The problem for the consumer with credit card debt is it gets charged off and sold to a junk debt buyer six months to a year after payments have stopped. Some consumers may be forced to stop paying that debt because of temporary low income. But, once they are able to pay again, the damage is already done. Their credit is ruined, and the debt collectors are calling. A card's balance could be grossly inflated by interest, penalties, commissions and fees. At that point the best way to credit card debt relief is to continue to not pay the debt, as opposed to filing bankruptcy.
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In addition to bankruptcy being a difficult experience to handle and to its 10-year presence on a consumer's credit report, a consumer could qualify for Chapter 13 and be forced into payment plans for five years to many unsecured creditors including the junk debt buyers who own their inflated credit card balances. Bankruptcy is overkill for that debt. Bankruptcy stays on a credit report for 10 years, while an unpaid debt can only remain there for a maximum of seven.
According to the Credit Card Debt Survival Guide, the proper written communications in keeping with the Fair Debt Collection Practices Act to a debt collector's or collection attorney's initial demand for payment can signal the collectors that this consumer is educated in debt collection matters, knows his or her rights and is therefore not a good candidate to continue to pursue with court action.
While debt collectors can threaten a lawsuit and notices on collection attorneys' letterheads can be unnerving, consumers who bother to educate themselves about debt collection can motivate debt collectors and collection attorneys to focus their energies elsewhere. It is all about documentation; how a consumer responds in writing to collection attempts and what original creditor documents the collection attorney has to pursue someone with (usually none, or just a few copies of old statements).
Consumers file for bankruptcy for protection against creditors; to stop creditors from taking legal action to deprive them of assets. Bankruptcy should be the last option, not the first. Typically there is no signed contract between the bank and the credit card holder. Those signed charge slips are for the merchant's benefit, not the bank's. Consumers should think about documentation, and be willing fight debt collectors, before considering bankruptcy. Selective informal bankruptcy with non-payment of selected unsecured debts is the effective debt solution to consider.
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