Credit Card Debt

If you are one of the millions of consumers that is struggling with credit card debt, this article aims to offer valuable advice and solutions to you. The good news is that there are a myriad of programs and services available which aim to provide real debt relief and offer consumers a chance at a fresh start.Free Virtual Credit Cards for Online Transactions - DSD

Most certainly what most consumers think of when faced with dire financial circumstances and mountains of credit card debt is bankruptcy buy vcc. The word itself can make one shudder; as well it should because while bankruptcy can offer a wiping of the slate clean (to a limited extent) it brings with it a vast array of extremely negative and long-lasting consequences.

These include a virtual destruction of the filer’s credit record, and the inability to obtain future credit and loans since the bankruptcy filing will remain on the filer’s credit for up to 10 years. That being said, bankruptcy does have a place in the realm of debt relief. However, it clearly is the option of last resort and needs to thoroughly be explored in depth with one’s family and attorney before deciding on it as the option that makes the most sense.

There are, however other programs and forms of debt relief which offer immediate benefits and relief for those struggling with credit card debt. A newer program which does not involve bankruptcy or standing before a bankruptcy judge is known as debt settlement. A relatively new program compared to bankruptcy, debt settlement is a program which can achieve spectacular results in the reduction and elimination of credit card debt.

 

A debt settlement firm negotiates on behalf of the consumer with their creditors. Their aim is to seek a great reduction and compromise off of the original amounts owed by the consumer who is suffering a financial hardship. It is normal these days for accounts to be settled for 50% down to 25% of the original amounts owed. The consumer enters into a new payment agreement with the credit card companies, and upon completion of the payment plan the creditors report the accounts as “settled” to the credit reporting agencies.

Consumer Credit Counseling

Another option which consumers have available to them and can be quite effective they are not too deeply in debt is consumer credit counseling. In fact, 6 months of consumer credit counseling is now mandatory prior to one being able to file a bankruptcy petition. Yet, consumer credit counseling can actually prevent a smaller credit card debt problem from growing into something more sever, more out of control. Credit counselors are able to sit down with and examine a consumer’s entire financial state. They can pinpoint the positive as well as the negative in the consumer’s personal finances and formulate a plan that will stave off a financial crisis from occurring and prevent a debt situation from spiraling out of control.

One of the tactics which consumer credit counselors employ is the development of a personal household budget. This budget is key for a consumer, whether in debt or not to understand exactly where their money is being spent. It can shed light on where funds are being wasted. When a person is going about living their day to day lives, buying their daily coffee, buying their daily lunches and dinners, renting DVD’s, going out, etc. it can be next to impossible to calculate or even guess how much money is being spent and/or wasted. With a budget in place that one can see in black & white on paper, or on an Excel spreadsheet it is often quite surprising when one realizes where all the money is going. The consumer credit counselor is without a doubt able to offer advice and real world solutions to those consumers who are not too far in debt.

Debt Consolidation

Another program available to those consumers dealing with credit card debt is debt consolidation. Debt consolidation itself does not necessarily involve a new loan being taken out, although it may. Debt consolidation can be helpful to consumers who are struggling with credit card spread out over multiple credit cards, and find it difficult to manage payments of multiple cards. A new loan may possibly be taken out at a lower interest rate than the existing multiple loans.

This program has the benefit of giving the consumer in debt a single, lower monthly payment that is easier to afford. The drawback with debt consolidation is that while the consumer benefits from a lower monthly payment the length of the loan term is extended. Typically with a debt consolidation program the consumer in the end will pay a higher amount, although over a longer period of time and at a lower monthly rate.

Bankruptcy

Finally, we can discuss the granddaddy of all debt relief programs – bankruptcy. Bankruptcy as institution is established by the U.S. Constitution. The last 2 major overhauls of the system occurred in 1978 – that reform became known as the Bankruptcy Code, and in 2005 major changes were made to the bankruptcy laws which tilted the system more towards creditors. This was done to prevent the abuse of the bankruptcy system and to reduce the number of petitions which are filed and also to reduce the number of consumers who file more than once during their lifetime.

Bankruptcy was enacted to offer the U.S. consumer a chance at a fresh start, though the consequences of filing for bankruptcy are extreme and severe. Unfortunately, the wide array of bankruptcy lawyers these days that are advertising bankruptcy on TV ads do not tell the whole truth and nothing but the truth. Instead, they highlight the positive while not informing the viewers of the negative. And the negatives are numerous and considerable.

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