Almost all individuals in the U.S. are infected with the habit of making the indiscreet use of credit card that often incur them an overwhelming credit card debt. However, fortunately there are several ways to clear credit card debt, such as bankruptcy and credit card debt settlement. Both are viable ways to wipe off the debt depending on your unique financial situation. If you feel your outstanding balance of debt is manageable, you may settle your debt with credit card companies by approaching them through a credit card settlement letter.
If necessary, you may follow some sample debt settlement letters in order to write the letter correctly. On the other hand, if you feel your credit card debt is a large part of your financial obligation, then you may consider the option of filing for bankruptcy.
Bankruptcy chapter 13 expunges credit card debt, meaning you will not be obligated to repay your debt to creditors. But before the debt is forgiven, the court appointed trustee will liquidate all your non-exempt properties to pay off the portion of your debt and the rest will be discharged. So under this bankruptcy you may loose your assets like automobiles, home, place of business and personal items. Chapter 7 also closes down your credit card account that blemishes your credit score for next 7 to 10years.
Under bankruptcy chapter 13, none of your assets are to be sold by the court to pay off your credit card debt. Rather this bankruptcy involves a court monitored restructured payment plan to clear the debt over a period of 3 to 5 years. So as long you make your payments on time in accordance with court approved debt repayment plan, no creditor can take action against you and reclaim your property. After your debt repayment plan is over, your remaining outstanding balance will be discharged by the court. Even under bankruptcy chapter 13, all your credit accounts are to be closed that may affect your credit score.
You may also choose to reaffirm your certain debts when your bankruptcy is in process. Reaffirm a debt means to remove it from bankruptcy and repay it as normal. Debt reaffirmation is beneficial to people as they can achieve better repayment terms like low interest rate by negotiating with creditors. This makes it easier and more convenient for you to repay the debt with some credit intact. It also allows you to keep your account open that helps you reestablish your credit score as you pay down the balance.
Credit card debt settlement is a process that allows you to negotiate with creditors to reduce the pay-off amount. So it is an agreement between you and credit card companies to make one time payment and discharge the rest. So settlement with credit card companies enables you to repay as little as half the balance on your accounts reporting to credit bureaus that your accounts have been paid in full. However, the disadvantage is, if the amount being forgiven by the credit card company is more that $600 then you will have to report it as generated income on taxes. Your credit accounts are also likely to be closed when the settlement is reached, which in future may hurt your credit score.
In conclusion, both bankruptcy and settlement can remove your exiting credit card debt with some advantages and disadvantages. However, it is always recommended to pursue any of the options considering your fiscal background.