Almost daily, we get solicited by people wanting to write guest posts for us. Testament to our importance, we guess. 99% of those solicitations don’t make it past the “show-this-email-to-each-other-and-laugh” stage. But occasionally a competent one makes it through the obstacle course. This one is from the magnificently christened Odysseas Papadimitriou, CEO of Card Hub, a major site for credit card offers and personal finance education. Mr. Papadimitriou has written for Forbes.com, TheStreet.com, The Huffington Post, CNBC, and U.S. News & World Report, so we’re honored to have him on board.

This post is on how to minimize the damage if you incurred debt. Yes, we at Control Your Cash will forever maintain that not getting crushed by debt in the first place is the result of simple choices you made years earlier. But still, a pound of cure is better than a ton of wage garnishment and harassing phone calls.

Credit card companies and debt collectors can be awfully intimidating, especially when you owe them money. However, no matter how much you owe or how delinquent you are in paying it back you still have rights. Certain debt collection techniques are, in fact, illegal. And, depending on your situation, there are a number of resources and options available to you. So, what should you do when encumbered by significant debt? Let’s find out.

Establish a Dialogue
While your instinct may be to lie low and hide from your creditors, starting a dialogue with your credit card company can make all the difference. So, if you start missing payments or have already charged-off on your credit card debt, pick up the phone. And remember, a person is on the other end of the phone, a person who likely gets yelled at for a good portion of the day. Explain your situation calmly and work at finding a mutually beneficial solution to the problem. After all, credit card companies would rather avoid the hassle of debt collections, and you most certainly don’t want to get sued. Just make sure not to agree to anything—and I mean anything—that is not part of a long-term plan you can realistically afford.

Eliminate the Possibility of a Lawsuit
In general, there are two types of agreements indebted and delinquent consumers can reach with their creditors directly (i.e. not through a court) that will not only eliminate the possibility of a lawsuit, but also get them on the road to being debt free. They are:

• Debt Management – This involves your creditor lowering your monthly payments by giving you a break on finance charges and fees in return for you agreeing to a long-term payment plan.
• Debt Settlement – Creditors often agree to forgive some debt in return for a customer paying down the rest of the amount owed in one lump sum. If you are having trouble making minimum payments, however, paying down a significant portion of what you owe at one time likely isn’t feasible.

Consult an Attorney
Though bankruptcy carries with it a weighty social stigma, it can actually be the best move in certain situations. Many bankruptcy attorneys offer free consultations as well, so why not listen to what one has to say? In general, the bankruptcy options available to you are as follows:

• Chapter 7: Provides for the court-supervised liquidation of your assets, the value of which is used to pay off your debt obligations. Information about this type of bankruptcy will remain on your major credit reports for 10 years from the date you file.
• Chapter 13: Involves establishing a three-to-five year payment plan, which is based on expected future earnings. Discharged (completed) Chapter 13 bankruptcies stay on your credit reports for seven years from the date you filed for bankruptcy. Non-discharged Chapter 13 bankruptcies (i.e. payment plans that you fail to abide by) will remain for 10 years.

Statute of Limitations
If all else fails it’s time to wait and hope not to get sued. Each state has its own statute of limitations for written contracts, which applies to things like credit card and loan agreements, and any failure to abide by such an agreement is therefore only relevant for 3-15 years from the date of your last payment. In other words, you can’t get sued for money owed after a certain point. Actually pardon me, a suit can still be brought, but it will be thrown out as long as your debt is time-barred (i.e. older than your state’s statute) and you make this clear to the court.

If you are unable to reach an agreement with your creditor and bankruptcy isn’t a good fit, still trying to pay down what you owe might therefore be inadvisable, since it will only extend the window for a lawsuit and your creditor ultimately won’t be satisfied.

Still, this doesn’t mean creditors won’t try to trick you into paying. The following is a list of things to keep in mind while you wait so as not to fall victim to shady debt collection practices and/or open yourself up to a lawsuit:

• Depending on your state, signing any statements promising to pay your debt or even acknowledging that you owe money will also reset the statute of limitations clock
• Debt collectors are legally barred from threatening a lawsuit unless one is actually under consideration
• Debt collectors may not contact you after a written request that they not do so or if you’ve made it clear that you have an attorney
• Debt collectors are not allowed to misrepresent your debt to credit reporting agencies

Given the risk involved, waiting out the statute of limitations should only be done as a last resort, and hopefully things will not even get to this point in your case.

**This article is featured in the Carnival of Personal Finance: Where does the Money Go? Edition**