As of 2011, there are no grants, tax cuts, personal bailouts or loans available from the federal government for resolving credit card debt issues. The government does make help available in other ways, but generally the credit card holder must accept responsibility for solving his own problems.
Counseling
The government makes free credit card counseling available through a nationwide network of government-certified credit counselors. The counselors are approved by the U.S. Department of Housing and Urban Development and can recommend all legal and ethical options for resolving credit card debt problems. The counselors also offer debt management plans for a fee. The plans last for four or five years with a goal of eliminating or greatly reducing credit card debt. Guidance from credit counselors is significant because of their good working relationships with credit card companies. The counselors can often negotiate lower monthly payments and interest fees.
Chapter 7 Bankruptcy
The government also provides protection from credit card and other debt through bankruptcy. The Federal Trade Commission (FTC) recommends that most people choose bankruptcy only as a last resort for addressing financial problems, but for some people it is unavoidable. Chapter 7 bankruptcy eliminates credit card debt in just a few months. Individual states set their own income limits for qualifying for Chapter 7, and usually only people with low incomes are approved. Chapter 7 liquidates assets to pay credit cards and other debt, but many people qualify to keep cars and a primary residence.
Chapter 13 Bankruptcy
Chapter 13 is a less commonly used form of personal bankruptcy, and it takes much more time to complete than Chapter 7. Chapter 13 requires a payment plan of three to five years, with unsecured creditors such as credit cards receiving money remaining from income after the court allows for reasonable living expenses. Some people with low income pay nothing to unsecured creditors during the three to five years, with all unsecured debt wiped out at the end of the bankruptcy. Chapter 7 and Chapter 13 feature a legal injunction called "the automatic stay." The stay is signed by a judge and prohibits collection efforts by credit card companies and others during the bankruptcy.
Debt Settlement
The federal government also makes it easier for some people to engage in debt settlement. The FTC recommends debt settlement as an alternative to bankruptcy. The strategy allows for paying off debts for less than the full amount owed. The Internal Revenue Service usually treats the savings as income, but people who are considered financially insolvent at the time are granted exceptions. Insolvency means a person has more debts than assets.
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