Lowering debt is a priority for every family that sees a growing percentage of disposable income being taken up by debt interest payments. The Federal Reserve’s G.19 report on consumer credit revealed that the median level of unpaid charge card debt was $15,519. Clearing credit card debt can be difficult, especially if there wasn’t enough money to pay the bills in the first place. Fortunately, there are ways to pay off debt faster without breaking the bank in the process.
Debt Resolution: Affordably Lowering Debt
Paying off credit card debt can be achieved at an accelerated rate with a debt free plan, such as a debt management plan or debt settlement program. In order to proceed with a debt relief program, any credit agreements that are to be included in the repayment plan must have been defaulted on. If the customer continues to make the minimum payment, the lender will continue to milk this for the next 40 years. As far as the banks are concerned, this makes for the perfect customer.
Why Clearing Credit Card Debt is Possible
Issuers are far more likely to agree to a debt relief program, such as a debt management plan or debt settlement program, when the account has been sold-on to a debt collection agency. Financial institutions sell-on debt for as little as 10 cents to the dollar and write-off the balance against taxation. When the account is in the hands of a collection agency, offering a reduced sum of money is far more likely to be accepted because offering to repay just 50% of the balance represents a considerable profit.
Getting Out of Credit Card Debt with a Debt Free Plan
- Debt management plan. Following a comprehensive budgetary analysis, it will be determined how much can be affordably contributed to creditors each month. Under a debt management plan, the client will make a repayment to an intermediary and they distribute the proceeds to creditors on a pro rata basis. Although it may be possible to freeze further interest and charges, lowering debt will take longer at the reduced repayment rate.
- Debt settlement program. The intermediary will attempt to secure a debt reduction of up to 50% and the remaining balance will be cleared over a period of up to 36 months. Although the debtor doesn’t receive full court protection from creditors, a debt settlement program is widely regarded as the leading alternative to filing for bankruptcy.
- Chapter 7 bankruptcy. Not everyone has sufficient disposable income to offer creditors each month. Provided that the debtor’s income is below the state median, clearing credit card debt can be achieved in about 4 months. People who have filed for chapter 7 bankruptcy in the last 8-years will need a new debt solution due to the 2005 bankruptcy laws.
Is Lowering Debt Possible?
Clearing credit card debt more quickly is achievable, but it requires discipline and a bit of luck. Failing to keep-up with the agreed repayment terms will lead to the return of collection agency calls. A lot can happen over the course of the next 3 to 5 years and this can making paying off credit card debt more difficult. Filing chapter 7 bankruptcy is only suitable for tackling serious debt. Although it is possible to file without legal assistance, a bankruptcy attorney is likely to be needed for the more complex cases. Once a debt resolution has been achieved, it’s important to stay out of debt by making the right decisions.