Facts On Credit Card Debt Program Settlement

By Sean A. Kelly

Credit card debt is a rising problem in America and many consumers are seeking for the perfect credit card debt program settlement. There are also other ways to deal with your rising debt problems such as debt consolidation and credit counseling. With debt consolidation, you can take up a home equity loan to pay up all your debts and then you only pay the loan. As for credit counseling, you can seek help on how to plan your budget and work out a schedule to slowly and steadily pay up all your debts.

Sometimes situations make it impossible for you to pay all your debts in full, even over a period of time. Perhaps you lost your job or you had an expensive medical emergency or there is a pro-longed illness or even death in your family. Whatever the reasons, unforeseen circumstances may be preventing you from recovering your financial standing and making it highly impossible for you to settle your debts fully on your own. Well, rather than face bankruptcy or foreclosure, debt settlement is another avenue you could choose. That’s because bankruptcy will ruin your credit score for up to 10 years and you do not want to lose your home too.

So, this is how debt settlement programs work. You can try to do it yourself by negotiating with the credit card company for a settlement. But if you are unsure of how to negotiate with the credit card company since it is a tedious process which could drag on for months up to years, then you should probably hire a professional debt settlement service to handle the negotiations and paperwork for you. Sometimes, the credit card companies may agree to settlements as high as 80% of the balance or as low as 20% of the debt balance.

By taking up debt settlement, it will definitely affect your credit rating because your creditors will report your account as ‘settled for less than the full balance’. So, you have to be very sure about exhausting other credit card debt settlement alternative before taking this path. Besides this, you may even have to pay higher taxes as it is a requirement that all settlements over $600 be reported as income so you could be taxed on the amount of debt that you didn’t pay. Also, your creditors will not be open to negotiation and insist that you seek other ways to settle the debt in full like debt consolidation or credit counseling.

You only choose to go for debt settlement if you are on the verge of bankruptcy with several debts in delinquency. In short, if you are one step away from bankruptcy, are behind in payments and facing collection and foreclosure, only then you can consider this option. Otherwise, there are other options available. You can always cash out the equity of your home, increase your income and cut down expenses to make the monthly repayment, change your spending habits or take up debt consolidation.

You should also seek credit card debt settlement advice and whether it is the only option, other than bankruptcy, that you could take. Do remember that it is usually better to work on your finances and resolve the root problem, which is your spending, that first caused the debt problem. You can learn to change your spending habits, do some serious budgeting, stop using your credit cards and map out a debt repayment plan. You need to stop depending on credit cards so that you will not end up in deep debt again a few years down the road.

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