Credit Card Debt Relief with a Debt Solution

Credit card debt relief is now an absolute necessity as consumers are now increasingly reliant on their credit cards. According to the Nilson Report, the median amount of money owed on charge cards was $10,679 at the end of 2008. Fortunately, struggling consumers are able to escape financial difficulties and debt collection activity by filing for bankruptcy under chapter 7 or chapter 13, debt settlement or a Debt Management Plan (DMP). Others have been able to reach a reduced full-and-final settlement with creditors.

Level of Credit Card Debt Written-off by Leading Card Providers

Citigroup - 9.3%
American Express - 8.7%
Capital One Financial - 8.5%
Chase Card Services - 7.7%

* Figures obtained from financial reports.

Credit card companies have experienced an increase in the level of default amongst its customers due to rising unemployment.

Credit Card Debt Relief Methods

The good news is that debt collection agencies are now far more likely to accept a debt solution, such as debt settlement and Debt Management Plans. If a debtor has no alternative but to default, wait until the debt has been sold to a collection agency before negotiating.

Filing for Bankruptcy

Chapter 7: It is possible to clear unsecured debt by file for bankruptcy under chapter 7. Provided that the debtor doesn't have non-exempt assets and their disposable income isn't above the state median, it is possible to become debt-free in as little as 4-6 months.

Chapter 13:Those who don't qualify under chapter 7 may be eligible for this alternative. This allows a consumer to write-off debt and keep non-exempt assets in return for a series of monthly repayments over a 3-5 year period. It can provide a welcome source of credit card debt relief with full court protection.



Debt Settlement Plans

The objective of this debt solution is to clear credit card debt over a 3-5 year term. Private debt settlement companies are able to write-off up to 50% of unpaid balances. However, this will cause FICO scores to deteriorate and any charges are front-loaded. This means that it can take several months before any outstanding personal debt starts to reduce.

Debt Management Plan

Unlike debt settlement, a Debt Management Plan does not write-off any of the money owed. In practice, further charges and interest are often frozen. Personal debt is restructured and an affordable monthly payment is made to an intermediary (normally a private company or charity) and they distribute this money to creditors. Whilst providing some protection from collection agencies, it can take a long time before debts are cleared.

Any of these debt solutions can act as a source of credit card debt relief. A Debt Management Plan involves making repayments more affordable without any debt forgiveness. A debt settlement plan and filing for bankruptcy under chapter 13 seeks to restructure the money owed and write-off some of the money owed. Chapter 7 bankruptcy allows a consumer to become debt-free in just months, although it will affect a FICO score for a period of 10 years.

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.