Credit card question

[Anonymous]

HEre is the scenario: Due to some medical emergencies, both me and my wife have very very high balances on our credit cards. After a lot of thoughts, we are almst at the decision of stop paying for either my cards or my wife's card. Most probably it will be my wife's card. But the questions that we need answers with advise are as under:

• We have joint mortgage: Is that going to have any effect of this
• She has private health insurance: how much that is goign to be effected
• What about the auto insurance: we have joint auto insurance
• We want to make a calculated move so that she can still retain some cards in good standing and she probably can use them if needed (and if the credit limit survives). But we have to decide between two cards: Citi card (this is the oldest card she has) and BOA (which has our joint checking/savings account,our mortagage bank and has the highest limit for her). If we chose BOA to keep, she will loose about 5 years of credit history eventually.

Please advise.

[llecs]

Welcome to the forums! Sorry you are in this situation.

If you stop paying your CCs, or a CC, your mortgage won't be affected (unless you refi in the future) and your insurance won't be impacted (other than from the medical situation).

Some auto insurers pull your credit. Maybe there could be an impact upon renewal or if you sign onto new service, but I wouldn't worry about it. They won't cancel.

If I was in that situation, I personally would not stop paying, for the reason that they could sue me in the future for a whole lot more that the balance now...plus the garnishment if they take it that far. I would make changes to my lifestyle to at least come up with the minimum. I would obviously stop unnecessary expenses like cable, newpapers, phone or cell phone if I both. I'd sell a car if I had to. I know you probably did this already, but I would stop eating out, going to the movies, and so on. I'd also focus on my income. If I received a tax refund within the past year, I'd change the W-4 to have more on my paycheck. Even if I didn't get a refund, I would change the W-4 to a zillion dependents with a hope of having a bigger check. I'd stop saving $$$, including IRAs or 401(k)s. I'd use all of my savings (except for IRA and 401(k)) to pay off the CCs. I'd sell stuff on E-bay, and so on. Doing these things will save you $$. If the CC gets CO'd, then aside from your score dropping, you'd wind up paying a whole lot more than what the balance is now down the road.

[Anonymous]

You say the cards have "very very high" balances.  The higher the balance, then the more likely the OC or CA will attempt to obtain a civil judgment which could be enforced by wage garnishment or a lien against property.  However, in these economic times, the risk of getting a judgment may be less because of the projected defaults on credit cards. 

FYI, credit scores drop like a rock when judgments and liens are reported -- and it takes a long time to get your scores back up after you take the hit.  I had two liens reported and my scores were comparable to what people have when they go bankrupt (high 400-low 500's). 

Even if you don't burn BofA, they might close your account or change your interest rate.  Most likely, you will not be treated as a customer who is in good standing -- you will be treated like a customer who is on the verge of default.

You also should read up on how private medical insurance is rated.  They may take your credit scores into account when setting the rate.  If that is the case, then you may see your premiums for the private health insurance increase significantly.