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Common credit card repayment plans

Did you know that if you get behind on your credit card payments, many companies will work with you on payment plans for your balance? It's not always easy to get a credit card company to agree with a plan that works for you, though, and there are some potential disadvantages with regard to your credit history. It's important to consider all the factors before moving forward with a credit card repayment plan.

Most of the time, possible payment plans fall into one of several categories. The first is a lump-sum agreement. This is when you agree to pay a single lump sum that is usually quite a bit less than your total balance, and the credit card company agrees to forgive the balance and consider you paid in full. You usually don't retain access to your account, which is closed, and this could be seen as a negative on your credit history by future lenders. You might also owe taxes on the forgiven portion of your debt.

Another option is called a workout arrangement. The credit card company makes it easier for you to pay off your debt by lowering your interest rate and forgoing charges such as late fees or over-balance fees. A third option is known as forbearance, and this just means that you don't pay a monthly payment for a certain amount of time while you deal with financial duress. This is not a common option for credit cards.

A fourth options is a payment plan. This is similar to a lump sum agreement in that your account is usually closed and you agree to pay a certain amount to the credit card company to resolve your debt. That amount is broken up into a number of payments ranging from two or three large payments to dozens of small payments.

It's not always possible to resolve credit card debt in these ways. If you are facing overarching financial problems, consider speaking to a lawyer about bankruptcy.

Source: CreditCards.com, "Credit card debt negotiation in 3 (not) easy steps," Dana Dratch and Karen Haywood Queen, accessed July 15, 2016

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Joshua Z. Goldblum, Attorney at Law
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