How to Get Out of Credit Card Debt in Arizona
Many Arizona small businesses rely on credit cards to fund their businesses. But sometimes, that credit card debt can become overwhelming. There are several different methods for getting out of credit card debt. They vary greatly in the amount of money you will pay and the time it will take.
Our firm believes that for many people, an attorney negotiated credit card debt settlement is the best solution. We offer a free consultation to determine if credit card debt settlement is right for you. But here are some of the many ways to get out of credit card debt:
Strategic Payoff: the Snowball Effect
The most obvious way to get out of credit card debt is to pay it off. And that does not mean simply making the minimum payments. Doing that will just dig you a deeper hole. But strategic payoff of credit card debt could be right for some. This involves a sort of triage of your credit cards in which you pay off the highest interest rate ones first, then the next highest and so on. The idea being that as you start to knock off credit cards, it will have a “snowball effect” because you will have more money each month to payoff the remaining cards and you may benefit psychologically from picking them off.
Another twist on this strategy is to pay the littlest credit card debt off first, then the next biggest, and so on. The same “snowball effect” applies.
The problem with this strategy, of course, is that if you are truly burdened with a lot of credit card debt, it’s probably not that easy to pay them off. Indeed, it may be impossible given your income situation. So for most people with serious credit card debt problems, this approach doesn’t make much sense.
Credit Card Debt Consolidation
Another option is credit card debt consolidation. This approach usually involves one of two things: 1) transferring balances from higher interest cards to lower interest cards, or 2) getting a new loan, like a HELOC or second mortgage that allows you to payoff your credit cards and instead make one payment under the new loan.
The problem with #1 is that it is just a gimmick. Eventually, the new credit cards that you transferred the balance to will start to incur interest. Plus, you still have to pay off the debt in full, which provides little relief and is usually just a temporary delay of the inevitable.
The problem with #2 is that you are just trading one debt for another, much longer debt. When you take a credit card and essentially refinance it with a HELOC or other loan that may have a term of 15 to 30 years, you are likely going to end up paying a lot more in the long run. The length of the loan term makes a big difference in how much total interest you pay over the life of the loan. What’s more, with the way amortization schedules are set up, the first several years of your loan go almost entirely to interest. So you still aren’t paying down the debt.
Bankruptcy to Eliminate Credit Card Debt
Bankruptcy may be an option for some. But it should be a last resort. Filing bankruptcy has lasting negative consequences that will follow you around for years to come. A bankruptcy filing can stay on your credit report for as long as 10 years. Many employers will look at whether you have filed bankruptcy in evaluating you for employment opportunities.
And qualifying for bankruptcy is not a given. Many people don’t pass the “means test”, or make too much money for a Chapter 7 bankruptcy. You may be surprised at how little income puts you out of contention for a Chapter 7. Consequently, you could be forced into a Chapter 13 bankruptcy. The problem with Chapter 13 bankruptcy is that it can take up to 5 years and your end up paying back most of the debt anyway.
Credit Card Debt Settlement
We are firm believers that for many people, debt settlement is the “Goldilocks” of getting out of credit card debt – providing just the right balance between debt relief, asset preservation and the ability to move forward. Our credit card debt settlement process involves extensive negotiation by a licensed attorney to dramatically reduce and eliminate credit card debt, without the need for bankruptcy.
Get a free consultation to see if credit card debt settlement is right for you.