Credit card debt piles up quickly if you use your accounts excessively and only pay the minimum amount due each month or skip payments. Certain organizations, like nonprofit credit counseling companies or bankruptcy-focused law firms, offer help getting rid of the debt if you cannot handle it yourself. Scam organizations claim to reduce or eliminate it, but the Federal Trade Commission (FTC) warns that they just rip you off, so choose debt help wisely.
Credit Counseling
Nonprofit credit counseling firms offer debt management plans (DMPs) to get rid of your credit card debt in 60 months or less. A good counselor assesses your situation to see if a simpler solution, like personal budgeting, might work. If your debt is beyond self-help, the counselor negotiates with the credit card companies for waiver of late fees, lower interest rates and other helpful concessions. You agree to a payment plan in which you send the counseling firm a lump sum every month. They take a fee, then distribute the rest to your credit card issuers and other lenders per the DMP terms.
Bankruptcy Law Firms
Chapter 7 bankruptcy gets rid of all your credit card debt, according to the FTC, although the courts liquidate your major assets, too. Chapter 13 is a less intrusive form of bankruptcy in which you pay back some money and keep most possessions. Some law firms specialize in bankruptcy filings. Be aware that attorneys charge legal fees on top of the actual filing costs. Federal law mandates credit counseling before and after the bankruptcy for an additional fee, although the cost is waived if you are unable to pay.
Debt Negotiation Firms
Debt negotiation firms claim to stop collection efforts and reduce your credit card balances significantly, but the FTC charges that many such companies are fraudulent. Negotiation does not stop collection efforts, interest or late fees, and unsuccessful negotiations often leave consumers with no choice but bankruptcy because of the damage to their credit ratings from delinquencies, charge-offs and collection accounts.
Payment Pushes
You may not need an organization to get you out of credit card debt if you have an income and are able to make at least your minimum payments on all your cards. Bankrate's Dollar Diva, Dorothy Rosen, recommends calling your card issuers and asking for interest rate reductions. Prioritize your card by interest rate and pay as much extra money as possible toward the highest rate account each month. For example, if you get a tax refund or have some extra money in your budget, channel it to the designated card. Repeat this with the next-highest interest account when the highest one is paid off, and continue this strategy until you are rid of all your credit card debt.
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