Drowning In Credit Card Debt? Various Settlement Options

Drowning in credit card debt doesn’t have to include using secured debt such as homes to pay off credit card debt. There are various settlement options such as contacting credit card companies to work out modified payment arrangements that can help stop the drowning.

Work on a Budget

Credit counselors help people settle their credit card debts. Although they don’t work with creditors, they help people create budgets which allow people to pay off their credit card debts. The budgets help people manage and pay off their debts.

Work with Creditors

People seeking credit card relief can contact creditors directly. This is different from negotiating modified payments. To do so, people must know exactly how much money they owe and the amount they are willing to pay. Typically, credit card creditors will want either one lump sum payment or small number of payments. People should start with an offer of approximately 40 percent of their debt. However, people shouldn’t agree to less than 30 percent of the credit card amount. Credit card negotiations can work with collection agencies too. If credit card companies or collections refuse to negotiate don’t be discouraged. People should wait for a short amount of time and try again.

Use Debt Settlement Agencies

However, negotiating directly with credit card companies isn’t for everyone. People who don’t like confrontations may want to use debt settlement agencies. These agencies, also called debt negotiation firms, work on behalf of people to settle their credit card debt. They claim to negotiate 10 to 50 percent off of people’s credit card debt, according to the U.S. Federal Trade Commission (FTC). Usually, people make payments to the debt settlement agencies and the agencies make payments to the credit card companies. However, using debt settlement agencies accompany a lot of risks such as trusting them to make the payments. Also, debt settlement agencies charge fees for their services.

File for Bankruptcy

If debt settlement options don’t work, another option is considering bankruptcy. There are two bankruptcy options. People filing Chapter 7 Bankruptcy won’t have to repay debt. However, their items may be sold by the bankruptcy trustee to pay off creditors. Chapter 13 allows people to repay debt over a period of time. Typically, it’s over a 36 month period. However, bankruptcy does have risks such a lower credit score.