Don’t Do A Larenz Tate! How To Deal With Credit Card Debt

October 1, 2014  |  

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A couple of days ago, TMZ reported that Larenz Tate was being sued by American Express because he had not paid his $57K bill. To be exact, the amount is $57,912.85.

Even if you owe your credit card company, you can be proactive about not getting to the collections point.

“One of the things most credit card issuers offer, that is not widely advertised is a credit hardship program,” says attorney and credit card expert Stephen Lesavich, co-author of the award-winning book The Plastic Effect: How Urban Legends Influence the Use and Misuse of Credit Cards. Lesavich is with Lesavich High-Tech Law Group, P.C.

First call the card issuer and alert them to your payment problem. This would be the time to see if a hardship program is available. “Such programs are offered because, in many instances, the credit card issuers would rather work with you for a specified time period instead of having you declare bankruptcy or default on what you owe,” Lesavich tells MadameNoire via email. “During the specified time period (e.g., one year), the credit card issuer may take actions such as temporarily reducing the interest rate you are paying, suspending all finance charges, eliminating one or more months of payments, etc.”

Also try and make a deal with the company, something Tate could have had his attorneys do. “You can also try to negotiate canceling of credit card debt directly,” says Lesavich. “However, most of the time this requires an attorney or some other person to help you with the credit card issuer. Before entering any credit card hardship program or trying to negotiate cancellation of any credit card debt, consult with your tax professional and your financial planning professional.”

To avoid getting into this position again, Lesavich says to take note of your situation.

–Why are you in this situation?

–Did you overspend? If so, why?

–Did you make any frivolous purchases? If so, what triggered the purchases? “Many credit card purchases are triggered by emotional purchases used to fill an emotional void,” explains Lesavich. “In our book for each Urban Legend we include a section called ‘Plastic Reactions.’ The Plastic Reactions sections includes questions the reader can ask him/herself to check in on their own emotional state.”

–Do you need  credit card/financial counseling?

–Go through your budget and debts. “Write your down current income and debt obligations. Many consumers have no idea what their monthly income and expenses actually are,” Lesavich points out. Then create a budget and stick to it. “Do not buy anything that is not in your budget unless there is an emergency,” he says.

–Pay off your credit card balances with the highest interest rates first. “That will give you more money each month to spend,” he adds. And make more than your minimum payment for your credit cards.

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