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Advice if 6 Months Behind on Credit Card Payments

Mark Cappel
UpdatedSep 3, 2009

I am going through a hardship and have been unable to make any payments for the past 6 months. How bad is an R9 Status?

I had a good history of making my credit card payments. However, I am going through a hardship and have been unable to make any payments for the past six months. The credit card company has informed me that they will put me in R9 status. I asked if they could give me more time for things to turn around so I could pay them. Apparently, without some type of payment now, which I don't have, they can't do it. Any suggestions on keeping me out of this R9 status until I can come up with the money to pay them. Also, if it goes R9 should I file for bankruptcy. They tell me that an R9 is worse than a bankruptcy.

I'm sorry to hear of your hardship, but the good news is that there are possible solutions other than bankruptcy for someone who has fallen behind on payments for one credit card account. I'll provide a general overview of credit card accounts and R-9's and the possible solutions.

The "R9" account status is a code used by some consumer credit reporting agencies to indicate a credit card account which has been "charged-off" by the creditor. "Charge off" is an accounting term used by creditors, meaning that a creditor has transferred an account from its "accounts receivable" books to its "bad debt" ledger; credit issuers are required to do this by the federal Office of the Comptroller of Currency, in an attempt to prevent banks from inflating future earnings statements with old and defaulted accounts. For the consumer, the account will report as a negative item on the consumer’s credit reports, but is certainly not worse than bankruptcy.

Since I do not know the details of your situation, I cannot give you direct advice telling you what to do; However, I can say that falling behind on a single credit card account for 6 months and for the first time is not normally something that calls for a bankruptcy filing. Of course, there may some situations where it is the only option, but there are several alternatives that may prove more advantageous to a consumer, such as debt settlement, credit counseling, or a debt consolidation loan. Depending on your specific needs and situation, one of these may provide an alternative to bankruptcy.

Debt Settlement

Debt settlement, also called debt negotiation, is a form of debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money.

Credit Counseling

Credit counseling, or signing up for a debt management plan, is a very common form of debt consolidation. There are many companies offering credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a credit counseling program, you are still repaying 100% of your debts Â- but with lower monthly payments. On average, most credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan does show up on your credit report.

Debt Consolidation Loan

Many people think first of a debt consolidation loan when seeking debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are a 30-year loan, which means that the total cost and the time to debt freedom could be very high, but the monthly payment will be lower than other options and there is no credit rating impact.


Bankruptcy may also solve your debt problems. A Chapter 7 bankruptcy is a traditional liquidation of assets and liabilities, and is usually considered a last resort. Since bankruptcy reform went into effect, it is much harder to file for bankruptcy. If you are considering bankruptcy, I encourage you to consult with a qualified bankruptcy attorney in your area.

Net-net: while there are many ways to handle problems regarding credit card debt, many people with good to perfect credit who own homes may want to look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the option that best fits your situation.

Lastly, makes it easy for you to apply for traditional forms of debt relief, by following this link: Debt Relief Savings Quote

I wish you the best of luck in resolving your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.