If you’ve accumulated $30K in credit card debt, it can be reasonably argued that your credit score would go spiraling down. Not to mention if you’re unable to pay it, you’d have debt collection agencies hounding you for a long time to come. So how do you get yourself out of this mess?
Well, the obvious answer is to pay it! But obviously given the scale of the debt, it won’t be easy. The average credit card debt in the US is $6,506 so you can guess how high a debt like $30,000 is for a daily American.
Fortunately, there are ways you can make it easier for yourself to pay a high credit card debt, like debt settlements, debt management and the good old chapter-13 bankruptcy. However, if you fail at financial planning, a lot of trouble could be headed your way with this kind of credit card debt.
What happens When You Fail to Pay Off Credit Card Debt?
1- Late fees
Your creditor would keep adding penalties to your debt like late fees that can go as high as $40 every time you miss credit card payments. Late fees are a sort of a deterrent to encourage credit card holders to pay their outstanding debt on time. The debt burden increases the longer the debt remains unpaid.
2- Increased Interest
Every time you fail to pay your credit card bill, you incur higher than standard interest rate on your credit card debt.
3- Credit Default
Consecutively missing out on your payments leads to default on your credit account and its shut down. What follows can be troubling. Your creditor is then likely to sell off your debt to collection agencies at cheaper rates.
The collection agencies are armed with means to recover the debt at its face value like legal garnishment orders on your bank account or wages.
4 ways to Pay Off Credit Card Debt
There are four ways you can pay off your credit card debt fast if it’s something like $30,000 or above.
1- Debt Settlement
Debt Settlement refers to negotiating with your creditor yourself or through a professional debt negotiation firm to get some of your debt written off. Usually 20-40% of your debt can be discharged while you pay the rest. The reason it can work is the creditors’ costs and benefits calculus.
If you default, your creditor does not have much in options (Unsecured debt) other than to sell your debt at less than its face value to debt collection agencies. If you or the negotiation team on your behalf can negotiate a deal better than that, the creditor might be willing to settle for it.
2- Debt Management
You can hire the services of counsel agencies for your debt management. Basically, you pay a fixed sum at a fixed period to the agency and the agency pays your debt and in some cases, can negotiate a lower interest rate with your creditor or rarely even get your entire debt discharged.
3- File for Chapter-13 Bankruptcy
This is probably the worst option on the list, but if there’s no other way, chapter-13 Bankruptcy might be the only way to go. It’s bad because it would derail your credit score. (Not like having a humongous debt of $30,000 wouldn’t) but bankruptcy is a different animal and in most cases, you have to start building your credit from scratch. Chapter-13 can have the court give you some relief when it comes to debt by extending the period in which you can pay it back. Additionally, while debt in chapter-13 would still accrue interest, it would usually be lower than standard.
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