Government Assistance for Credit Card Debt

Government assistance for credit card debt is offered through bankruptcy. Bankruptcy severely damages credit scores, but it is the only program available from the government for directly eliminating credit card debt. Bailouts for credit cards are not available through the government as of 2011, and the government does not offer debt consolidation loans for credit card debt or other financial assistance such as tax credits or grants.

Considerations

Bankruptcy remains on credit reports for a minimum of 10 years, and it significantly hurts credit for a while. People emerging from bankruptcy usually need two or three years to restore their credit ratings.They rehabilitate their credit by opening new credit accounts and making on-time payments while keeping balances low.

Chapter 7 Bankruptcy

Chapter 7 Bankruptcy appeals to many people because it eliminates credit card debt in three or four months. Income guidelines, which vary from state to state, prevent many people from qualifying, however. People who qualify usually have low incomes or are suffering from long-term unemployment of more than six months. Federal bankruptcy courts offer Chapter 7 programs, which focus on selling certain assets to pay off credit card companies and others. However, many assets, such as houses, cars and household items, are exempt from the process, and some people emerge from Chapter 7 without losing any assets. At the end of the process, the debtor has no further responsibility for credit card debt listed in the bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is another option, but it requires a repayment plan lasting three to five years. The bankruptcy trustee helps the debtor create a court-monitored spending budget. The budget allows for reasonable expenses and monthly payments on secured debts, such as mortgages and automobile loans. Money left over is contributed to a payment plan for credit card companies and other unsecured creditors. Credit card companies may receive full payment over three to five years, or they may receiver a percentage or nothing at all. It depends on the debtor's income and the budget arranged by the trustee.

Credit Counseling

The government also helps by making free credit counseling available through counselors certified by the U.S. Department of Housing and Urban Development (HUD). The counselors can recommend other legal and ethical options for resolving credit card debt, including debt management plans and debt settlement. Debt management plans allow counselors to manage a person's unsecured debt over a given period, often four years, with a goal of eliminating or greatly reducing the debt over that period. The agencies charge a monthly fee for the service. Counselors can also teach people how to settle delinquent credit card debt for considerably less than the amount they owe.