Credit card debt plagues so many today. Even with the economic stimulus relief, some consumers are having to utilize credit cards to make ends meet. Escaping the load of credit card debt can seem like an impossible feat. Whenever someone offers a way out or credit card debt forgiveness, it can be easy to jump to accept the offer. The problem is credit card debt forgiveness can be more complicated than simply having the debt forgiven.
Not All Debt Forgiveness Strategies Are Equal
Credit card debt is forgiven usually from two strategies, namely debt settlement or bankruptcy. Many consumers try a third strategy, which involves ignoring the amount owed until the statute of limitations has passed for collecting on the debt. However, the damage that can result to the consumer’s credit score as a result of this failed strategy make it often not worth the wait.
Patience Is Required
Debt settlement is not an immediate process. The debt settlement process involves working and negotiating with the creditor or collection agency, if the debt collection process has gotten to this point. The longer the consumer waits to work with the creditor, the harder his or her credit will be hit, especially if the account moves from delinquent status to “in default” or “collections.” It can take several months or even longer to work with the creditor or collection agency on negotiating the settled amount. For this reason, many consumers choose to hire a debt relief company, so long as the company is reputable and does not require the consumer to charge fees upfront.
Credit Score Damage
Both credit card debt settlement and bankruptcy will affect the consumer’s credit score. By the time the consumer has gotten to the point of settling or forgiving the debt, however, the damage has already been done. Missing payments, having accounts go into default, and being on the receiving end of a collections case will also hurt the consumer’s credit score, just as much if not worse than bankruptcy or debt settlement.
The consumer’s credit score can rebound with good financial habits after the matter is finalized. Eventually, the bankruptcy case or debt settlement will fall off the person’s credit report, too. Debt settlement will stay on the consumer’s credit history for seven years while bankruptcy cases will stay for ten years.
Legal Assistance May Be Needed
Many consumers do not feel equipped to handle the negotiation process alone, especially if they decide to pursue bankruptcy. Whether it be a Chapter 7 or Chapter 13 case, an experienced Miami bankruptcy attorney can guide the consumer as to the wisest choice for him or her.
Alternative Methods
If the consumer does not want to pursue debt settlement or bankruptcy, other methods can be used to pay down the debt, including the snowball and avalanche methods. Both accomplish the same goal of eventually paying down the debt through prioritizing certain debts over others. The snowball method focuses on paying off the consumer’s smallest balance first before paying down the one with the next smallest balance until all credit cards are paid in full. Alternatively, the avalanche method starts with paying off the credit card with the highest interest rate first and continuing this trend with other cards until all are paid in full.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.