Credit card debt relief: How to get it and what to know
Know that you are not making progress on your debt, no matter how hard you try? If so, you may be facing a lot of debt.
To get rid of this financial burden, consider your debt relief options. These tools can change the terms or amount of your loan so that you can quickly get back on your feet.
But debt relief programs are not the right solution for everyone, and it is important to understand the consequences.
Debt relief can include debt relief. Make changes to your interest rate or payment schedule to reduce your payments; Or persuade lenders to accept less than the full amount owed.
What Is Credit Card Debt Relief?
If you are dealing with a crushing credit card balance, you can consider anything that can help you make this loan a relief. And it is true that there are many ways to reduce your debt.
Creating this breathing room may involve something you do yourself, such as using a low-interest personal loan or a credit card to pay off a high-interest credit card debt. While this will not eliminate the amount you owe, it can help you pay off most of your original balance quickly. Relief can also come from a formal negotiation between you and your credit card issuer that actually reduces the amount of debt you need to repay.
Should I Get Rid of Credit Card Debt?
In this case, the credit card may be able to get out of debt.
- Your credit card debt is making it difficult to pay other bills.
- You are receiving submission notices.
- You feel overwhelmed by your debt and overall financial situation.
When you should get rid of debt?
Consider bankruptcy, debt management, or debt settlement when one of them is correct:
You have no hope of repaying unsecured loans (credit cards, medical bills, personal loans) within five years, even if you take extreme measures to reduce costs.
The total of your unpaid unsecured debt is equal to half or more of your total income.
On the other hand, if you can possibly pay off your unsecured debt within five years, make a plan yourself. This can include debt consolidation, lender appeals, and tight budgeting.
Beware: Debt relief can make things worse.
The debt relief industry includes fraudsters who want to take less money from you. Many people who enter debt relief programs fail to complete them. You may end up with loans that are more than you started.
But getting out of debt can give you a fresh start or a breathing room that you really need to make real progress.
Before entering into any agreement, make sure you understand and affirm these points:
- What do you need to qualify?
- What fees will you pay?
- Which lenders are being paid, and how much; If your debt is in recovery, make sure you understand who owns the debt so that payments go to the right agency.
- Implications of the tax.
Debt relief through bankruptcy
There is no point in entering into a debt settlement or debt management plan if you are unable to repay as agreed. We recommend that you talk to a bankruptcy lawyer before proceeding with any debt relief strategy. The initial consultation is often free, and if you are not eligible, you can switch to other options.
The most common form of bankruptcy, Chapter 7 liquidation, can eliminate most credit card loans, unsecured personal loans, and medical loans. This can be done in three or four months if you are eligible. What you should know:
- This will not eliminate the tax liability or child support obligations, and the student loan is less likely to be forgiven.
- This will lower your credit score and will remain on your credit report for up to 10 years despite restoring your credit history. This is no small matter, as poor credit history can affect your eligibility for certain jobs, your chances of getting an apartment lease, and how much you pay for car insurance. When your credit is already bad, bankruptcy can allow you to repay your credit very quickly by continuing to try to repay it. (Learn more about when bankruptcy is the best option.)
- If you have used a co-signer, your bankruptcy filing will make that co-signer fully liable for the debt.
- If the debt piles up, you can’t file another Chapter 7 bankruptcy for eight years.
- This may not be the right option if you have to give up the property you want to keep. Laws vary by state. Generally, certain types of property are exempt from bankruptcy, such as motor vehicles up to a given value and part of the equity in your home, but you usually have another car or truck, family inheritance, vacation home, and no. You also have to give up valuables.
- This may not be necessary if you are “proof of judgment”, which means you have no income or property after which the lender can go. Lenders can still sue you and get a decision, but they will not be able to collect.
Bankruptcy: Last resort option
The effects of bankruptcy on your credit are severe and can last for many years, so it is important to find and eliminate all other options before considering bankruptcy. If you decide to pursue bankruptcy, the two most commonly used types of individuals are Chapter 7 and Chapter 13. Your circumstances will determine what kind of file you should file.
Note: Bankruptcy does not have to pay off all your debts. Some forms of debt, such as student loans, can be very difficult to repay, and bankruptcy courts will ultimately decide how much you owe.
What are the potential risks of getting rid of credit card debt?
While it may be tempting to get relief from over-the-counter credit card debt, some solutions come with potential drawbacks.
- Debt settlement and bankruptcy can affect your credit. While these efforts can help manage your debt payments, they can also affect your credit for many years to come. Failure to repay your credit in accordance with the terms of your credit agreement may expose you to potential lenders, so consider the long-term consequences of seeking short-term relief. In addition, if your debt settlement company advises you to stop direct payments to your creditors, you may incur additional interest charges and late fees. (Debt consolidation can also affect credit score, although the effect is usually more minor and more temporary.)
- It can cost you money to get out of a credit card debt. If you take out a personal loan or balance transfer card to pay off a credit card debt, you will incur fees and interest. Similarly, declaring bankruptcy may mean that you need to pay court costs, and even nonprofits and credit counselors usually charge for their services.
- Discharge or low debt can affect your federal income tax. If your credit card debt is forgiven, the IRS will likely treat your canceled debt according to income and taxes.