If you have an abundance of credit card debt you may want to investigate methods of debt reduction. Reducing your debt can make your budget more manageable and help you become debt-free.
Lower Rate
If you want to reduce your debt, you should contact all of your credit card companies and negotiate lower rates of interest. When you make your payments, a larger portion of the payment will go toward the balance, resulting in faster debt reduction.
Settlements
Call your credit card company and negotiate a settlement of the balance. Credit card companies will offer and accept settlements in the area of 20 percent to 75 percent of your balance. You need to be past due 90 pays before they will negotiate with you.
Debt Relief
If you deal with a debt reduction company, it can negotiate with your creditors but the fees it charges you can be costly. Sometimes the fees can be as much as 15 percent to 18 percent of your balance. This information can have a negative impact on your credit report. Fees can vary from company to company.
Taxable Income
If you have a balance of $7,000 and you settle for $5,000 the remaining balance, which is forgiven debt, of $2,000 may have to be reported as taxable income when you file your taxes. Insolvency, which is when your liabilities exceed your assets, and bankruptcy are the two exceptions under which forgiven debt does not have to be reported as taxable income.
Credit Counseling
If you contact the consumer credit counseling debt management program, it can negotiate lower rates of interest and lower balances. You will be able to reduce your debt quicker than you would under normal circumstances.
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