In the quest for credit card relief, millions of Americans are considering filing for bankruptcy. In fact, the number of cardholders heavily in debt has grown substantially since the start of the economic crunch. Financial analysts and economists say that rising unemployment figures coupled with higher rates and fees have resulted in many consumers unable to pay off their balances. The number of Americans filing for chapter seven or personal bankruptcy has even grown significantly in the past few months.
Fueled by speculations of higher jobless rates in the near future, more and more cardholders unable to settle their debts have resorted to bankruptcy as their only way out. While Chapter 7 Bankruptcy may offer financially troubled consumers a quick way out of their problems, experts say that the long term effects can be devastating.
Credit experts say that if a bankruptcy judge approves a cardholder's petition, then the record of that bankruptcy will stay on his or her credit records for seven years. During this period, consumers can have trouble looking for creditors or lenders willing to extend them financial assistance. Bankruptcy is often viewed as a sign of a consumer's financial weakness and lack of responsibility. This can often mean distrust from card companies and banks. Bankruptcy is also considered as a form of escapism by many card issuers. Cardholders who have filed for financial protection from their creditors can find it extremely difficult to find card firms willing to risk dealing with them.
However, experts say that there is a better alternative to declaring bankruptcy. Proper credit management and responsible financial decisions can go a long way in keeping consumers out of trouble. For cardholders already garnering thousands of dollars in card debts, however, debt settlement may be the only recourse.
Unlike bankruptcy, debt settlement does affect credit ratings or histories significantly. If anything, analysts argue, debt settlement shows card companies that a cardholder is willing to work with them to settle outstanding balances. By employing the services of a credit debt professional, consumers can negotiate with their card issuers to lower their balances. Financial experts contend that these debt reduction services can help lower existing debts considerably. In some cases, banks and card firms have been known to slash credit debts by some 50 to 75 percent.
Analysts point out that mounting industry losses are forcing more and more card companies to take whatever payment they can from cardholders that are in debt. They explain that card issuers today are more than willing to collect any payment than write these off as losses.