For people who have credit card debts that are past due, letters and phone calls demanding payment often abound. These demands can put undue pressure on the person who owes the money. They understand that they owe the money and most want to pay. However, there are sometimes instances in which payment isn't possible. In those cases, exploring options for getting the debt taken care of might be necessary.
One option that people have is bankruptcy. A person who opts to file for bankruptcy will have to deal with the consequences of doing so. This can include a negative impact on their credit report.
Another option that might be explored is seeking a repayment plan by using the help of a credit counseling organization. It is vital to make sure that the organization is a reputable company. Unscrupulous organizations often prey on people who need to get out of debt.
In some cases, creditors might opt to work out a plan that will enable you to pay off the debt without having to file for bankruptcy. This type of agreement is a mutual and voluntary agreement between the creditor and debtor. The agreement is a formal one, much like a modification, that occurs when two or more creditors agree to an extension or a composition. An extension gives a debtor more time to pay the balance, while a composition enables the debtor to settle the debt for less than the balance owed.
No matter what choice a person makes, it is vital to consider the consequences of the choice. With that in mind, it is helpful to seek experienced legal guidance to get answers to any questions prior to making a decision.
Source: FindLaw, "Loan Workouts and Dealing with Creditors Informally," accessed July 01, 2015