Credit card debt relief is available through a variety of public and private programs. However, as of 2011 there are no government grants or bailout programs for credit card debt relief. The government does assist by offering complete or partial elimination of credit card debt through various forms of bankruptcy. The government also makes free credit counseling available through partnerships with credit counseling agencies.
Debt Management Plans
Debt management plans are commonly used to provide relief from excessive credit card debt. Credit counseling agencies certified by the U.S. Department of Housing and Urban Development offer the plans for a monthly fee. The counselors arrange payment plans with credit card companies with a goal of greatly eliminating or paying off the debt in about five years. Participants in the plan send a check to the counseling agency each month, with the agency making direct payments to credit card companies. The benefit is that card companies agree to end other debt collection efforts, such as credit card lawsuits, while the borrower continues with the plan.
Debt Settlement
Debt settlement is usually self-directed or managed by a for-profit firm. The Federal Trade Commission recommends debt settlement as an excellent alternative to bankruptcy. Credit card debt is a leading cause of bankruptcy, with some people facing lawsuits, monetary judgments and wage garnishment because of runaway spending on credit cards. Settlement resolves credit card debt by allowing debtors to pay off accounts for a fraction of the balance -- usually for around 50 percent. Settlements are available in lump sump agreements or installments. The FTC recommends people self-manage debt settlement to avoid abuses by some for-profit firms. Credit counseling agencies offer advice for people wishing to settle their debts.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy provides quick credit card relief by completely eliminating credit card debt in as little as three months. However, income limits, which vary by the state, prevent many people from qualifying. People with low incomes or those who have not worked for more than six months usually qualify. The filing fee for Chapter 7 is $299 as of 2011. The bankruptcy courts recommend that people filing do so with assistance from a reputable bankruptcy attorney, although it is not required. Fees for an attorney vary, starting at several hundred dollars and up.
Chapter 13 Bankruptcy
Chapter 13 is similar to Chapter 7 with one major difference. Chapter 13 is much longer because of a payment plan lasting three to five years. Most people looking only for credit card relief choose Chapter 7 over Chapter 13 -- if they qualify for Chapter 7. There are no income eligibility limits for Chapter 13. During the payment plan Chapter 13 participants follow a court-ordered budget allowing for reasonable living expenses. Money left over is paid to credit card companies and other unsecured credits. Credit card debt remaining at the end of the payment plan is eliminated. The filing fee is $274 as of 2011.
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