The road to claims court is a long one

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Dear Debt Adviser: How can I avoid going to court regarding unpaid credit card bills? - Cagney

Dear Cagney: Let me offer some perspective on the collection process. After incurring a debt, you generally receive a statement to pay.

If you don't pay the statement when it is due and in the amount requested, you become delinquent. Interest charges pile up.

If you still don't pay, the debt gets turned over to a collector who works for the company. The collector calls or writes and tries to collect the account while attempting to save you as a customer.

If that fails, the debt may go to an outside collection firm that will not care if you remain a customer. Instead, it will desire nothing more than to get you to pay the bill so the firm can get paid, usually in the form of a commission.

This begins the hardball phase of collections. About six months after the bill is past due, it may be passed on to an attorney for collection. The attorney will send you a demand to pay. If you don't pay or work out an agreement, the next stop is court.

If the court determines that you really owe the money, it will issue a judgment. If you still fail to pay, the attorney will go back to court. Using the judgment, the attorney will ask for a wage garnishment - or, if you don't have a job, put a lien on your property.

As you can see, court is the end of what usually is a very long process.

The bottom line is that you need to determine how to pay off the balance. How much can you realistically afford each month to pay down debts? Once you know this amount, negotiate a repayment plan with creditors, collectors or the attorney, depending on where you are in the collection cycle.

It's important to decide what you realistically can afford to pay before negotiations begin. That way, you'll know your limits. Don't make the mistake of overpromising if and when the person trying to collect pushes for more. The last thing you want is to get behind on the rent or mortgage to satisfy an unsecured credit card debt.

If you haven't made any payments in more than a couple of years, look up your state's statute of limitations that applies to your type of debt. If the time to collect on your debt has elapsed, use that as a defense in court.

Another approach may be to speak to a bankruptcy attorney to see if you qualify for Chapter 7 or Chapter 13 bankruptcy protection. The attorney can help you determine whether or not filing bankruptcy is in your best interests.

Using a bankruptcy should be a last resort. It's sort of like dueling with swords to settle a dispute - it works, but is inefficient for small disagreements and carries long-term repercussions.

Visit www.moneymanagement.org for additional debt advice. If you have a question for Steve, e-mail debtadviser@bankrate.com. The Debt Adviser is a weekly feature of bankrate.com on the Web.