replies and if it's possible I will make any payments I can but my outlook for the rest of this year is bleak.

[disneysteve]

my windfall is a 26 yr volunteer firefighters pension worth $65,000 that will be paid in one lump sum when I turn 50 yrs old at the end of November. I am willing to pay the taxes to cash out enough to pay this debt
I have already cashed in a $20,000 retirement account to pay down these debts as far as possible but I am now at a point where the income does not meet the debt obligation.

So you have already cashed out your retirement and intend to cash out your pension at age 50. Then what? What's your plan to live going forward? How are you going to be able to retire with no pension and no retirement account?

I'd really suggest again that you post your budget so folks can try and help you get on solid ground with a good plan for the future.

[Petunia 100]

One strategy to use to stay current is to use your credit card to buy groceries and pay utilities, then use your grocery/utility money to make the credit card payment.

It is important to stay current. It keeps unpleasant things such as judgments and garnishments away. It preserves your credit rating so that better financing options remain a possibility. But, staying current isn't a solution, it just keeps your problems from getting even worse.

I agree with the others that it sounds like a budgeting problem. Do you have a written budget? If not, it is time to start working on one. Does your income cover your expenses? If yes, then where is your money "leaking" away? If no, then you must reduce expenses, increase income, or some combination of both.

I am sorry to hear you cashed in retirement money to make credit card payments. I think that is a bad idea. I think you need a better action plan than cashing in your pension to pay credit card debt. You're still going to need to eat and have a roof over your head once you retire. 50k is not a lot of retirement savings to begin with, you will want to draw it down slowly to supplement your SS benefits and any other income, not cash out a large chunk of it to pay debt.

Please tell us more about your circumstances.

[~bs]

you're stealing from the future to fund past purchases. I would really reconsider cashing out retirement accounts.

If you cannot afford to make more than minimum payments without coming up short on your other expenses then you need to re evaluate your montly spending and make some hard cuts. You could also consolidate your credit card bills and hopefully pay a lower interest rate and loan term as well.

[mom-from-missouri]

So you have already cashed out your retirement and intend to cash out your pension at age 50. Then what? What's your plan to live going forward? How are you going to be able to retire with no pension and no retirement account?

I'd really suggest again that you post your budget so folks can try and help you get on solid ground with a good plan for the future.

I too have a volunteer fire pension fund, as does my husband. In addition, we also have our "real job" retirement funds. I suspect the poster does as well, and this was just a bonus. So, he may very well have another one or possibly more (esp if he was former military as many volunteer ff are)....

[PSF]

Once in a tricky situation like this it is often hard to get out, prevention is certainly better than cure. Improving your money management skills (through a budget or other means) will help you and you should work on it, however by the sounds of it this won't be enough (still try it though).

A question for you then is how much can you afford to pay each month of the $400? if for example it is $200 that means you only need to find another $200 each month ($1800 for the 9 months). If cutting costs doesn't help you achieve this, nor working a second job, go to your lender and talk to them they may ease the repayments for you.

If the lender doesn't help you I suggest you borrow some money from family and friends. This is never an easy thing to do, but considering your getting a payout at the end of the year they might be happy to help you. If you do this though I suggest you write up a written agreement with them, this shows that you are committed to repaying them when you receive your payout and gives them added security. Mention things such as amount, timeframe, dates, schedule for evidence of payments so they can track you progress (if they want that), witness signatures, etc. Search the net you might even find a template.

I would personally avoid stopping payments until you have tried these things and the other suggestions people have made.

Another thing you should look at doing is selling some stuff around the house that you don't need or want anymore. This good help for a month or two of repayments

Good luck, you'll get there.

[snafu]

Sprag 63, This site is most helpful when folks list spending categories, amounts and interest rate charged. It will help you identify where the $$$ goes and point out leakage. Although many for profit debt counsellors/consolidators are useless & expensive, there are government sponsored debt mediators [orderly payment of debt] who will work with you and your credit grantors to stop interest charges and make income based monthly payments. The downside is that you must follow the negotiated plan. Miss a payment and you're back in deep do-do.

Like the others I suggest you review what you could possible sell to increase funds, find PT work, temporarily cut every possible expense, create a meal plan to use what you have, eat healthy and inexpensively. There are tons of ideas on-line. What are you willing to give up short term? . Check for no cost entertainment, community events, use parks, library, H Sch. baseball/soccer/basketball games, go for a walk/hike daily. - whatever your points of interest to avoid feeling hard done by. Life throw out nasty challenges and it's how you handle them - the actions you choose to take - or not that makes a difference.

[dunnrobert700]

I have a Citi Visa card with a $15,000 balance. Making the $400 a month payments (mostly interest) would be extremely difficult causing severe stress and possibly late payments on more important needs (rent, food, car ins, ect...). In December of this year, 9 months from now, I will have the funds to pay this debt off in full plus interest and penalties. If I chose not to pay now, how hard will they come down on me with the exception of phone calls, letters and lowering my credit rating? Will they come after my assets and wages in those 9 months?

Pay the bare essentials...food, rent, transport (unless you can use public). the rest is for the cc. If it's not the minimum TALK to them and negotiate a plan. Failing that, you're bascially textbook "bankrupt" and can file as such.