I made an agreement with Citibank to pay my credit card debt of $35,787.83 in five years, at a rate of $613 per month. I kept my word for a whole year, but now my income has come down drastically, and I am being forced to consider stopping payment. Can they go against the equity in my home which is still mortgaged? Will my spouse be responsible for the debt when I pass away? What do you advise I do?
Thank you for your important question about potentially defaulting on the payment agreement you made with Citibank.
Your question did not include enough information for me to know your current income and what other obligations you have and will be able to maintain. Do you have other credit cards that you are going to continue paying? If so, that can make Citi less willing to be flexible with you, feeling that you are choosing to pay other unsecured creditors instead of them. Will you be able to make your mortgage payment? That has to be priority number one, especially if you have equity in your home.
Before you stop making payments, it makes sense to call Citi and explain your situation. Be forthright with them and be prepared to provide evidence of the nature of your financial hardship, in your case the drastic drop in income. You should know how much you can afford to pay Citi each month moving forward. This way, if they are willing to renegotiate the payment arrangements, you know your limits. You do not want to commit to a new and lower monthly payment arrangement, unless you are confident that you will be able to honor it.
Another issue is whether the agreement that you are considering breaking was preceded by a judgment against you. If you had been sued and there was a judgment, breaking the terms of the agreement can lead to rapid action against you, including having your wages garnished and your bank account levied. It could also lead to a lien being filed against you, which would affect your home. The lien is filed against you personally, but encumbers assets you own. Regarding your home, the lien makes it so that you cannot refinance or sell your home without satisfying the lien. A lien also has a negative effect on your credit, where it will appear in the Public Records area of the credit report.
Relating to the specific question you asked about the effects on your spouse, should you die, it is not clear from your question if you are solely responsible for the credit card or if your spouse was a joint account holder with you. If the Citi credit card was issued only in your name, then your spouse is not responsible for your debt, though if you live in a community property State that could be different. If you do live in a community property state, here is some good information about debt and community property law.
If a lien is filed against you, the debt will need be paid by your estate, when it goes through probate. If your home is titled in both your name and your spouse's, it will impact your spouse. In general, if the debt is solely in your name, the creditor cannot levy your spouse's bank account or garnish your spouse's wages, making a lien against jointly held property the primary effect on your spouse.
If you defaulted on an agreement that was made after a legal judgment was made against you or if the creditor is not willing to be flexible with you, you may be well served by consulting with a bankruptcy attorney. Even if you end up not filing for bankruptcy, it is important to know if you are eligible to discharge your debt through a Chapter 7 bankruptcy. While the creditor may not be more flexible with you no matter what, sometimes, when the creditor knows that you have the ability to discharge the debt, leaving them with nothing, it can influence them to be more flexible. At the same time, they may force you to follow through on filing for bankruptcy, by pursuing collection of the debt as aggressively as the law allows them. Here is some general advice on finding an attorney.
I answered other readers questions regarding Citi credit card accounts. See Citibank Hardship Program for tips on how to enter Citibank's credit card hardship program; Negotiate Citibank Debt to learn what to expect when negotiating debt with Citibank; Citibank Settlement for ideas on how to negotiate with a collection agency that owns a Citibank collection account; and Settlement on a Citibank Credit Card to learn how Citibank's internal debt settlement goals vary from time to time.
I hope this information helps you Find. Learn & Save.