How Credit Card Companies Can Contact You
Handling credit card debt after a loved ones death can be confusing and emotionally difficult, especially when collectors start calling. Credit card companies may contact a deceased persons family regarding any debt left behind, but they must follow rules established by the federal Fair Debt Collection Practices Act, or FDCPA.
A debt collector can contact a deceased persons spouse, parents , guardian, executor or administrator to discuss the debt. But the debt collector cant mislead people by saying theyre responsible for paying the debt if theyre not, and the collector cant use abusive, unfair or deceptive practices to try to collect a debt.
You can also ask the collector to stop contacting you, regardless of whether youre legally responsible for the debt or not. If youre responsible for the debt though, the collector may contact you once more to explain that the creditor plans to take a specific action, like filing a lawsuit to collect the debt or confirm there will be no further contact.
If a collector does reach out about a deceased persons debts, you can specify how youd like to be contacted in the future. And know that its legally required to provide certain information to you. Dont give out any personal information until youve verified that the debt collector is legitimate. And if you can, talk with an attorney before making any payments to avoid any potential problems. You can also opt to have the debt collector contact you through your lawyer.
Pros Of Credit Card Debt Forgiveness
Understanding the benefits and drawbacks of credit card debt forgiveness can help you determine whether its the right decision for you. Some of the pros include:
- Paying less than you owe: Of course, the major advantage, particularly with debt settlement, is that you will pay a less than the total amount than you owe.
- Lessening the burden: Credit card debt forgiveness will lighten your debt load. This is not only a psychological benefit but can improve your financial situation, including potentially your credit score and debt-to-income ratio.
- Improving your credit: Because you are reducing your balances, debt settlement can improve your credit in the long run.
How Do I Pay Off A Credit Card If I Have Very Little Money
If you have very little money to pay off credit card bills, you might look into a debt management plan. The National Federation for Credit Counseling explains that these plans let you make a single monthly payment to a nonprofit credit counseling agency, which then distributes that money to your credit card companies and other creditors. To help you decrease your debt, creditors might lower your interest rates or waive fees.
While your credit report will reflect the fact that youre participating in a debt management plan, this wont cause your credit score to rise or fall. Thats because providers of credit scores dont use that information to calculate your score.
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Consolidate Your Credit Card Debts
Debt consolidation involves taking out a new loan and using it to pay off one or more old debts. You will make only a single monthly payment, which simplifies your finances. You may get a lower interest rate, and depending on the term of the new loan your payment may be smaller.
Consolidation does not involve credit card debt forgiveness or debt relief, but it can make your debts more manageable.
There are several ways to consolidate debts.
Balance Transfer Credit Card
A balance transfer credit card allows you to transfer balances from one or more new cards onto a new credit card. Balance transfer cards offer an extended interest-free promotional period, so you can concentrate your efforts on paying off the loan principal.
Remember these points.
- Pay your debt before the promotional period ends. Once the zero-interest period expires youll be back to paying high interest on your loan.
- Pay on time. Late payments may cancel the zero-interest period and put you right back to paying high interest.
- Watch your credit utilization. If the combined balances you transfer to your new card are close to the cards limit, your credit utilization may be high and your credit could suffer. It may be worth it, but be aware of what could happen.
A balance transfer card can be an effective way to consolidate credit card debt, but you will need good credit to qualify for most good balance transfer cards. If your credit has already taken a beating this may not be the best method for you.
What Is Credit Card Debt Forgiveness
Debt forgiveness happens when someone you owe agrees to forgive all or part of a balance you owe them. Literally, the is forgiven.
But thats not the altruistic act that may sound like. When it comes to creditors and lenders, debt forgiveness usually comes at some cost, at least. In most cases, complete debt forgiveness is rareand its pretty much nonexistent for credit card debt. In most cases, you must usually repay at least a portion of what you owe for them to forgive the remaining balance. And it often comes with penalties as well, usually to your credit.
People often look for ways to pay off credit card debt fast and want to explore debt forgiveness. Credit card debt forgiveness is where credit issuers forgive balances as part of debt settlement agreement. If an issuer thinks youll file for bankruptcy or otherwise wont pay your bill, they may decide that getting some money is better than nothing.
To forgive your debt, a debt settlement specialist negotiates with your creditors with the goal of getting them to sign off on a settlement offer, where they agree to reduce your principal so you only pay a portion of the original amount. In order for this to work, you need to set aside a designated amount of money each month that will be used to make the settlement offer to your creditors. But as with other forgiven debt, the amount you dont pay may trigger a tax bill.
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What Other Debt Relief Options Are There
If debt forgiveness isnt possible, you can choose to go with an alternate debt relief option to get your debt under control. Debt consolidation is a common option when you cant keep up with payments or the amount you owe is snowballing because of high interest rates. Under debt consolidation, you typically take out one loan with a lower annual percentage rate or more favorable terms to pay off your existing debt. You typically need a credit score of at least 580 to qualify for a debt consolidation loan.
You can also work with a to create a debt management plan . With a DMP, you can consolidate your monthly payments and potentially lower your interest rates. Plus, your credit counselor can help keep you accountable for sticking to your plan and making on-time payments.
Additionally, you can contact your creditors and possibly work out a payment plan so that your monthly payments are more manageable for your financial situation. You can also try to negotiate a lump-sum payment to pay off your debt without the assistance of a debt settlement company.
Debt Forgiveness Will Affect Your Credit Scores
Your credit scores arent random numbers pulled from thin air. Theyre based on your credit history, which is a record of credit accounts youve had and whether youve paid those accounts on time.
If you have made your payments on time, your scores should be relatively high. If you havent, your scores likely will be lower than average.
Debt settlement will usually stay on your credit history for seven years. Bankruptcy can stick around for up to 10 years.
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Credit Card Debt Settlement Can Feel Like A Game Of Chicken
You probably know how the game of Chicken works: Two players drive very fast cars head-on directly toward each other. The first player to swerve loses. If youre thinking that game doesnt sound like much fun, youre right. It isnt.
With credit card debt settlement, youre in one car and your card company is in the other. Your goal is to pay as little as possible. The companys goal is to collect as much as it can.
It may feel like youre playing a game of Chicken with your credit card company and subsequent debt collectors until the debt is paid.
When the flag drops, you stop making your payment. Soon, your card company will contact you and try to collect. You may both try to negotiate your way out of the situation.
To end the game, you may have to make reduced payments for a while or pay a lump sum. Your remaining debt will be forgiven. Your account will likely be closed.
Though there are some exceptions, you may owe federal income tax on your forgiven debt.
If theres no settlement, the company will eventually turn your account over to a debt collection firm. The collection firm will step into the car your card company was driving, and the game of Chicken will continue.
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If you are struggling to make your monthly credit card payment, or cant catch up with your past-due payments, we may have solutions for you. The sooner you contact us, the sooner we can determine what help may be available. We will review the nature of your hardship and your financial information to determine what payment solutions you may qualify for.
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Check Your Credit Reports Regularly
You can typically check your credit reports for free, once a year. However, the three major credit reporting agencies Experian, TransUnion and Equifax are currently allowing consumers to check their reports weekly for free.
If you sign-up for a credit card relief package and are meeting the terms of that relief package, such as making a lower minimum payment, the company must report to the credit reporting agencies that you are current on the account. However, if you were already behind on your payments at the time you receive relief, the lender is not required to report that you are current.
And, if you find an error, you should work to dispute it, this is when it would be helpful to have a copy of the written agreement on hand.
Ask For Forgiveness But Settle Cautiously
Want to settle your credit card debt for less than the actual balance? Its possible, but you need to offer a lump sum, and most creditors will do it only for borrowers who are at least a few months behind.
Arranging a deal with your card issuer on your own is best, because companies that facilitate it often charge a substantial fee and some arent very reputable. Still, you should attempt a settlement only after less radical steps to eliminate debt fail, as it can result in substantial credit damage and tax problems.
Forgiven debt is often reported as taxable income, says Norman Perlmutter, author of How To Settle Your Debts. And unless it resulted from a bankruptcy or your debts were greater than your assets when you made the settlement, youll have to pay tax on it, he added.
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Monitor Your Credit For Free
Join the millions using CreditWise from Capital One.
- Even if theyâre nonprofit organizations, credit counselors may charge fees for their services.
- Be sure the credit counselor you choose is a reputable, accredited and certified one you can trust to manage payments on your behalf.
6. Debt Settlement
Debt settlement is when a lender waives a portion of your debt in exchange for you agreeing to pay back the remaining balance. According to the CFPB, debt settlement companies are âusually ⦠for-profit companies that charge a fee for their services.â Youâve probably seen them advertise their services on TV or online.
How it works: As the FTC describes it:
- Debt settlement companies offer to ânegotiate with your creditors to allow you to pay a âsettlementâ to resolve your debtâa lump sum that is less than the full amount that you owe.â
- Debt settlement programs typically ask you to âset aside a specific amount of money every month in savings ⦠and transfer this amount every month into an escrow-like account to accumulate enough savings to pay off any settlement.â
Keep in mind: The CFPB advises consumers to examine their agreement very carefully to understand and prepare for any eventuality. For example:
- âMost debt settlement companies will ask you to stop paying your debts in order to get creditors to negotiate ⦠a settlement.â
- In the meantime, late fees and interest can still accumulate and âcause your original debt to increase.â
7. Bankruptcy
Student Loans: Biden To Appeal Federal Judge Decision To Strike Down Debt Forgiveness Program
A federal judge in Texas struck down the Biden administrations student loan forgiveness program on Nov. 10, saying that the law does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program, according to court documents.
Courts have issued orders blocking our student debt relief program. As a result, at this time, we are not accepting applications. We are seeking to overturn those orders, a notice on Studentaid.gov now reads.
Following the decision, Secretary of Education Miguel Cardona said the Biden administration believes the plan is lawful.
We are disappointed in the decision of the Texas court to block loan relief moving forward. Amidst efforts to block our debt relief program, we are not standing down. The Department of Justice has appealed todays decision on our behalf, and we will continue to keep borrowers informed about our efforts to deliver targeted relief, Cardona said in a statement.
It was further explained that for the 26 million borrowers who have already given the Department of Education the necessary information to be considered for debt relief, and for the 16 million who have already been approved, the Department will hold onto their information so it can quickly process their relief once we prevail in court, press secretary Karine Jean-Pierre said in a statement.
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How To Find The Best Solution For Your Situation
With many types of programs for different forms of assistance, the research process can feel overwhelming. The FTC recommends these ways you can narrow down which credit relief programs would work best for you:
- Try to use a program with a nonprofit organization that offers local and online support.
- Look for recommendations from your local bank, credit union, university or military base to find a reputable credit counselor or relief course.
- Ask the provider for additional information on its debt relief program. Most trustworthy agencies will send you educational literature for free.
- Check with your state attorney general to see if the agency youâre considering has any complaints filed against them.
- Find out if your state requires a license for credit counseling or debt settlement agencies. If one is required, verify that the agency you want to use has an up-to-date license.
- Interview your potential adviser to find out what services they offer and if they charge a fee.
You can look up any debt settlement or credit counseling agency online to see whether they are highly rated for their services and customer care. And you can also report any scams conducted by a credit relief program to the appropriate authorities.
Public Service Loan Forgiveness
College graduates who go on to employment with nonprofit organizations or the government may be eligible for the Public Service Loan Forgiveness program . You must first make 120 on-time payments on your loans while working for a qualified employer. Those who meet those requirements will have the remainder of their federal student loan debt forgiven.
So far, eligible borrowers have had a hard time receiving forgiveness. The Department of Education is working to remedy this situation with a program overhaul. On Oct. 6, 2021, the Department of Education announced a limited waiver for those in public service.
To have the loan forgiven, you must meet the qualifying employment criteria and have made payments on Perkins Loans, Federal Family Education Loans, or non-Direct Loans, regardless of your repayment plan. The waiver also applies to anyone who consolidates their loans into a Direct Loan and submits a PSLF form by Oct. 31, 2022.
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Student Loan Forgiveness Through Idr Account Adjustment Just Getting Started
The Biden administration recently announced the initial rollout of the IDR Account Adjustment program. Like the Limited PSLF Waiver, the IDR Account Adjustment permits the Department of Education to credit past loan periods towards a borrowers student loan forgiveness term under 20-year or 25-year Income Driven Repayment plans, even if they are not presently in such a plan. Like PSLF, student loan forgiveness under IDR has no cap.
The IDR Account Adjustment will also effectively extend many of the benefits of the Limited PSLF Waiver, since the same periods that can count towards loan forgiveness through the adjustment will also count towards loan forgiveness under PSLF for borrowers who were working in qualifying PSLF employment during those periods.
The Education Department will implement the IDR Account Adjustment automatically in July 2023 for all borrowers with government-held federal student loans. This includes all federal Direct loans, as well as federally-held FFELP loans. Borrowers can receive simultaneous credit towards both IDR and PSLF under this program, although PSLF borrowers can only receive that credit if they submit properly completed PSLF Employment Certification forms.
Borrowers who have commercially managed FFEL, Perkins, Health Education Assistance Loan Program, or other non-Direct Loan loans should apply for a Direct Consolidation Loan by May 1, 2023, to get the full benefits of the one-time account adjustment, according to .
