Credit Card Bankruptcy Alternatives

Settling Credit Card Debt with an Unsecured Debt Settlement Program

Aug 24, 2009 Asa Ghaffar

Looking for a credit card bankruptcy alternative? Find out how settling credit card debt is possible with an unsecured debt settlement program or Debt Management Plan.

Credit card bankruptcy is one of the leading reasons why people file under both chapter 7 and 13. According to the Automated Access to Court Electronic Records (AACER), the number of people declaring personal bankruptcy could reach 1.5 million during 2009. Filing for bankruptcy helps individuals to free themselves of unsecured debt, such as personal loans, credit cards, repossession deficiencies, negligence claims, auto accident claims and business debts.

Credit Card Bankruptcy Alternatives

Whilst there are valid reasons for filing for bankruptcy, there are several alternative debt solutions available. Settling credit card debt is possible through both an unsecured debt settlement program or a Debt Management Plan (DMP).

These solutions seek to reduce the principal (amount owed) or make repayments more affordable. A professional advisor will help determine what is affordable in order to ensure that money problems are not exacerbated.

Unsecured Debt Settlement Programs

A professional negotiator will talk to creditors in order to arrange a reduction in the principal by up to 50%. Whilst it is possible to extend the repayment period, settling credit card debt is generally achieved over a period of 12 to 36 months. An affordable monthly repayment is made until the end of the agreed term.

Whilst avoiding credit card bankruptcy is an important objective, don't sign-up to an unsecured debt settlement program that front-loads management charges. Any fees should be taken from each monthly payment and not in advance.

It is important to invest some time prior to signing-up to unsecured debt settlement program. Check with the Better Business Bureau for established providers with positive feedback. Ask family and friends for their opinion as they may have personal experiences to share.

Debt Management Plans

As an alternative to credit card bankruptcy, it may be possible to alleviate money problems with a Debt Management Plan. This debt solution involves an intermediary negotiating with creditors in order to agree upon an affordable monthly repayment until the debt is cleared.

Unlike an unsecured debt settlement program, none of the principal will be written-off. It may be possible to freeze interest payments and further charges in order to clear the balance more quickly. It is important to note that this is not guaranteed as some creditors will be more helpful than others.

This debt solution involves paying a management charge of 15% of cumulative contributions. The benefit is that you will no longer be harassed by collection agencies as they are receiving payment and all communications with creditors will be performed by an appointed intermediary.

Credit card bankruptcy may be the right debt solution for your personal circumstances. The important thing to be aware of is that an unsecured debt settlement program or Debt Management Plan are other possibilities. Before settling credit card debt, always consult a qualified debt counselor.

Sources

Automated Access to Court Electronic Records (AACER)

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

The copyright of the article Credit Card Bankruptcy Alternatives in Personal Budgeting/Finance is owned by Asa Ghaffar. Permission to republish Credit Card Bankruptcy Alternatives in print or online must be granted by the author in writing.