How to Restructure Credit Card Debt

You can choose from several options to restructure your credit card debt. You can use the restructuring as a part of a long-term strategy for paying down -- or paying off -- your credit cards. In the short term, your focus might be an immediate restructuring that eliminates at least some of the debt or provides smaller monthly payments at lower interest rates.

Instructions

1

Settle credit card debts that are seriously delinquent. According to "The New York Times," card companies will reduce your credit card balance by as much as 80 percent if you have fallen almost six months behind. Generally after six months the card companies will give up on collecting, close the account and sell it to a debt collection agency. Before doing so many of the companies will offer you the chance to settle the account by paying much less than the full amount owed. Settlement could be a viable part of your restructuring plan if you're deep in debt with lots of credit cards. To reach a settlement call or write your credit card companies after you're about four months behind and make an offer. Keep communicating with them until you have an agreement. Although settlements resulting in balances being reduced by 80 percent are possible, in 2010, settlement offers for about half the balance are more common.

2

Apply for a bill consolidation loan. A bill consolidation loan can help you avoid debt settlement. The loans are available at banks, credit unions and other lending institutions. Use the loan to pay off all or most of your credit card debt. That will make for a restructuring of your credit card debt with one monthly payment. Also, the interest rate likely will be lower than the rates on the credit cards.

3

Move your credit card debts to other loans with lower interest rates. This could be a good restructuring move if a bill consolidation loan isn't available. Use a home equity loan to pay off the credit card debt, or use an unsecured signature loan with available credit. Also consider applying for new credit cards offering no finance charges for the first several months. Transfer high-interest credit card debt to those cards and pay down as much of the debt as possible through the promotional period for no finance charges.

4

Ask the credit card companies to lower your interest rates and to reduce your monthly payments for a limited time. Many of the card companies offer hardship plans for customers with financial problems. Reasons typically include unemployment and illness. With lower interest rates and overall lower monthly payments you may be able to restructure your debt by paying off some of the balances during the hardship period.