Eliminate Credit Card Debt
How Can I Eliminate Credit Card Debt?
Generally speaking, a consumer can eliminate his or her unsecured debts through a number of debt relief alternatives. There are 2 types of Bankruptcy available to consumers, Chapter 7 Liquidation and Chapter 13 Adjustment of Debts. Which one of these alternatives is available to the consumer is based upon the individual's ability to pay back the debt. Depending in which state you live, if you earn above the state average OR have more than $100 left over after all of your bills and living expenses have been paid, then you will likely be forced into a chapter 13 in order to pay back the debts over a course of 3 to 5 years.
A Chapter 13 Bankruptcy is in effect a creditor repayment plan that is not much different than a debt consolidation program. The primary difference is the effect each one has on an individual's credit rating. A debt consolidation program is not quite as damning as a bankruptcy, but the only thing that really looks good on anyone's credit report is "Paid in Full" or "Paid as Agreed."
Another way to eliminate credit card debt is to enter into a debt settlement program. Debt settlement, in a nutshell, is a third party arbitration between your creditors and your representative, the goal of which is to lower the balance of your debt to a sum that you can pay off in one lump settlement sum.
You may wish to attempt the debt negotiation on your own, in which case you should be prepared when you speak to either your creditors or the collection agency to which your debt has been assigned.
Minimum Payments Cost You Big Money
Several states are now considering legislation that would compel creditors to spell out in plain English, on each and every statement, how many years it will take to pay off the debt while paying only the minimum payments. This will be a real eye opener for the credit card using consumer if it is passed.
Half a Lifetime of Debt
For example, if you have $15,000 in debt on a credit card(s) that charges 18% interest and are paying only the minimum monthly payment (on average, minimum is 2.5% of the debt), it will take you 423 months to get out of debt. That is 35 years and 3 months to pay off the debt, and this is if you make no further charges on any of the cards.
Enormous Interest
Not only will you be paying your debt for over 35 years, you will pay the credit card company $22,115.70 in interest, over and above the original $15,000 debt. If you have $8,000 in debt on a similar card it will take 347 months, or 28.9 years to pay it off and you will pay $11,615.32 in interest, over an above the original debt, using only minimum payments.
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