Getting out of high-interest credit card debt

A disabled wife's credit card debt is crippling her husband's income

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question for the expert

Dear Credit Guy,
My wife has a credit card in her name only. She is on permanent disability and unable to work. She gets approximately $400 a month, less Medicare. I don't know how old this account is, but I'd say 5 years at least. Long story short, the account has a $14,000 balance. The card issuer took advantage before the new regulations took effect and raised the interest rate to 29 percent. The account is current, but now we are paying $500 plus a month for the minimum amount due, most of which is interest. I have tried to call the card issuer, but they won't speak with me. My wife's disability prevents her from handling the situation. I am in sales, and my income based on the present economy doesn't leave me with enough income each month to pay anymore. How do I handle this other than to stop paying and mess up her credit score? I am a homeowner with good credit, and she is not on the mortgage. Also, how could she have gotten this card in the first place on her own with no job? -- Bill

Answer for the expert

Dear Bill,
The guidelines for extending credit certainly have changed in the past five years. Your wife's credit card account is a good example. At the time she acquired her credit card, card issuers had looser eligibility requirements, issuing credit cards to students and others with no documented income. However, if your wife was to apply for a credit card account today in our tight credit environment, I don't know of any card issuer who would qualify for an account today. So, that should give you a little peace of mind that she won't be able to open any other new accounts to surprise you -- in the near future at least.

Now, as for how to handle the situation of paying the $14,000 credit card account balance with a 29 percent (ouch) interest rate. First, you could consider transferring the balance from your wife's account to another credit card account in your name with a much better interest rate. Cutting the interest rate in half to 14 percent would be a savings of almost $200 on your monthly payment each month, and you should qualify for a card with an interest rate even lower. Shop for the card that best fits your needs and be sure to know what you will pay in balance transfer fees. Of course, with this option, you are taking on the financial responsibility for her account.

Second, you could contact a nonprofit credit counseling agency and talk with a credit counselor about your wife's account. You can reach a trusted agency at the Association of Independent Consumer Credit Counseling Agencies or National Foundation for Credit Counseling. Because the account is in her name, your wife would have to sign a debt management plan (DMP) agreement if you decide that would be in the best interest of you both. But you should be able to speak with a counselor about the situation and together determine if a DMP would be best. You should get a much lower interest rate on a DMP with a plan to pay off the balance in five years or less.

Lastly, I don't advise you just stop paying on the account. If you cannot afford to pay anything on the account, you might consider consulting a bankruptcy attorney to determine what options are available for your wife. She can file for bankruptcy protection separately from you, but I'd check with an attorney who will know what state laws apply and how best to protect your own credit.

Take care of your credit!

See related: Credit card lending standards keep tightening, Is a balance transfer credit card right for you?, 8 steps to picking a credit counselor

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Updated: 11-22-2017