Credit Debt Relief Help

When credit card balances climb and interest rates soar, you may begin to feel like you are over your head in debt. Even worse, making only the minimum payment on your debt can mean years of financial struggle. Fortunately, you may have access to some debt relief options that could result in financial freedom sooner than you think.

Negotiations

Unsecured credit card debt varies from secured debts, in that you have no collateral to secure your debts. When you face financial trouble, credit card companies know that your risk of a future bankruptcy increases, which means you may not have to pay your creditors. Instead of taking such drastic measures, try first to negotiate with your lender for a lower interest rate or for a partial debt forgiveness. You may also utilize the services of a third-party credit negotiation company, which works on your behalf to lower your overall debt balances by up to 50 percent or more. If you succeed in negotiating your debts, however, you may be responsible for paying federal income taxes on the value of the forgiven debt.

Financing Your Debt

If your credit card debt carries high interest rates or is spread out among multiple credit card accounts, you may benefit from refinancing your debt. Many banks offer debt consolidation loans that pay off your creditors with one lump sum, making it easier to pay only one installment payment toward your debt each month. If you are a homeowner with equity in your property, you may qualify for a home equity loan, which uses your home as collateral. In turn, you can deduct the interest you pay on the loan on your federal income taxes, as the IRS treats the loan as a second mortgage on your home. Be careful that when you refinance your debt, you do not continue to charge to your credit cards. You must stop incurring debt to pay off debt.

Credit Counseling

Consider using the services of a certified credit counselor to help you manage your debts and create a manageable plan to pay your way out of debt. Use a reputable counselor from a trusted source such as a local bank, credit union, university, military base or a housing authority. Credit counselors and the agencies they work for should have good reputations with the Better Business Bureau and your state's attorney general.

Avoid Scams

The Federal Trade Commission warns against debt help scams that make inflated promises with no way of guaranteeing results. Many of these companies promote avoiding your creditor and may ask you to stop paying your credit card bills, so you can afford to pay them. While these companies may eventually work out a negotiation with your creditors, there are no assurances, and its methods may result in significant damage to your credit report.

Bankruptcy

As a last resort, consider bankruptcy. Sometimes, your debts are truly unmanageable, and you need a fresh financial start. By filing bankruptcy, you can eliminate much of your unsecured debt and find freedom from debt collection and minimum monthly payments. Bankruptcies remain on your credit report for a full ten years, however, so carefully consider whether this is the right solution for you before filing.