Credit Card Debt

For millions and millions of Americans, debt is a major problem. Many people get into serious financial trouble because they use their credit cards too much, and the result is a pile of money owed to creditors who are charging astronomical interest rates. Sometimes these credit card interest rates can reach as high as almost 30%. If you're trying to get out from under your debt, and you're paying credit card interest rates on that order, you're going to need help getting your act together.

Of course, not all people get into debt because they couldn't handle the temptation of their credit cards. Many people get into serious debt because they became ill or injured and required major medical treatment. This is true of people who got sick or injured and didn't have health insurance; but also just as often for people who did have health insurance - only to discover that their policy was filled with all kinds of loopholes and fine print, and not all of their medical bills were covered. As everyone knows, medical bills are shockingly expensive, and hardly anyone can afford to pay for all of them out of pocket. When this happens, and you start to default on all your bills, the result is a spiraling nightmare of late fees, penalties, increased interest rates, devastating credit reports, and overall financial collapse. What's worse, the damage that is done to a person's bank account and credit report is nothing compared to the damage done to a person's soul and peace of mind. Those are often the first and hardest-hit "victims" of major debt and all its associated stress and problems.

Many people get overwhelmed by their debts and just simply seek to run away from them. This approach is not going to solve anything, and anyone in bad financial straights can either stop the slide and step by step work their way out of debt, or they can continue to run - and as everyone knows, you can run but you can't hide. Facing your debts is wise and proactive. When you think about it, the only way to get rid of a problem is to solve it. Hoping that it all goes away without doing anything is not a plan.

The answer to the question "is credit card debt ever forgiven?" is a resounding ... sometimes, and sort of.

For starters, if you are asking to get your credit card debt forgiven, you need to have some very good reasons for doing so. As in, you've been injured and can no longer work, or you've racked up crushing medical bills in the fight for your son's life. That sort of thing.

Forgiveness isn't a free pass

Additionally, once you've made it past the credibility test, credit card debt forgiveness almost never means walking away from a credit card debt scottfree. What it will mean is a reduction in a bill of, say, $10,000 to $5,000, or a cancellation of the interest on the debt, or reduction of the interest rate to something very low.

Declaring bankruptcy is different from debt forgiveness

Declaring personal bankruptcy, however, is another story altogether. When you declare bankruptcy, you will go to bankruptcy court, where a judge will determine whether your debts are to be canceled or whether you'll have to pay them off under different, more favorable terms. Declaring bankruptcy is a huge step, however, and needs to be thought through.

Don't forget the tax man

It is also important to remember that forgiven debt is very often considered taxable by the IRS. So, to return to the scenario of $10,000 in credit card debt, let's say the credit card company forgives $5,000. That means that in the final analysis, you paid $5,000 for $10,000 worth of stuff, or cash advances, or a combination of both. The IRS sees that $5,000 as income, and they want their share of it.

To learn more about credit card debt, credit card debt forgiveness, bankruptcy and any other aspect of debt, be sure to consult with a debt counselor or a financial adviser. You're going to need their expertise to help you navigate through the tricky steps and particulars of negotiating credit card debt forgiveness.

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