How to Avoid Losing Your House From Credit Card Defaults

Credit card debt is unsecured, meaning there is no collateral for the debt other than your signature and promise to pay. However, creditors and debt collectors can file a lawsuit against you if you default on your credit card account because of missed payments. A lawsuit could result in a civil judgment and garnishment of your wages and bank account. The creditor or debt collector could also attempt to foreclose on your home, but the site says that most state laws make that difficult for credit card debt.

Instructions

1

Make an appointment with a nonprofit credit counselor to discuss your financial situation, including the delinquent credit card accounts. The defaulted credit cards could be the tipping point for a financial crisis that could cause you to start missing mortgage payments -- and possibly lose your home to foreclosure in that manner. A nonprofit counselor approved by the U.S. Department of Housing and Urban development can tell you if your financial problems are broader than just the credit card debts. Your bank, credit union or mortgage company can refer you to a nonprofit credit counselor in your area.

2

Contact your credit card companies to make payment arrangements on the defaulted accounts. With your permission, the credit counselor can participate in the calls as your advocate, or the counselor can prepare you to make the calls on your own. Credit card companies or their debt collectors may agree to payment plans even after you have defaulted, according to the MSN Money website. Agreeing to a payment plan and adhering to the terms likely will end further collection efforts, including the threat of lawsuits.

3

Contact a bankruptcy attorney, if you are unable to make affordable payment arrangements. The Federal Trade Commission (FTC) reports that bankruptcy should be a last resort, because of its devastating effect on your credit. However, Chapter 7 bankruptcy can help you eliminate credit card debt in just months. There are income limits on Chapter 7 that vary by state, and not everyone can qualify. People who cannot qualify for Chapter 7 can apply for Chapter 13, which features a court-ordered payment plan of three to five years -- and protection against losing your house because of credit card debt.