How to Eliminate Credit Card Debt Legally

Eliminating debt is an important step in building financial stability. There are some concrete steps you can take to eliminate credit-card debt legally and start creating a more sound financial future for yourself.

Difficulty: Moderately Easy

Instructions

1. Stop using credit cards. The best way to legally eliminate credit-card debt is not to keep creating more. Don't sign up for new cards, and cut up your existing cards.

2. Create a plan to pay down your credit-card debt. Make minimum payments on larger cards and work to pay off smaller balances in full, or at least first. Once you've paid off a balance, move the next highest balance to the top, and start whittling away at that balance in larger chunks.

3. Communicate with your credit-card companies if you are having financial difficulties and have fallen behind on payments. Some credit-card companies will be willing to place a hold on interest charges for a set amount of time, or may work out a plan with you to settle the entire balance for a discounted amount over a set period of time. If you are concerned with negative credit reporting, however, you may not want to initiate a discounted settlement. This will appear on credit reports as "settled for less than full amount."

4. Consolidate debt, if possible. Investigate the opportunities for getting a consolidation loan or a home-equity line of credit. Of course, this would be another credit account; however, you can ask for a limit that is close to your debt balance, then close the line of credit once you have paid it off. It will only work, however, if you can control your spending habits and cut up all other credit cards.

5. Transfer high-interest-rate balances to the card with the lowest interest rate, if you have sufficient available credit to do so. If you are a good cardholder, always paying on time and never incurring overlimit fees, you can ask about getting a raised limit on the card with the lowest interest rate. This will eliminate the necessity of getting a consolidation loan or home-equity line of credit, and still allow you to get all of your credit-card debt in one location.

6. Take on some part-time work and devote all of those earnings to paying off your credit-card debt. Sell unused and unnecessary items on eBay, Amazon or craigslist. Hold a garage sale. Devote all extra earnings to your credit-card debt.

7. Have patience. It will take time to legally eliminate what you owe. Make a plan and stick to it. Focus on life without credit-card debt and work together with your family to make it a reality.

Tips & Warnings

• Check your credit report to make sure your credit-card companies are reporting correct information. Don't fall for gimmicks like rewards points, cash back and other perks on credit-card offers. Those won't matter if you're buried in debt.
• Don't close credit-card accounts until you are able to pay the balance in full.

Resources

• Facts About Credit-Card Debt

Who Can Help Sponsored

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