Credit Card Debt Reduction

Written by Kevin Tavolaro
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Debt reduction is one approach for freeing yourself from debts that have become larger than you would be able to realistically handle. This approach is different from credit counseling, debt consolidation, and debt management. Debt reduction is a more focused, aggressive technique than other debt solutions. While other methods are concerned with saving your credit rating, debt reduction is intended to clear all debts completely, as quickly as possible. Although it may be a faster approach to debt than the alternatives, it is only recommended for special situations, as a last recourse.

Credit Card Debt Reduction Options

While other debt management solutions help you gradually pay your balance over a prolonged period, debt reduction is used to reduce the actual balance so that you can pay it off in full, quickly. This is usually only done if there is no foreseeable way that you'll be able to clear the balance on your own, such as situations where the money owed is so great that the minimum payments would only cover the interest, making you constantly pay money towards a debt that can never be cleared. Debt reduction occurs when a creditor agrees to reduce the amount owed, on the condition that the new amount is paid in full, and immediately.

The most widely recognized type of debt consolidation is bankruptcy. If you're in a position where it's apparent that you will not be able to get yourself out of debt, you can declare bankruptcy in order to appease your creditors. In bankruptcy, all of your assets are liquidated in order to cover your debts. Even if a balance remains after liquidation, all debts are cleared. However, bankruptcy will completely ruin your credit rating.

After declaring bankruptcy, you will not be eligible for any kind of credit for at least seven years. This includes not only credit cards, but any type of loan as well. After the seven years has passed, your credit history will be wiped clean, which can still put you in a tough spot. Having no credit history is only slightly favorable to having a bad credit history, as even after the seven year period has passed, you can only gradually build a new credit history.

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