How To Tackle Excessive Credit Card Debt?

  • How To Tackle Excessive Credit Card Debt?

How To Tackle Excessive Credit Card Debt?

Call: 888-297-6203

Credit card debt is one of the biggest traps in which most borrowers find themselves in today. In the name of lucrative offers, the high-interest rates, charges, and beyond capacity spending, confines many borrowers to a debt cycle that is very profitable to the banks but extremely challenging for the debtors. If a borrower has multiple credit cards and the limits of the credit cards are higher than the income one has, there are strong indications that the borrower may end up filing for bankruptcy.

Implications of not paying credit card debt

The first thought any individual or borrower has in mind is that credit cards, payday loans, etc., are unsecured, and hence, let me just stop paying and the card companies cannot legally recover the money. However, credit card companies set a borrower up for willful default and there is a 50-50 possibility that once the issue is in court, the borrower might end up paying excessive interest charges, late payment fees, legal charges, and what not in that scenario. Hence, it is never a good idea to just ignore credit card debts, more so, if you are a resident of Los Angeles and Dallas, TX. Secondly, with each missed payment, the credit card companies start reporting discrepancies to the credit bureau. This instantly begins hampering the borrowers’ credit score with each payment default.

Bankruptcy or alternatives

Depending on the credit card outstanding amount and other factors, like income and payment ability, risk, etc., there are possibilities of negotiating with the credit card companies for a diluted one-time payment settlement. This usually is done through a settlement lawyer or an expert, which you can find on abundantly. Also, these experts might charge a considerable fee and you will have to arrange the funds instantly to pay the whole debt out.

As per advertisements from top companies, they may end up saving you 25-30% in debt, which is certainly not a bad deal and helps you out of credit card debt once and for all. However, the forgiven debt will be added to your net income and you may be liable for tax on the same based on the marginal tax rate you may fall under.

Debt management plan

The other option similar to negotiating debt would be a debt management plan. In this, some experts that can be found on 888-297-6203 can negotiate with the credit card companies to provide for a reasonable repayment plan with lower interest and waiver of any unfair charges to ensure the credit card plan is restructured in manageable terms for the borrower. However, both these plans remain at the disposal of the credit card companies and they may refuse to negotiate if they don’t see a risk of losing all their money. In a debt management plan, you might have less fees for the negotiator and there will be no income to be added as forgiven debt on your return, increasing your taxes.

Bankruptcy and Chapter 7

Chapter 7 if eligible is more likely to minimize the amount the lenders can extract. Unlike Chapter 13, Chapter 7 will most likely get you out without any payments to the credit card companies. Chapter 13 might have some portion of the debt be repaid in future installments, depending on the other debts and net household income. Bankruptcy has its own flaws long term and short term. Most of the time, it is the only way out for many people. However, when it comes to credit card dues, we might want to carefully reconsider.