Credit Card Debt Relief

All consumers should consider credit counseling as a first option for credit card debt relief. A credit counseling service involves working with the credit card companies to allow you to make one monthly payment at lower interest rates. This arrangement is done through a debt management plan (DMP). Participating in a DMP does not damage your credit score like other credit card debt relief options, so it should be your first solution of choice.

It is recommended for consumers who can benefit from the financial counseling and can afford the required monthly payments. If you can’t afford the DMP payments, then your situation may warrant alternative solutions, such as debt settlement or bankruptcy. These credit card debt relief options, however, are more aggressive and cause significant damage to your credit score.

Debt settlement has the potential to provide substantial credit card debt relief because of the reduced debt balances that can result, when successful. However, it is important to first understand how the debt settlement process works. In order to convince your creditors to settle your debts, they must believe that you might declare bankruptcy. To make your creditors believe this, you need to stop making any payments to them, and this causes serious damage to your credit report.

Remember that debt settlement is a negotiated process with your creditors, so it is impossible for a debt settlement company to guarantee you any specific results. Sometimes creditors will refuse to negotiate and instead may go through the court system to get a judgement, send the account to collections, or even garnish your wages. Therefore, while damage to your credit report is guaranteed, the settlement of your debt is not.

This credit card debt relief option is usually the last resort for consumers with the most serious debt problems. Bankruptcy inflicts serious and long-lasting damage to your credit report that can persist for 7 to 10 years. Also, new guidelines were introduced in 2005 to make it more difficult to qualify for a “fresh start” Chapter 7 bankruptcy.

Specifically, consumers now have to pass a 2-part “means test” in order to be eligible for Chapter 7. Otherwise they will be forced into a court-determined Chapter 13 repayment plan that can last for up to 5 years. Even if consumers pass the means test, the judge still has the authority to disallow a Chapter 7 if abuse of the system is suspected.

Debt consolidation loans were a credit card debt relief option worth considering at one time, but it appears that these are now difficult to obtain. Before the recession, it was common to qualify for an unsecured loan to consolidate high-interest credit card debt at a lower rate. Now these kinds of loans are nowhere to be found as lenders are averse to making any potentially risky loans. This leaves secured loans as the only real option for consolidating unsecured debt.

But taking this approach for credit card debt relief can be problematic. Borrowers must have substantial equity in their homes in order to include their debt in a refinance. Unfortunately, home prices have taken a steep decline, thereby reducing the requisite equity once held by homeowners. Also, by converting unsecured debt into secured debt, borrowers would be risking their home if they can’t make their payments.

Taking no action is the worst action anyone can take. Doing nothing is the least timely and most costly way to get out of debt. Many will discover much to their horror that their debt can take them up to 30 years or longer to pay off completely if they continue to make just the minimum payments. It can cost you thousands of dollars in interest alone, and you may potentially pay back over 3 times what you owe now on your balances. It only makes sense to explore the various debt solutions available that will actually offer some credit card debt relief and help you regain control.

You should first consult with a debt professional who can offer additional insight and recommend the appropriate credit card debt relief solution. You can fill out the online form on the right or call 1-888-338-6957 and a debt advisor will get in touch with you to discuss your credit card debt relief options.