The Truth About Credit Card Debt Forgiveness

People have been getting themselves into financial trouble with credit cards for years. And when the payments started coming late or not at all, the bill collectors started calling! Often, debtors would be able to get the money to pay back their creditors, whether they had to take advantage of the equity in their home, borrow it from a family member or friend, or get help from a credit counseling service.

Now, with the new credit card rules and many people out of work, severely in debt, and unable to access any more credit, the credit card companies are NOT always as willing to help.

So "debt forgiveness" (also known as debt settlement or debt negotiation) has become a more popular option for consumers. Realizing that they need to show some flexibility if they hope to get back any of their money, the banks are well aware that if a debtor goes bankrupt, they won’t see a dime.

Credit card debt forgiveness can take several forms:

• Reduce minimum payments

• Lower or even eliminate interest for a set period of time

• Waive fees

These days, it is becoming harder for consumers to get banks to agree to these options. So, in some instances they will also take less than they are owed. If you owe $5,000, for instance, the company may offer to settle for half of that. That's why debt forgiveness has become so popular.

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If you think these options sounds like they could help you, then you’re not alone. Having a good chunk of your credit card debt literally disappear overnight sounds great!

But here’s what else you need to know: credit card debt can be forgiven, but is not easily forgotten. Settling with a credit card company will seriously lower your credit score. But for people who already have bad credit, or can't afford to use credit, that may be the lesser of two evils. So debt forgiveness may still be a good option!

You’ll also have to pay tax on the amount that was forgiven, so be sure to set aside some cash for Uncle Sam if you decide credit card debt forgiveness is the best way to go.

Having your debt forgiven by the banks sounds so simple. And for consumers, it is very appealing. For the banks, on the other hand, it means they'll lose out on money they were supposed to get back from you.

So if this is an option you decide is right for you, make sure you know exactly what you are getting into!

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