A: Using credit cards to pay for necessities is an unmistakable sign that you’re in over your head. But so was the fact that you used your home equity to pay off credit card bills.

You probably had the illusion that you were “doing something” about your debt, when actually you just moved it from one bucket (the credit cards) to another (your home). The loans didn’t solve your real problem, which is overspending, so you just ended up wracking up more debt and frittering away a major source of wealth in the process.

Keeping plastic available “for emergencies” isn’t a solution either, since it’s too easy to use the card rather than figure out an alternative. You don’t need to close the account, but until you get your spending under control you should make the card difficult to use–either by cutting it up or freezing it in a block of ice in the refrigerator.

You’ll find plenty of books in your local library on ways to save money, and the Internet is full of Web sites devoted to frugality. But once you’ve identified the easy places to cut back–eating out less, making more meals from scratch, buying fewer clothes, canceling subscriptions for magazines you don’t read–you need to take a hard look at your supposedly “fixed” expenses.

For example, many people find their budgets are perpetually unbalanced because they’re trying to hang on to a home that’s really not affordable. In addition, you may discover you’re simply not earning enough to maintain the lifestyle you want. That means you’ll either need to cut back more, or look for a better-paying job.

Living within your means isn’t necessarily easy, but ultimately it’s a much better–and cheaper–way to live than being perpetually in debt to credit card companies.

 

A: Only if you let her.

 

The money is still owed to your mother’s estate unless she specifically wrote in the loan document that the balance would be erased on her death, or forgave the debt in her will or living trust, said Los Angeles estate planning attorney Burton Mitchell.

 

It doesn’t sound like that was the case, so the loan is considered an asset of the estate like any other asset.

 

“Tell the borrower, ‘Good try,’ ” Mitchell said.

 

You should write a letter to the debtor explaining that the loan is still valid and demand payment. If the woman refuses to honor her commitment, you can consider a variety of options, including hiring a collection agency or suing her in court for repayment. (If the amount is small enough, you may be able to pursue the case yourself in small claims court; otherwise, you probably should hire an attorney for help.)

 

But don’t delay. Each state has a time limit on how long a borrower can be sued over a debt, and you don’t want that limitation to expire before you have a chance to collect the money.

A: You may need to start by getting a secured credit card that offers you a line of credit equal to the deposit you make at an issuing bank. Look for a card that doesn’t charge steep upfront fees and that converts to a regular credit card after 12 to 18 months of on-time payments. .

Q: I have accrued $7,000 on credit cards with a total credit limit of $10,000. My interest rates average over 20%. My wife has $4,000 in debt on two cards with a total credit limit of $14,000, and her rates are 6% and 9%. Is it a good idea for me to transfer my high-rate debt onto her lower-rate cards, or should we not risk ruining her good credit scores?

A: Your wife’s great rates might not last if you transfer debt to her cards. Credit issuers get wary when consumers start to max out their cards, and may raise her rates. And using more than 30% of any card’s limit can hurt a borrower’s credit scores, the figures that lenders use to help gauge credit-worthiness.

You might try to ask your card issuers for lower rates, and you should work hard on paying those balances off.

A: The FICO credit scoring formula doesn’t really care why you flaked out; it only cares that you did.

The formula weighs recent behavior more heavily than past behavior, which is both bad and good for you. The bad news is that your scores were almost certainly devastated by the delinquencies, charge-offs and collection accounts you accrued, despite your long history of on-time payments. But if you get your act together and start handling credit responsibly again, you can start to rehabilitate your credit.

Continuing to pay your installment loans on time will help, but you also should think about getting a secured credit card, which gives you a credit line equal to the amount of cash you deposit at the issuing bank. Choose one that converts to a regular card with 12 or 18 months of on-time payments, and use it lightly but regularly. Try not to charge more than 30% of your limit, and pay the balance in full every month. (Perhaps you’ll want to set up automatic payments, as you have with your other bills.)

It may take a few years to recover from your six-month lapse, but it can be done.