11 Sep 23

How to Get Out of Credit Card Debt Without Paying the Full Balance

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Last Updated on: 2nd October 2023, 02:59 pm

How to Get Out of Credit Card Debt Without Paying the Full Balance

Credit card debt can feel like a heavy burden, especially if you’ve accumulated balances across multiple cards. According to the Federal Reserve, total revolving consumer credit card debt in the U.S. reached over $1 trillion in 2022. With interest and late fees, balances can quickly snowball out of control.

If you’re struggling with high credit card balances you can’t readily pay off, rest assured there are options to resolve your debt for less than the full amount owed. However, relief programs do come with trade-offs to consider carefully.

Ask Creditors for Relief

Your first step should be contacting your credit card companies directly. Many major issuers have hardship programs to help borrowers manage overwhelming debts.

For example, you may be able to get a temporary reduction in your interest rate, eliminating extra charges while you get back on your feet financially. You can also request an altered repayment schedule, spreading out payments over a longer period of time at lower monthly amounts.

Creditors may also agree to settle your account for less than the full balance if they believe it’s the only way to recoup a portion of what you owe. According to the Fair Debt Collection Practices Act, you have the right to request a validation of debts and settlement options.

Explore Debt Management Plans

Non-profit credit counseling services like GreenPath Financial Wellness and Money Management International can help you consolidate multiple credit card payments into one monthly payment through a debt management plan (DMP).

Counselors negotiate with creditors on your behalf to waive late fees, reduce interest rates, and create a payoff plan 2-5 years in length. However, credit damage or reduced access to credit cards may occur while enrolled in a DMP.

Consider Debt Settlement

Debt settlement firms like National Debt Relief promise to negotiate lump sum payoffs of a portion of your balances. However, you must allow accounts to fall delinquent to secure these deals.

The FTC warns debt settlement companies often take large fees upfront without settling any debts. Reputable firms charge only after settlements occur. Be aware settled debts may still be subject to taxes on the forgiven amounts.

Explore Bankruptcy Options

Filing for Chapter 7 or Chapter 13 bankruptcy immediately stops collections activity. With Chapter 7, eligible unsecured debts like credit cards can be discharged entirely. Chapter 13 allows a 3-5 year structured repayment plan before discharging remaining balances.

However, bankruptcy damages credit scores for years. Consult a bankruptcy attorney to assess if it’s the right debt relief solution for your situation.

Weigh the Pros and Cons of Relief Programs

Getting out of credit card debt for less than you owe does provide financial relief. But utilize caution when considering programs that suggest you simply stop making payments entirely.

While settlement firms boast “debt forgiveness,” remember creditors are ultimately waiving balances they believe to be uncollectible. Defaulting on payments allows accounts to be charged off and sold to debt buyers, who may sue for repayment.

Ethically resolving debts through open dialogue with creditors and certified counselors leads to the healthiest financial fresh start and protects your credit and legal rights.

With persistence and patience, there are legitimate options to reduce credit card burdens without adverse legal consequences. Seek help to negotiate the optimal solution for your unique situation.

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