Rebuild finances with secured credit card?

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Dear Debt Adviser,
Hello, Mr. Bucci. I accumulated debt in my earlier years without thinking of the consequences. I’m 31 now and I’ve noticed that you can’t get far in life with debts and no credit. I’m about $10,000 in debt altogether. I noticed I had two debts in civil judgments and others in the hands of debt collectors. I want to consolidate my debts. I work a full-time job, but I find it would be hard if I can’t consolidate the civil judgments to pay a consolidation company and two separate civil judgments at the same time. What is the best approach I can take toward this?

I have another question. Due to one civil judgment years back, my paycheck was garnished and my bank accounts frozen. I ended up quitting my job. Now someone has given me the idea to take out a secured credit card so I can start re-establishing my credit. My question is, will a debt collector be able to access the funds on my secured credit card? I’m afraid to put significant funds in it, because I don’t want to wake up to find they’ve taken funds out or if they happen to freeze the account. Can they do this?
— Chaner

Dear Chaner,
It is rare to have so many examples of consistently doing the wrong thing in one letter. With that said, to your credit you at least have a somewhat manageable amount of debt at $10,000. I’ve seen much worse. So, that’s one piece of good news. That you have a job and thereby an income source is good news item No. 2. And third, you are about to get some sound advice! Here’s what I believe you should do.

Before you begin to think about rebuilding your credit, you first need to pay what you owe. Your credit report and credit score are reflections of the state of your financial life. Solve the financial mess and the credit part will take care of itself. I recommend you contact a qualified, nonprofit credit counseling agency and see what it can do to help. Your counselor will complete a thorough review and suggest how to rebalance your finances. Together you will decide what you can afford to pay each month toward your debt. If you agree, your counselor would then contact those creditors that you owe and determine if they are willing to work with you through the agency’s debt management plan to get your accounts paid.

I don’t know if the creditors who hold your civil judgments will work with a credit counseling agency this late in the game, but it won’t hurt to find out. In my experience, they may since the creditors hold all the cards and have nothing to lose by having the counseling agency spend their time getting you back on track. If they do, one missed payment will cause them to go for your wages with a garnishment, and I don’t mean a sprig of parsley!

To answer your question about secured credit cards, you must deposit money in a bank or credit union account to receive a secured card. You are correct that if a creditor with a judgment learns of the account, they could execute the judgment to levy the account. Any money in the account above the amount securing the credit card would be free game for a levy. You may want to look into prepaid reloadable credit cards. They don’t use a bank account and may be a better way to store your cash than under the rug.

Good luck!

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