QUESTION: I would like to know how best to approach this question. There is a major bank credit card from 2011 that still appears on my credit report. The card was issued in 2011 and expired in 2015. The original balance of $260,000 on said card on my credit report now shows over $1.4 million owing. Please help.

—Robert

FINANCIAL ADVISOR: You didn’t say you made a payment on your credit card, so I’m guessing you haven’t paid since 2011. Eleven years!

I find it interesting that you incurred the debt in 2011, the same year the card was issued. Did you understand then, and even now, how credit cards work?

There is a big difference between borrowing from a financial institution and borrowing from family and friends. Financial institutions insist that money borrowed from them be repaid and work to collect it.

Typically, a debt stays on your credit report for seven years after it’s paid off, so a debt that hasn’t been repaid will live on your credit report, which is bound to have very serious repercussions for you.

These are unsecured and very high risk loans for financial institutions, hence the very high interest rates. The other reason why your debt has reached this level is that the unpaid interest has been added to the principal sum each time you failed to pay, thus increasing the interest and the principal sum. This will continue to happen if the loan remains unpaid.

Credit card issuers are seriously considering collecting the loans they make through the credit card facility. There are several instances in which they may require immediate payment of balances to be made, for example, if the customer does not make all required payments by the payment date, if the outstanding balance at any time exceeds the credit limit and if the customer fails to comply with the other terms of the cardholder agreement.

If the cardholder fails to comply with the issuer’s request for full payment of outstanding balances on the account, the financial institution may employ the services of a collection agent, an attorney, or both. to get payment. The cost of these services becomes the charge of the cardholder and adds to the debt.

When a lender assigns an overdue account to a collector, the collector calls and the debtor responds by meeting with the collector to make arrangements to settle the debt. The collector will review the debtor’s situation and ability to pay so that they can both come to a plan for satisfactory repayment of the debt plus the collector’s costs.

The payment does not need to be a lump sum, but the intention is that the debt be repaid as soon as possible. The collector tends to consider the debtor’s position but also considers the lender’s desire to settle in a timely manner, but prompt settlement is very important in situations where interest is still accruing on the debt.

You did not say that the bank took any of the above actions or that you received statements from the bank showing an increase in your balance over time, only that the credit report shows the amount of $1.4 million.

It is unwise to believe that credit card and other debts reflected on a credit report will simply disappear if not paid, and credit card debt is not canceled when the card expires. The debt on the account is carried over to the new card.

Did the $1.4 million come to your attention because you had to get a credit report to get a loan? It’s such a shame that you waited so long to see how to deal with the matter.

Whatever may have caused you to find yourself in the situation you are in now, it is important to take steps to remedy it, as the debt will remain on your credit report and will severely limit your ability to borrow. Also, paying off a debt is the right thing to do.

I suggest you engage with the bank to make arrangements to pay off your debt. Another option is that you could approach another financial institution to lend you funds for this purpose as the bank to whom you owe the debt will generally not lend you to liquidate a bad debt on their books.

You have a difficult road ahead, but you must act now. It is important to put your financial situation on solid ground.

– Oran A. Hall, author of Understanding Investments and lead author of The Personal Financial Planning Handbook, offers personal financial planning advice and guidance. [email protected]