Credit card debt is a major drain on your finances these days, and you are not the only one. As of early 2024, American consumers owe a total of more than a trillion dollars in credit card debt. Minimum payments on credit cards take up a big portion of your paycheck, so even as you pay more and more toward your credit cards, you get deeper and deeper into debt, as you must use credit cards and buy now pay later (BNPL) for necessities like groceries. 

You are thinking about filing for bankruptcy, but the thought scares you. You do not like the idea of the bankruptcy filing showing up on your credit report for so many years, and you do not like the idea of the bankruptcy court having the power to sell your assets if you file for Chapter 7 bankruptcy or to convert your case to chapter 7 and then sell your assets if you originally filed under chapter 13. Settling your debt through a credit card debt relief program could be a beneficial option, but it is not for everyone. Unless you really need credit card debt relief but need to leave the rest of your financial situation undisturbed as much as possible, applying for credit card debt forgiveness could even make your financial situation worse. 

If you are considering applying for credit card debt forgiveness, contact an Oakland lawsuits, collections, and creditor harassment lawyer.

How Credit Card Debt Settlement Works

In its simplest form, credit card debt settlement just means that you ask the credit card company to reduce the amount that you owe, and it subtracts that amount from your outstanding balance. When you see advertisements for credit card debt forgiveness, though, the process is usually more complicated than that. For-profit companies act as intermediaries in the debt settlement process. You enter an agreement with the settlement company, which negotiates with the credit card issuer to determine the reduced balance, and then you pay that amount in installments. After you have paid the agreed-upon amount to the settlement company, it pays it to the credit card issuer, thereby settling your debt.

Debt Settlement Can Have Unintended Adverse Consequences for Your Finances

Settling your credit card debt can help you avoid bankruptcy, but it is not a freebie. Any time you settle a debt for a lesser amount instead of paying it in full, this reflects negatively on your credit score. To make matters worse, the amount that the credit card issuer forgives counts as taxable income; this means that you will be paying taxes on money that never even passed through your bank account. If you can pay down your debt, albeit not as quickly as you want to, a better option is to borrow a debt consolidation loan or transfer your balance to a card with a lower interest rate.

Contact the Law Office of Melanie Tavare About Credit Card Debt Settlement

A debt relief lawyer can help you decide whether to settle your credit card debt. Contact the Law Office of Melanie Tavare in Oakland, California, or call (510)255-4646 for a free case evaluation.