Unsustainable debt damages your credit report, and is detrimental to family life. The February 2011 Federal Reserve's report on consumer credit revealed that the average amount of debt per household stood at $14,750. When your income-to-debt ratio is excessively high, you need to find the quickest way to pay off credit card debt. Paying the minimum each month will prolong the life of your debt. You can eliminate debt without bankruptcy, but you'll need to make lifestyle changes and establish a suitable debt-free plan. There's no easy solution, but you can take control of your spending and start to clear your debt a lot faster.

Unless you comply with the terms of your credit agreements, your FICO score will fall. However, if you've already failed to make payment, a debt management plan or debt settlement program is unlikely to cause further damage to your credit. In fact, making a payment may improve your credit score. Although not a legally binding debt solution, you're likely to find that calls from your creditors cease. This is because they're glad that you're making a genuine attempt to repay your debts.

Paying Off Your Credit Card Debt with a Debt Management Plan

When you owe a small amount of money to multiple creditors, a debt management plan will help to organize your finances. An intermediary negotiates with your creditors in an attempt to reduce your repayments and freeze the accrual of any further interest. Your creditors are under no legal obligation to freeze or reduce the rate of interest, but may be prepared to do so because you're making an attempt to eliminate debt without bankruptcy.

Provided that the terms are agreeable to all parties, you'll go on to make a single monthly payment to the intermediary. The money will be distributed to your creditors proportionately. A debt management plan is a non-legally binding arrangement between a debtor and his creditors, so it can be cancelled by either party at any time.

Is Debt Settlement the Quickest Way to Pay Off Credit Card Debt?

A debt settlement program is the main alternative to bankruptcy. If you owe a large amount of money, it represents the best way to get out of credit card debt. An intermediary will scrutinize your finances, and decide how much you can comfortably afford to pay to your creditors each month. Part of the negotiation process involves reaching an agreement so that any remaining debt is written off after the end of the term, typically a three year period. The term can be extended, but this will decrease the likelihood of creditor approval.

Any money eliminated through a debt-free plan is likely to be classified as taxable indebtedness income. However, the IRS stated that: "Nonbusiness credit card debt cancellation can be excluded from income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation." Not everyone will have to pay tax when debt is written off, but it's important to get tax advice before proceeding.

What's the Best Way to Get Out of Credit Card Debt?

The quickest way to pay off credit card debt may not be appropriate for your personal circumstances. A debt settlement program is the main bankruptcy alternative, but should only be considered when you have serious debt problems. If your debts are relatively small, a debt management plan may be more effective for paying off your credit card debt. Before you proceed with a debt-free solution, always seek advice from a free credit counseling service.


"Credit card statistics, industry facts, debt statistics." CreditCards.com

"The Mortgage Forgiveness Debt Relief Act and Debt Cancellation." Internal Revenue Service