Three Credit Card Debt Relief Options

Credit card debt relief has become a top priority for consumers

. Financial reports state nearly one-quarter of the American population is indebted by $10,000 or more to credit card companies. Debtors making minimum payments will never be released from financial bondage unless drastic actions are taken.

Several credit card debt relief options exist. The most popular involves using the services of a debt settlement company to reduce outstanding balances. Debt settlement companies often claim they can reduce debt by as much as 60-percent.

The problem with using debt settlement is there is no guarantee creditors will lower balances. Additionally, debtors must pay the settlement company a start-up and monthly maintenance fee which often amounts to the same as written-off debts.

Before enlisting help from debt settlers, consider contacting creditors to negotiate debts on your own. The worst that can happen is creditors will say no. It is best to make an offer when you can provide an upfront cash payment and reasonable payment plan.

Those who choose to enroll with debt settlement companies should carefully review contracts and calculate the actual costs. One trusted source for learning about how debt settlement works is ConsumerFed.org.

Another popular method of obtaining credit card debt relief is personal bankruptcy. However, new bankruptcy laws that took effect in 2005 have limited debt relief options to debtors who engage in frivolous spending habits.

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) require debtors to repay debts by establishing Chapter 13 payments. These payments are in addition to normal monthly expenses and extend for 2 to 3 years. Individuals already struggling to make ends meet often find adhering to bankruptcy payment plans exceptionally challenging.

When consumers are unable to comply with Chapter 13 payments and fail to make payments in a timely fashion, creditors can seek bankruptcy dismissal. When this occurs, debtors fail out of bankruptcy and lose protection through the courts. Creditors can initiate collection action which can include obtaining creditor judgments, wage garnishment, or repossession of property.

One requirement of BAPCPA is that debtors must engage in credit counseling through a U.S. Trustee approved agency. Debtors carrying high levels of credit card debt should engage in credit counseling prior to submitting a bankruptcy petition. The new bankruptcy laws allow debtors to obtain credit counseling up to six months prior to submitting their petition.

In many instances, consumers can avoid bankruptcy by learning how to better manage their finances. Credit counselors can oftentimes help consumers negotiate with creditors to reduce outstanding balances or lower interest rates.

Homeowners may want to consider taking out a home equity loan to pay off high interest credit cards. The interest assessed against home equity loans is considerably less than interest assessed on unsecured loans. Obtaining home equity loans can save debtors a substantial sum of money, but is not without risk. By using home equity loans, real estate is used as collateral. If borrowers default on payments their lender could initiate foreclosure proceedings.

In order to overcome credit card debt, consumers must commit to becoming proactive about developing a realistic get out of debt plan. Debtors should research all available debt reduction options including budgeting, debt settlement, debt consolidation, and credit counseling to determine which option can help them achieve their goals.

Three Credit Card Debt Relief Options

By: Simon Volkov

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