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MoneyWatch: Managing Your Money
By Joshua Rodriguez
Edited By Angelica Leicht
/ CBS News
Credit card usage is common in the United States, but charging purchases on a credit card can lead to big financial trouble if you aren't careful. Right now, more than eight out of 10 adult Americans have at least one credit card in their wallets, according to theU.S. Government Accountability Office, and many people don't realize how quickly the interest on their balances can add up, especially wheninflation skyrockets.
But while credit card debt is common among Americans, it can also be stressful. And if you're facing down a mountain of credit card debt, it's important to try and tackle it right away, before the issue gets worse. So what can you do when your credit card debt gets out of control? Well,credit card debt forgiveness could help you get some of your debt forgiven, but who qualifies for it — and how?
Get access to the credit card debt relief you need now.
Who qualifies for credit card debt forgiveness?
When it comes to credit card debt forgiveness, you may think there are government programs that help get rid of debt. Unfortunately, there is no such thing as a government-sponsored program for credit card debt relief. In fact, if you receive a solicitation that touts a government program to get you out of debt, you may want to think twice about working with that company.
But the good news is that credit card debt forgiveness does exist — it's just not government-sponsored. While it's highly unlikely that any credit card company will forgive 100% of your debt without it being part of a bankruptcy, you may be able to negotiate a settlement with your lenders in which they forgive a percentage of the balance you owe. Moreover, nearly anyone who has a hard time making their credit card payments may qualify for forgiveness.
How to get your credit card debt forgiven
There are a couple of ways to get your debt forgiven by credit card companies. Those include:
Debt settlement programs
Debt settlement programs are a type of debt relief service. At the start of the program, a debt relief expert will typically analyze your debts and financial position. Using this information, the expert will create an affordable, effective payment plan.
When you make your payments to the debt settlement company, they generally hold the money in a special-purpose savings account. Once you've saved enough money to settle your debts, the debt settlement company starts negotiating with your creditors in hopes of reducing your principal balance. These negotiations are often successful, resulting in significant long-term savings.
But there are some potential disadvantages to think about before signing up for one of these services. For starters, debt settlement companies do not make payments to your creditors as you save for your settlement. That will likely hurt your credit score and impact the ability to borrow for some time.
Moreover, there's no guarantee that your credit card company will accept the settlement. If they don't accept it, you could end up with a larger debt burden than you started with, and if they do, you'll likely need to pay income taxes on the amount of debt that was forgiven.
Find out how a debt relief service can help you now.
Bankruptcy
If credit card debt settlement doesn't provide enough relief, it may be time to reach out to a bankruptcy attorney. Sure, bankruptcy will likely harm your credit score and ability to borrow in the near term, but as a last resort, it's oftenan effective way to get out of overwhelming credit card debt. You may be able to get your debt 100% forgiven through bankruptcy, giving you the ability to restart on a clean financial slate.
Debt forgiveness may not be your only option
Debt settlement programs and bankruptcy both have the potential to result in forgiven debt, but they're also likely to have a significant impact on your credit score and your ability to borrow. But there are other options to consider, too, including:
- Debt consolidation loan: You may be able to take out a personal loan to consolidate your credit card debts at a lower interest rate. These loans usually come with fixed payment schedules, offering a clear path to payoff.
- Use your home equity: Home equity is a relatively inexpensive way to access cash when you need it, and the average American homeowner has quite a bit of it. You may be able to tap into your home's equity to consolidate your credit card debts at a lower interest rate.
- Debt consolidation programs: Under these programs, debt relief experts use your financial data to negotiate better terms with your lenders and create payment plans to help you pay your debts off faster.
- Financial hardship programs: Many credit card companies offer financial hardship programs that could offer relief through lower interest rates and fixed payment terms. Signing up for these programs is often as simple as calling your lenders and asking for help making your payments more manageable.
The bottom line
Credit card debt can be overwhelming, but you don't have to deal with it forever. If debt consolidation loans are unavailable and debt consolidation programs don't offer enough relief, it may be wise to use a debt settlement company to try and get a percentage of your debt forgiven. But if debt settlement doesn't provide enough relief, it may be time to file bankruptcy and restart on a clean financial slate.
