What To Do If You Are Over Your Head In Credit Card Debt

Credit card debt has a tendency to build up, unnoticed—until all of the sudden, you owe a shockingly large sum. Suddenly, you regret all of those purchases, necessary and unnecessary, that are still waiting on that card, begging to be paid off. If you're feeling overwhelmed by a mountain of credit card debt, you may not know what to do next. Most people can solve the problem, one way or another, by following these five steps.

1. Add up what you owe.

If you're like most people, you probably have the debt split between various cards. If you're going to tackle the debt, you need to know exactly how much you owe. So, add up the totals to come up with your total debt.

2. Call about interest rates.

At this stage, you are going to try to figure out whether you can possibly repay your credit card debt or whether declaring bankruptcy is a better choice. But before you add up your total debt, you need to see how willing the credit card companies are to negotiate with you. Call them all up, and ask if there is anything they can do to lower your interest rate. Be polite, but honest. Many companies will lower your rate if you ask because they figure that at least then there is a greater chance of you actually paying off the debt. If the companies say "no," then move on.

3. Make a budget.

This is the hard part. You need to sit down and make a list of all of your monthly expenses. First, list essential costs, like your mortgage, gas bills, water bills, and so forth. Then, list all of the items you spend money on that you don't really need, like entertainment and dining out. Subtract all of these costs from your income. How much is left? That's how much you can afford to put towards your credit card debt each month. Is there very little? If that's the case, then you need to cut some of those optional expenses. For instance, you could stop dining out and put that money towards your credit card debt.

4. Calculate your payoff period.

Now that you know how much you owe and how much you can reasonably put towards debt each month, it's time to calculate how long it would take you to pay off your credit cards in full. Divide your total debt by the amount you can afford to pay each month. For instance, if you owe $10,000 and can afford to pay off $500 a month, your result would be 20. That means it will take you 20 months to pay off your debt. This does not take into account interest, so it won't be exactly accurate—but it is good enough to give you an idea of whether paying off your debt is feasible.

5. Decide if payoff is feasible.

If you get a result like 20 months or even 30 months, then it is time to start chugging along and paying that debt down. But what if you get a ridiculously high result, like 100 or 150 months? Clearly, paying off debt over a 10-year period is difficult. Unless you can do something to drastically reduce your expenses so you can put more money towards debt each month, your best bet in this situation may be to declare bankruptcy.

6. Meet with an attorney.

If you think bankruptcy may be a good choice for you, your next step is to meet with an attorney who offers bankruptcy law services. They can more closely analyze your finances and let you know whether this is a smart choice. Keep in mind that declaring bankruptcy is not easy. It will damage your credit and make it tough to get financing in the future. However, it is a chance to push the "reset" button, which can sometimes be all you need.