Federal assistance is readily available for handling credit card debt through government-sponsored counseling and debt-elimination programs. The U.S. Trustee Program, a division of the U.S. Department of Justice, maintains a list of government-approved credit counseling agencies offering a variety of options for handling credit card debt. Initial consultations with counselors are free.
No Bailouts
As of 2011 the federal government does not provide direct payments, tax breaks or grants for credit card debt. People with credit card debt are personally responsible for the accounts. However, the government offers valuable assistance, including the Fair Debt Collection Practices Act, a federal law which regulates what bill collectors can and cannot do as they attempt to collect. It is illegal for debt collectors to intimidate or threaten debtors, and the law makes it possible for people not to receive phone calls from debt collectors if they choose. The federal law is supported by state guidelines, including state statute of limitation laws which limit the number of years debt collectors have to win court cases for credit card debt.
Counselors
Federal government-approved credit counselors are located across the country. The counselors are experts in resolving issues related to credit card debt. They are an excellent source of legal, ethical advice on reducing credit card debt. They specialize in debt management programs, which combine a person's multiple credit card payments into one monthly payment. The debtor mails a check to the counseling agency each month, and it makes direct payments to individual card companies. Counselors take over management of the credit card accounts, including all conversations with the card companies and debt collectors. The counselors establish a plan for paying off the cards within about five years. The plans require a monthly management fee from the debtor.
Debt Settlement
The Federal Trade Commission recommends self-directed debt settlement as a solution for credit card debt. The endorsement is another way the government helps with credit card debt. Government-certified counselors offer free counseling sessions instructing people how to settle credit card debt. Credit card balances are sometimes paid for as little as 20 percent of the balance through debt settlement, although settlements of around half are more common.
Chapter 7 Bankruptcy
Federal bankruptcy courts help people whose credit card and other debt is out of control. Chapter 7 bankruptcy, the simplest form of bankruptcy, eliminates credit card debt in just months. The government waives filing fees for people who qualify and also allows people to file without the assistance of an attorney. That means it is possible file for Chapter 7 bankruptcy and eliminate credit card debt for free. There are income restrictions on qualifying for Chapter 7, which vary by state. People with long-term unemployment or low salaries are the best candidates for Chapter 7.
Chapter 13 Bankruptcy
Chapter 13 is similar to Chapter 7 but takes three to five years to complete because of a court-ordered payment plan. A participant in Chapter 13 may pay some or all of his credit card debt during the three to five years. It all depends on how much money remains after the court allows for reasonable living expenses. Money left over is paid to credit card companies and other unsecured lenders. If nothing is left over they receive nothing and the debt is eliminated at the end of the bankruptcy.
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