Bankruptcy vs debt consolidation, which one is right for your current debt problems?

The average American household has nearly $10,000 in credit card debt, and many people are only able to make the minimum payment of 2% of the balance. Even 2% is $200, and by paying the minimum payment, you could be paying on the balance for decades before you finally pay it off.

Since new legislation will make it more difficult to file for bankruptcy, it may occur to savvy debtors to try to negotiate a good proposal with their credit card company in order to make it easier to pay off the balance. Is this possible?

It might be possible depending on your current balance,credit history and interest rate. If you have a history of paying on time, then you can easily get lower interest rates by calling your company. They will, if you tell them that you got a better offer from another company. If you have a history of paying late, however, they probably will not be willing to lower your interest rate. That is really unlucky because late payment has probably forced the credit card company to raise your interest rate in the first place. Still, it’s worth a phone call; you may get lucky.

If you’ve been paying your bills on time, asking for a lower interest rate may be the only option available to you. If credit card companies are receiving payment on time then they aren’t going to be too compassionate to your financial woes.

On the other hand, if you’re late on your payments, especially if you’re more than three months behind, you may have some negotiating leverage. That leverage comes with a few strings attached, however. You may be able to negotiate a lump-sum settlement for your outstanding balance, where the credit card company accepts a portion of your debt and writes off the rest.

They’re often willing to do this instead of turning your debt over to a collection agency, as it’s cheaper just to settle. The settlement amount will vary, depending on your interest rate, your balance and your payment history.

This type of agreement comes with a couple of problems of its own, though. What if you can not pay the settlement amount at once? If you are late in payments the probably you do not have the cash to settle at once. Additionally, the amount of your debt that gets written off will show up on your credit report as bad debt, and that will stay there for seven years.

Your credit card company may or may not be willing to work out a payment plan, but it costs you nothing to ask them, and negotiating a settlement with them may be cheaper for you than if you consult with a debt consolidation firm. If your credit card debt is substantial and you just can’t make the payments, it’s worth a try.

About the Author:

Here’s How to Become a Millionaire The Guaranteed, No Risk Way. From Debt to Wealth

Max Vogt | Debt Consolidation |

Tags: credit card debt, credit report, Debt Consolidation

A Free Gift For You!

As a way of saying "Thank You" for visiting this site here's a free gift for you. This money saving eBook is worth $17.

About this eBook: Are you wasting money? Chances are there are ways that you can easily cut back on your unnecessary spending and you won't even notice a difference. Simply learning about these techniques is the first step to making changes to your finances. We asked money experts what their best tips are for trimming the fat from the average person's budget and here are their suggestions. Click here to download this free eBook. This is a time limited offer and the download link can be taken away without notice. No sign-up form to fill-up, no email address to give, just plain free download!

You might also like to read these recommended articles

• Understanding Debt Consolidation
  Most people have heard of debt consolidation through junk mail, on television, or other forms of media. Today, with the price of goods skyrocketing to include groceries, medical bills, and even gas, consumers are trying to find solutions for better money management. Over time, bills can pile up, virtually squeezing the life out of you. Stop feeling consumed by being in this type of situation and consider getting help with debt consolidation.
  
  
• 3 in 1 Credit Report
  When it comes to your credit, more is not always better. Many individuals have received a 3 in 1 credit report, which fails to provide the necessary detail to help you fix your credit. A 3 in 1 credit report is basically a combined report from all three credit reporting agencies - TransUnion, Experian, and Equifax. You are required to one free credit report every year, so these agencies have teamed together to encourage consumers to get all the information in one report. Though it might sound good on paper, this actually leaves you with less information than you need.
  
  
• Debt Consolidation Can Be Efficiently Planned
  One thing that nearly everyone seems to have an opinion on, is whether or not debt consolidation is a wise or unwise move. At the end of the day, however, the only opinion that matters is the one coming from the person who is considering the consolidation strategy. Sometimes, the hardest thing to do [...]
  
  
• Avoiding Debt And Bankruptcy
  The two most severe forms of financial trouble that most consumers can imagine are foreclosure and bankruptcy. These two events often happen together, but it is not necessary that they do. A homeowner may lose the house through foreclosure and avoid bankruptcy, and likewise, a person may go through bankruptcy court while managing to keep his home.