Overwhelmed with credit card debt? You’re not alone

Credit card balances in the U.S. have hit more than $420 billion, an increase of 5 percent over 2017, new research shows.

The debt can feel overwhelming: 9 percent of those with credit card debt don’t believe they will ever get out from under, polls show.

Three options

If you find yourself in over your head, you have likely tried a variety of ways to get yourself out from under the debt. You have tried cutting up cards, getting low- or no-interest cards and putting high-interest debt on them, paying only the minimum and watching your interest mount, and so on.

After trying these methods, you usually only have three options left:

  • Call your card issuer and ask to set up an alternate payment plan
  • Get credit counseling who can help you put together a budget
  • Declare bankruptcy

A credit card payment plan is sometimes called a hardship plan. Most credit card companies offer them but you’ll rarely see them advertised. They are meant to get as much money as possible before you declare bankruptcy. They often offer a combination of:

  • Lower interest rates
  • Smaller minimum payments
  • Lower fees and penalties
  • Fixed payment schedules

The credit card payment option can affect your credit score because it the company may close your card while you pay it off. Closing a card can affect your length of credit history and your credit mix, both of which result in a lower credit score.

Credit counseling or bankruptcy

A credit counselor will, for a fee, analyze your spending and your income and then negotiate a repayment plan with your creditors. You make one deposit each month with the counselor who then distributes the money to your creditors.

Bankruptcy involves going to court and declaring either Chapter 7 or Chapter 13 bankruptcy.

In Chapter 7 bankruptcy, non-exempt possessions are sold and used to pay off your creditors who are then forbidden to continue to seek repayment from you.

In Chapter 13 bankruptcy, your debts are reorganized and you are put on a schedule to pay the debts back in between three to five years.

If your credit card debt is great and you have tried to refinance, tried to work with the credit card companies, tried to maintain a budget and you still are in over your head, you should talk to a qualified, experienced attorney to discuss your options under bankruptcy. It may be the best way out of a bad situation.

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