Credit Card Debt Relief
Are you in need of credit card debt relief? You're not alone. Millions of Americans are suffering from an abundance of credit card debt. In fact, experts claim nearly 34-percent of all bankruptcy filings are caused by excessive credit card debt.
There are numerous companies offering credit card debt relief. Most claim they can convince credit card companies to reduce interest rates and slash outstanding balances. They offer the hope of helping consumers get out of debt in a matter of months. Unfortunately, a large percentage of debt solutions companies cannot fulfill the promises they make.
This is not to say all credit card debt relief organizations are scammers. There are legitimate companies that can help consumers take control of their finances and avoid filing for credit card bankruptcy. However, caution should be taken when retaining services from debt reduction companies.
The reality is no one can completely eradicate your debts overnight. Even if you file for credit card bankruptcy, chances are you will be required to repay a portion of outstanding debts. The Bankruptcy Abuse Prevention and Consumer Protection Act, signed by President Bush in 2005, requires all debtors to repay a portion of debts through Chapter 13.
Chapter 13 bankruptcy is oftentimes referred to as reorganization. When debtors file for Chapter 13 protection, they must submit a repayment plan to the bankruptcy court. In most cases, repayment plans extend for three to five years. During this time, a large percentage of disposable income must be contributed to repayment of debts.
The primary downside of Chapter 13 is the fact that many people are unable to comply with the repayment plan. When this occurs, debtors fail out of bankruptcy and run the risk of having a bankruptcy judge dismiss their case.
When debtors fail out of bankruptcy, creditors can petition the bankruptcy court and request dismissal. The judge determines if the debtor is eligible to file for Chapter 7, which requires liquidation of assets to repay debts. If the judge dismisses the case, debtors lose all protection from the bankruptcy court and creditors can proceed with collection activities.
Bankruptcy is a costly and time-consuming process. Additionally, there is no guarantee that a judge will grant bankruptcy protection. While every U.S. citizen has the right to file bankruptcy, there is no law that states a judge must approve the request.
A better way to obtain credit card debt relief is through credit counseling. Approved credit counseling programs are offered through the Department of Justice U.S. Trustee Program.
Other credit card debt relief programs include budgeting, debt consolidation and debt settlement. Each of these bankruptcy alternatives offer solutions to eliminating credit card debt and the opportunity to work with creditors to lower outstanding balances and interest rates.
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