According to The Christian Science Monitor, the average American household has about $14,500 in credit card debt. That's actually down compared to the high of $18,000 in 2006. This may seem like a lot of money, and it is, but some people have much more than this and end up struggling to pay back the debt they've accumulated.

In the old days, you may have faced debtors prison as your worst-case scenario, these days you're going to face the law too, just in a different way.

Garnished Wages and Seized Assets
After you've stopped paying your credit card payments for more than three months, your credit card company may contract with a debt-collecting agency to get their money. If the debt-collector doesn't receive payments or can't get in touch with you, then the collector may take the case to court.

You could be summoned to appear in court, where a judge will make a decision on the debt you owe. Part of your wages may be garnished to help pay back the debt, and some of your property could even be seized. States have different laws on wage garnishing and property seizure, so it may be best to look up the laws for your state in order to avoid this kind of predicament.

Chapter 13 Bankruptcy
If the garnished wages and seized assets don't work out, or there isn't enough money or property to start repaying the debt, then you may need to file for bankruptcy. This is not an ideal situation. Filing for bankruptcy should be the option of last resort. According to the Federal Trade Commission (FTC), filing for bankruptcy will not only remain on your credit for 10 years, but also hurt your chances of buying a home, a car and life insurance.

As per the FTC, filing for Chapter 13 is for people who have a steady income, allowing them to keep their property, such as their car or house. Under Chapter 13, the court approves a payment plan that you pay off for up to five years, using your future income. Once the payments have been made, the remaining debts are removed from your record.

Chapter 7 Bankruptcy
Filing for Chapter 7 is the worst-case scenario of personal bankruptcy filings. If you can't pay any of your credit card debt, or other debts, the court may liquidate most of your assets and leave you with only minor personal property items like furniture or work-related tools. In some cases, you will be able to keep your car.

The court may sell your property or it may be given directly to your creditor. There are some exemptions for keeping certain property, but just like Chapter 13, the laws vary by state. Though it's unlikely you'll receive as many options to keep property under Chapter 7 as you would with Chapter 13.

The Bottom Line
No one wants any of these scenarios to happen to them. So if you're in credit card trouble, talk to a credit counselor and determine the best way for you to start repaying your debt. Communicate with your credit card company and make payments before they hand over your debt to a collection agency. For more information on your options and advice on handling your debt, visit the Consumer Protection section of the Federal Trade Commission website.

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