You don't have to owe! It is entirely possible to use credit cards regularly and stay out of debt forever. By only charging what you can afford to pay when the bill arrives.
Baran BulkatAttorney In general, simply ignoring your credit card bills will not make them go away. If you default on your credit cards, the credit card company can sue you to recover its debt. Filing for bankruptcy can stop all collection efforts and eliminate your credit card debt.
But it may not be for everyone. If you stop making payments on your credit cards, the first thing you will receive is a lot of collection letters and phone calls from your credit card company telling you that you are in default. Depending on how much you owe, if you ignore the collection calls, the credit card company can assign your account to a collection agency and write it off as a bad debt or take you to court.
If the credit card company sues you and you do nothing, it will obtain a judgment against you. Once a creditor has a judgment, it may be able to garnish your wages, levy your bank accounts, or place liens against your assets.
In most cases, credit card companies want to avoid the hassle and expense of litigation. As a result, they will typically be willing to settle your account for less than you owe. During this time, you will have to endure numerous calls and other collection attempts by the credit card company or its agents.
But even if you are willing to work with your creditors, settling your credit card debt can have negative tax consequences discussed below. Potential Tax Consequences of Credit Card Debt Settlement If a credit card company agrees to settle your account for less than the balance you owe, it is essentially forgiving a portion of your debt.
If you have a significant amount of forgiven debt, it can substantially increase your tax liability. This means that you would not be able to wipe them out even if you decide to file for bankruptcy after settling your debt. Whether the IRS will consider your forgiven credit card debt taxable income depends on numerous factors including your financial situation.
Because tax laws are extremely complex and tend to change frequently, talk to a tax professional in your area to learn about the tax implications of settling your credit card debt.
Should You File for Bankruptcy? If you are struggling to pay your credit card bills, filing for bankruptcy can stop the collection calls and wipe out your credit card debt without negative tax consequences.
However, whether bankruptcy is the right choice for you depends on a variety of factors including the amount of income, assets, and debt you have.
As a result, if you only have a small amount of credit card debt, filing for bankruptcy to wipe it out may not be in your best interest.Finally, as we dive into this topic, you need to be prepared for the possibility that your credit card company may not be willing to entertain or negotiate a credit card debt settlement.
If this happens, it's time to consider discussing your options with a bankruptcy attorney. Past due credit card accounts are sold along with thousands of others to a debt buyer such as Midland Funding or Portfolio Recovery Associates.
These companies buy credit card and other consumer debt accounts at steep discounts with the expectation that they will collect enough to make a profit overall. This content is not provided or commissioned by any issuer.
Opinions expressed here are the author’s alone, not those of an issuer, and have not been reviewed, approved or otherwise endorsed by an issuer. Credit card companies are the banks and credit unions that issue credit cards to consumers.
Credit Card Insider has not reviewed all available credit card offers in the marketplace. Content is not provided or commissioned by any credit card issuers. Reasonable efforts are made to maintain accurate information, though all credit card information is presented without warranty.
But the credit card companies' dispute processes do give an alternative short of lawyering up. For example, Bank of America helped Denise Bauwens, a Pennsylvania resident, receive a $ refund for a set of teak rocking chairs from an online store.
Universities should not make agreements with credit card companies for affinity credit cards. The problem is: affinity credit cards allow universities to profit off the rising debt accumulated by their students. Even if universities created a credit card misuse and debt management program, it is still an ethical issue.
Although laws have been made to try to protect students, lobbyist, such as.