Christian Debt Recovery

Debt Deadline Date

April 1st, 2009 |

Author: Gavin

How to Eliminate Credit Card Debt

Debt is destructive. It destroys lives and families.

In order to get your arms around your debt and eliminate it, you must make some key decisions and develop a plan of action.
Acknowledge that you are in debt, and possibly over your head, and want to get out of debt once and for all. This may seem obvious but it is a fundamental starting point.

Let’s put the goal out there. The goal is to pay off all of your the credit cards as soon as possible. The target is within the next 1 to 2 years. The price of everything is starting to go up. The banks are sucking you dry by collecting interest and late fees. If you are not feeling the pinch now, you soon will. You have to have a plan. This is about your survival.

If you stop paying on your credit cards, two things will happen: (1) Your phone(s) will continue to ring by the credit card companies and / or their debt collectors. (2) Your credit ratings will plummet.

You need to get this debt resolved soon and put it behind you. You can rebuild your credit again but it will take at least a couple years, sometimes less. It is better to start to learn to pay cash as much as possible. The banks are not our friends. The amount of interest they charge should be illegal.

Before you default (stop paying on your credit card bills), you need to have the answers to these questions because they will help lead you down the right path. Do you have any assets? Should you consider claiming bankruptcy? (This should be an absolute last resort). Should you call your credit card company and ask for a lower rate? (Yes, but most companies don’t negotiate until you are in default over 90 days.) Should you get help from a credit counseling company or debt consolidation company? (Some are reputable; others are not; never pay an upfront fee). Should you seek legal help? (It is advisable). Can you get out of debt by yourself without a lawyer? (Yes, but you need a roadmap as there are many pitfalls). What if I just stop making credit card payments? (If you don’t settle then eventually you may get sued and have to go to court. The courts will likely put a judgment against you and your house or your assets.)

Everyone’s situation is different, but my general recommendation for the best option to deal with debt is to try to settle it. You can do this yourself or you can use an attorney. Understand that you should be able to settle your debt for pennies on the dollar (average is about 40% of what you owe). But you will need to come up with the cash in order to do that (think of asking a relative, get a loan from your retirement account, your tax refund, etc.). You contact your creditor in writing and offer a cash settlement of about 10% of the outstanding balance. Continue to negotiate with each creditor until you have a response in writing that they will accept a certain amount by a certain date. You need to make sure you have access to the funds before you start negotiating. Then mail a check for the agreed-to amount to the creditor by certified mail, return receipt requested, so that you can prove it was sent by the agreed-to deadline. Also be aware that the IRS considers forgiven debt to be income. So if you settle a credit card debt of $10,000 for $4,000, the credit card company may send you a Form 1099 for $6,000 and you may have to pay income tax on that.

Once you have done this, you can start to rebuild your credit. And start using cash. If you don’t have the cash, don’t buy it. If you want to get out of debt, you have to change how you spend money and the best place to start is to not borrow money to buy stuff you don’t need.

For more information, details, tips, techniques and options visit http://GetOutOfDebt.thepinot.com

About the Author

Joe has been writing various articles about getting out of debt and creating wealth. Joe is an avid home winemaker and a stock market investor.