According to a credit report analysis by Experian in August 2008, the average American consumer had $16,635 of personal debt. This figure excludes mortgages. A debt elimination program can help to resolve credit card debt problems.
Ways to Solve Credit Card Debt Problems
Options include debt settlement plans, filing for bankruptcy and debt management programs. Understanding how each debt solution works is absolutely essential before proceeding. Debt elimination programs are not cheap and choosing the wrong option could serve to exacerbate financial difficulties later on.
Filing for Bankruptcy
Chapter 7 bankruptcy is a debt elimination program that allows someone to free themself of credit card debt problems in as little as 4 to 6 months. It is a suitable debt solution for individuals who have an income below the state median and few non-exempt assets (valuable collectibles, a second home etc). Those who don't qualify under chapter 7 may qualify under chapter 13 bankruptcy. This allows someone with sufficient disposable income to restructure their personal debt. In return for a monthly payment for the next 3 to 5 years, any remaining money owed is written-off.
Debt Settlement Plan
Credit card debt problems can be solved through a debt settlement plan. Once negotiations have taken place through an appropriate intermediary or debt settlement company, an affordable repayment plan will be made for the next 12 and 36 month period. It is possible to extend the term, but it is less likely that creditors will be agreeable as it means they will have to wait longer before receiving payment. This debt elimination program can write-off up to 50% of the amount owed. Management charges are front-loaded which means that the amount owed will actually increase in the short term.
Debt Management Program
More of a gradual debt elimination program, a debt management plan is concerned with making monthly payments more affordable. The debtor makes a payment to an intermediary and this is distributed to creditors on the basis of how much each one is owed. Many creditors agree to freeze further charges and interest payments to stop the amount owed from increasing in light of the reduced repayment schedule. The objective is to help someone with credit card debt problems to become debt-free within 5 years, although it can take considerably longer.
There are several viable debt elimination programs to negotiate credit card debt problems. Before proceeding, perform research and always consult an independent debt counselor. This preliminary work will help to ensure that the right debt solution is chosen from the outset. Making changes further down-the-line could prove to be a costly mistake.
Sources
CreditCards.com
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.
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