What happens when you declare bankruptcy and then find yourself back in debt? It happens more often than you think, and it’s a sign that you need to re-think your financial plan.

One of our readers, Elizabeth, sent in this question:

I filed chapter 7 bk in 2003 which has been discharged. I’ve managed to get myself into debt again and I just cant seem to make the minimum payments anymore.

Till now I’ve been on time with my payments and still making my payment. How can I negotiate with the credit card company to allow me to pay a certain amount a month that I can afford. Please advice? Thanks, Elizabeth

Its a good question Elizabeth, and you aren’t alone. I made this mistake myself fresh out of bankruptcy. Let’s take a look at the options you have for getting out of debt.

1. So, what happened? Up until this point you have been able to make the minimum payments on your debt. Something tipped the scales – either losing income, or just plain having too much debt. Before you start calling the credit card companies (which I will cover in a minute) make sure that you take a look at what is really causing your problem.
2. Get a plan - Since you’ve declared bankruptcy so recently, it is no longer an option for you. This means that you are going to have to work the debt out with your creditors. The best way to start is with a plan.

   How many credit card companies do you need to negotiate with? How much money per month can you afford to pay them? (You may have already worked this out). Once that is done, gather your current credit card statements, the cards themselves, and your budget together. That way you have all of the information you need when you start making those phone calls.

3. Begin calling your creditors - Understand that since you are not behind on your bills, they may not be as willing to help you as if you were late. I completely respect that you don’t want to hurt your credit score by being late, so just be persistent. Make sure that you ask for a manager right away instead of wasting your time with the regular representatives. Managers are always better equipped to handle credit card negotiations.
4. Ask about “payment plans” or “hardship programs” - both of these magic keywords usually mean reduced interest rates, or smaller monthly payments.If the person you are speaking to is unwilling to help you, hang up and call back a few hours later.

   There is a lot that your credit card company can do to help you, but sadly, most of it depends on how cooperative the person on the other end of the line is! If they are rude or unhelpful, just keep calling back. No matter how many times they say they can’t help you, it just isn’t true. All it means is that you haven’t yet reached the person that is able to help you.

   Never forget, this is your money, your credit rating, and your future – even if you have to fight for it, it will never matter to anyone else more than it matters to you.

5. If you have recently lost your job - make sure that you tell your credit card company what the situation is. Many credit cards offer programs that will freeze your payments for a couple of months until you get back on your feet.
6. Be prepared to make a payment that day - If you want them to negotiate with you, you are going to have to be able to offer them something in return.
7. If at first you don’t succeed - If you have called and harassed every regular customer service manager so many times that you know them by name, you can always consider going a couple of days past due and harassing the collection department managers instead. What customer service can’t always accomplish, the collections representatives can. If you do this be aware that the late payment will show up on your credit reports – try to avoid it if you can. Some credit card companies are easier to negotiate with than others, and unfortunately you may have to end up doing this.
8. As a last tip,try to raise your income. After all, having a little extra to pay on your cards each month is a good thing, and right now it may keep you from going into default next month. I suggest taking a loot at some work-from-home jobs that you can do part time. You can check out Elance, or Freelance Writing Gigs for starters. Just be careful of scams – if you’re paying them it’s a scam not a job!

Thanks so much for your question Elizabeth, and please don’t feel bad. You are definitely not alone in this situation. I recovered from it myself, it was hard, but these steps do work.

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This entry was posted on Tuesday, January 27th, 2009 at 07:45 and is filed under Bankruptcy FAQ, Debt Reduction FAQ. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.