In these bankruptcy blogs, I’ve often written about credit card debts (see Will You Have Debit Or Credit With Your Meal?). As credit card defaults rise, credit card companies have tried to maintain profits, often by increasing fees and penalties. Regulators, in turn, have been penalizing credit card companies for unfair practices. The sharp rise in food prices, gasoline prices, and heating costs has had the effect of driving people to use credit cards as a last resort for paying everyday bills. In fact, as I go over credit card debts and budgets with clients preparing to file bankruptcy in Indiana, I see more and more of this.

Meanwhile, the credit card companies are taking two “tacks”. First, they’re stepping up collection efforts. People who are just a couple of days late in making their payment are starting to get phone calls. But these collection calls are taking a more lenient approach is many cases, with the card companies offering compromise payment plans, working on the premise that getting partial payment is better than getting none. At the same time, banks are already under pressure because of defaults on mortgages, and so they are trying hard to shore up their balance sheets by doing a better job collecting on credit card loans.

Big banks and credit card companies such as American Express, Washington Mutual, and Discover are creating websites to offer payment assistance to customers. But not all collection efforts are friendly and helpful. Even as the number of defaults on credit card debt rises, the number of consumer complaints about collection tactics is rising as well, creating a vicious cycle of credit card companies putting the squeeze on debtors, and debtors complaining about strong-arm tactics used by credit card companies.

A piece on debts in the Indianapolis Star stresses something I’ve been saying for years: “Consumers will have an easier time if they contact creditor at the first sign of trouble.” Having served as a consumer bankruptcy specialist for two and a half decades, I know how crucially important it is to seek help early on. The earlier in the process I can meet with bankruptcy clients and we can start building a strategy to combat financial difficulties, the greater the number of options that clients will have to choose from. In fact, seeking help early is the only way to escape the vicious cycle of the credit card crunch.