When is Not Paying Off Credit Card Debt the Right Choice?

Whilst not paying off credit card debt may not seem like a sensible option, this isn't necessarily the case. Although maintaining a good credit rating is usually the right choice, an unsustainably high debt-to-income ratio is detrimental to your health and well-being. Many individuals struggle to make the minimum monthly payment with little prospect of ever clearing the money they owe when a debt solution would be a far better alternative.

Not Paying Off Credit Card Debt for 120 Days

A Debt Management Plan (DMP) could help you to get your finances back under control. However, a creditor will not agree to amending the terms of an agreement if they are receiving punctual repayment each and every month. As far as they are concerned, it is a good business account.

If you don't make repayment for a period of at least 120 days, creditors will classify your account as a bad debt and write it off against their taxes. At this point, it will normally be sold-on to a debt collection agency who will seek full repayment.

Unsecured debt is difficult to collect so most debts are sold on for 20-30% of its value. This creates an opportunity for you as a collection agency is prepared to negotiate with respect to how the balance is cleared. It is now the right time to discuss either a debt settlement program or Debt Management Plan with a qualified professional.

A Debt Management Plan Achieves Affordability

Once your account is in the hands of a debt collection agency, the time is now right for paying off credit card debt. This debt solution involves an intermediary negotiating with creditors to achieve an amendment to the terms of how any unsecured debt will be paid-off.

A financial professional will work with you to establish what you can realistically afford to offer to creditors each month. This will be based on a comprehensive analysis of your income and expenditure details. A fee of about 15% is taken from each monthly payment and the remainder is disseminated to creditors on a pro rata basis.

Whilst no unsecured debt will be written-off, it may be possible to stop further charges and freeze the payment of interest on the outstanding balance. The intermediary will also deal with creditors correspondence which will help to alleviate much of the pressure that debt brings.

A Debt Management Plan is a great way to get your personal finances back under control. Paying off credit card debt can now be achieved at an affordable rate without further creditor harassment.

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.