Credit Card Debt Relief Options

Excessive credit card debt can easily lead to financial ruin. Carrying large balances while struggling to make even the minimum payments can lead to debt that could literally take decades to pay off. You can avoid that by taking advantage of various credit card debt relief programs. The programs can help you through a temporary hardship--or end your credit card debt all at once.

Hardship Plans

Credit card hardship plans are designed to help you recover from a temporary setback. The credit card company will lower your minimum payment to as little as 1 percent of the balance for up to a year. In some instances, the card company will also waive finance charges while the plan is in effect. To apply for a hardship plan, call your credit card company and explain your financial situation. Be prepared to offer detailed information about your income and expenses, and how long you expect your hardship to continue.

Debt Management Plans

Debt management plans are usually directed by nonprofit credit counseling agencies such as those affiliated with the Consumer Credit Counseling Service. The counseling agencies will require you to enter into a four-year program aimed at eliminating or greatly reducing your credit card debt. For a management fee of about $50 a month, the agencies will contact all your credit card companies and negotiate lower interest rates, lower monthly payments and even a reduction of your balances through the reversal of some fees and finance charges. You can direct your own debt management plan by doing the negotiating yourself as you contact each individual credit card company.

Debt Settlement

You can pay off your credit card debt for less than the full balance through a process called debt settlement. Generally, debt settlement is available only after your account has fallen behind by at least three months and is on the verge of being closed and sold to a debt collection agency. In 2009, The New York Times reported that some credit card companies were settling delinquent credit card accounts for as little as 20 percent of the balance. However, that was at the height of a U.S. recession and housing crisis. The Federal Trade Commission says debt settlement offers are generally between 30 to 70 percent of the balance. You can ask for a debt settlement agreement by contacting your credit card company. The FTC says the card company may turn down your first request, but that you should keep trying if you're deeply in credit card debt and need a way out.

Bankruptcy

Bankruptcy represents the most extreme form of credit card debt relief. Chapter 7 bankruptcy allows you to eliminate all of your credit card debt in just a few months. However, there are income limits on Chapter 7 which vary by the state. Generally, only those with lower incomes will qualify. Another form of personal bankruptcy, Chapter 13, requires a five-year payment plan based on your ability to pay. The bankruptcy court sets guidelines on your living expenses, and money left over is used to pay your creditors. At the end of the five years, your remaining credit card and other unsecured debt is eliminated.