Credit card companies are in business to make money and we make it very easy for them to be profitable. Credit cards fulfill our need for instant gratification. It is very easy to spend money on a credit card because there is no physical exchange of cash and you are not expected to pay at the time of transaction. This process plays upon humans’ need for instant gratification.
The trouble comes when you spend too much and are incapable of making payments. If there is no easy way out you will need to find a debt solution. Debt consolidation and debt settlement are two options which require compliance from credit card companies in order to be successful. Whether you have hired a company to consolidate your debt or you are attempting to settle your debt directly with your creditors you need to be aware that participation is voluntary for creditors. Bankruptcy options, on the other hand, require participation from credit card companies plus they allow you to more quickly and effectively get your debt back under control.
Bankruptcy is Not Voluntary for Credit Card Companies
Bankruptcy requires credit card company compliance. Filing for bankruptcy takes the stress and pressure off your shoulders. You don’t have to take time or waste energy attempting to make arrangements with credit card companies or pay consolidation companies to do it for you.
If your debt is unmanageable, your credit card company is unlikely to comply or agree to your repayment plan or you are looking to eliminate some or all of your debt, bankruptcy is a viable option for you. Debt consolidation will not eliminate your debt (in fact, it may cost you more in the end) and debt settlement will usually span a fairly short timeframe and there will be no room for error. Both options are subject to credit card company compliance. But, bankruptcy requires credit card companies to comply. In summary, credit card companies get to choose if they want to work with you under debt consolidation programs and settlement plans while under bankruptcy they must work with you.
Chapter 7 bankruptcy will eliminate your debt completely while chapter 13 will set up a repayment plan that allows you to pay back some of your debt for an allotted amount of time (3 to 5 years). There is an option for you and your specific financial situation; you just need to take the time to assess your situation and determine which is most suitable for you.
Participation is Voluntary for Credit Card Companies
You or your debt consolidation company can approach your creditors and request their participation in your settlement or consolidation plan. Talking to your credit card company can potentially buy you some extra time to come up with money, avoid closing your account, stop interest buildup or, ideally, eliminate some of your debt to make it easier to pay it off.
Explain to the credit card company why you have fallen into debt and have missed so many payments. Go into detail on how you plan to pay back your debt. For example, tell the credit card company you are taking out a loan from your parents or cashing in your retirement plan. Let them know you are on the verge of declaring bankruptcy and this is your final attempt to avoid it, but without their cooperation you will have no choice but to file.
This is a viable option if you believe your credit card companies are flexible and willing to work with you. Also, credit companies may choose to comply if:
- Your debt is manageable
- You have the ability and a plan to repay it in the near future
- You have a solid repayment or settlement plan that is favorable in the eyes of the credit card company
- You have a clean credit history (with the exception of your current debt) indicating you are likely to follow-through and make the agreed upon payments
Playing the sympathy card won’t always work, unfortunately. When you decided to take out a credit card you signed a contract that holds you accountable for making timely payments and eventually, repaying all credit borrowed. Credit card companies have the right to hold you to the contract.
Bankruptcy – A Viable Debt Solution
Contrary to common belief, filing for bankruptcy isn’t the end of the world. A weight will be lifted and you will be able to breathe freely. A court trustee will communicate with your creditors so you don’t have to spend time or energy arguing about your situation. In the end, you will be granted a fresh start with no debt (chapter 7) or a manageable repayment plan (chapter 13).
Download our Debt Solutions ebook to learn about all of the debt solutions discussed in this blog.
If you believe bankruptcy is right for you, consult a bankruptcy attorney for legal advice and case-specific information. This no-obligation consultation will prepare you for successfully dealing with your debt.
