Legal Question in Credit and Debt Law in Pennsylvania

I made a HUGE mistake and have several charge off credit cards AFTER my bankruptcy went through. The credit cards are roughly at the $400 mark; there are 3 of them. What is the best way to handle this mistake and make it right so I become 'credit-worthy' in the future? I'm in counseling now for compulsive spending and want to make things right. I am a full time working single mom with 2 kids in college and used those cards to help. Now I'm stuck because I never paid them off. I haven't paid since June 2011.

Asked on 12/27/12, 9:41 am

1 Answer from Attorneys

See the articles on options for debt resolution options and the differences between the various types of debt resolution explained at my website at for a more in-depth discussion.

But what you do depends on what you want to do and what you can afford to do and how quickly you want things resolved.

If these debts are as small as you claim, then its unlikely (its not impossible but unlikely) that you would be sued as it will cost more than the debt is worth to sue. But if you want your credit cleared, then you need to think about paying sooner rather than later.

If you did nothing, the debts would eventually drop off your credit in 2018. If you want to restore credit and be eligible for future credit, then you need to decide whether to pay in full or settle. Neither is "better" when it comes to credit. If you can afford to do so, pay in full, but see if the debt collector will remove the negative item or change it to something neutral (like "pays as agreed." Technically, its not proper, but there are creditors who will do that. If you cannot afford to pay in full, when you have about 50% of the balance on the card with the largest balance, then see if the creditor will settle. Get a settlement letter once they agree to accept a settlement figure. Start at 50% - there is not a whole lot of wiggle room with very small accounts, but if its for credit cards and there is no litigation, they should not be demanding 60% or more. When you pay, do not give them access to your bank account. You pay by money order or bank check. And you follow up after you send the settlement letter within 30 days to get a closure letter indicating that the settlement was paid and that no further balance is owed and that there will be no further collection efforts and that the debt will be reported as "paid settled" or "paid collection." And keep a copy of any checks/money orders before you send them as well as a copy of the settlement letter and closure letter FOREVER. Debts have a way of re-surfacing.

Beyond that, once you get the debts resolved, you need to get yourself back on track. Its good that you readily admit you have a spending issue and I'm glad you are getting help for that. You need to prevent yourself from getting back in this mess. However, it helps your credit to have one credit card.

I suggest that after you get your credit cards resolved, see if you can get a stored value/pre-paid debit/secured card that will permit you to graduate to a real credit card in 1-2 years. Use the card only every other month to buy groceries or a tank of gas. When you need to put more on your card, you do. You cannot overspend as the card only allows you to access what funds you have put on the card so its more like cash.

After you prove to yourself that you can handle it, get a regular credit card with a small spending limit. Use it again every other month to buy a tank of gas or groceries. When you get the bill, pay the bill in full.

Your credit score is made up of mostly paying bills on time and how much credit you have available to you. Have no more than 1/3 of your available credit used up. It looks better for a person to have 3 cards with low balances than to have 1 card that is maxxed out. To learn more about credit go to

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Answered on 12/27/12, 3:10 pm

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