Eliminate Credit Card Debt without Bankruptcy

Although there are no easy answers to serious debt, you can eliminate credit card debt without bankruptcy. Since the Bankruptcy Abuse Prevention and Consumer Protection Act became law in 2005, it's become a lot harder to qualify for chapter 7. As well as passing a strict means test and surrendering all non-exempt assets to a court-appointed trustee, you are no longer permitted to file twice in any 8-year period. Even if you qualify, filing for bankruptcy isn't necessarily the best debt-free plan for your personal circumstances.

According to the Federal Reserve's March 2010 consumer credit report, the average American family owed $14,750. As we all know, statistics don't always tell the fully story. While some people don't owe their creditors any money, many people have unsecured debts that exceed $100,000. As your income-to-debt ratio starts to deteriorate, the likelihood of you struggling to pay your creditors increases exponentially.

Eliminate Credit Card Debt without Bankruptcy

Even if you have yet to default on your credit agreements, your personal finances are likely to be severely stretched. This doesn't just have implications for your spending, it damages your quality of life. Sleepless nights are common side effect of financial difficulties. Don't suffer in silence, speak to a non profit credit counseling service. No matter how bad things seem, they'll help you find a solution to your money troubles.

You'll need to do some preparation, but this could be a huge help. Provided that you have sufficient disposable income, you may be able to clear your debt with a debt settlement program. It'll take longer to become debt free, but eliminating credit card debt with a debt solution is the main alternative to bankruptcy. Unlike chapter 7, it'll show on your credit report for seven, not ten years, because you're offering creditors a partial payment.

Eliminating Unsecured Credit Cards with a Debt Settlement Program

You can eliminate credit card debt without bankruptcy and be discharged from unsecured credit obligations in under three years. Although you can carry out the negotiations yourself, most people prefer to use a professional to deal with creditors. Their services aren't free, but they'll achieve a far better result. You may be able to clear up to 50% of your debt.

Unless you're technically insolvent when you eliminate your debts, it's advisable to speak to a tax attorney. This is because the Internal Revenue Service (IRS) treats discharged debt as taxable indebtedness income. In essence, the money that you've written off could be subject to tax. It's advisable to check whether this is the case before you make the decision to eliminate credit card debt without bankruptcy.

Sources:

Woolsey, Ben. (Feb 11, 2011). Credit card statistics, industry facts, debt statistics.

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

Updated: 6 May 2011