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Credit card debts can be a challenge to settle, thanks to the interest rates, which can accumulate with every billing cycle, making the outstanding balance to snowball. Because of the high interest rates, all or most part of payment goes to cover the interest rates instead of the actual balance itself, which makes the outstanding balance impossible to cover. Although bankruptcy can give instant freedom for the outstanding balance, it has a lot of strings attached to it. Bankruptcy can cause the credit report to get the lowest of scores, which will remain in records for seven years. An individual who applies for bankruptcy will not be able to get any kinds of loans until the records are clean again. Also, applying for a bankruptcy calls for a tedious and long process and also extra costs of hiring a lawyer. There are several ways in which a bankruptcy can be avoided.

Balance transfer:

Balance transfer is a process where outstanding balance from one credit card will be transferred to another credit card. The outstanding balance will still have to be paid, but there are advantages. balance transfer cards do not charge any interest rates for at least 12 months. During this time, any payment made, will go to cover the outstanding balance, without interests. Debt can be managed and covered at one's own pace, without worrying about the accumulating interest rates. Balance transfers will costs a transaction fees which one or both the credit card unions participating can charge. Also, balance transfer cards should not be used for nay new purchases, as the interest rates on new purchases will be very high. If debt can be managed with time, then balance transfer is ideal, because it gives up to 12 months or more to recover from debt.

Debt settlement:

Debt settlement is also one option to consider before thinking about bankruptcy. Debt settlement, as the name indicates, is the settlement or negotiation between the card holder and the credit card company. If the outstanding balance cannot be paid by the card holder, then the financial status can be discussed with the credit card union and both parties can arrive at a consensus about payment. Debt settlements are preferred by credit card companies too, since bankruptcy might leave them with no payment. Up to 70% of the outstanding balance can be reduced, and the balance can be paid off in full or in installments. The credit card will be cancelled, but it is a better option any day, than a bankruptcy filing.