Credit Card Companies Offer Hardship Plans for Debt

Things To Watch Out For

A Lot of Questions. Your issuer is going to probably ask you a lot of detailed questions about your finances before qualifying you for a hardship plan. Most of the questions center on what you make a month and what your monthly expenses are. You may be asked what you pay for rent or on your mortgage; and for phone, gas, electricity, Internet, etc. What you state for income and what you have in expenses will have an effect on what plan you qualify for, or whether you qualify at all. If you show you have no money available after essentials are paid, it will show you cannot afford any plan, no matter how favorable. If you have too much money left over after necessary expenses are calculated then you may not get as attractive an offer. That’s why it’s important to go through these numbers before you talk with your creditor to get the best deal.

Your participation in answering these questions is often a requirement if you are seeking to enroll in a hardship plan. You want to be sure you are speaking to the original creditor who issued you the account before agreeing to answer. If your accounts have been placed with an outside agency for collections, I would not advise providing the same level of personal budget details. Once accounts are assigned out to agencies for collection you will often be better served by negotiating a reduced balance payoff. Providing too much information to a third party debt collector can prove harmful to the settlement process.

[Infographic: What to do if a Debt Collector Calls]

Your Request May Backfire. Hardship plans are generally only available to those who have already fallen behind with their credit card payments. If you are current and call in requesting information about the availability of a hardship plan, your lender may instead reduce your credit limit or even close your account.

Not Enough Relief. Be very careful about agreeing to a hardship payment plan if it won’t provide enough relief, or if only a few of your creditors will work with you. You may find yourself simply treading water, but not making any progress toward actually getting out of debt. If you get to the point where you can’t keep up with your payments and expenses, regardless of how low the interest rate, contact a bankruptcy attorney near you or find a reputable company to find out whether you are better off settling your debt or wiping it out in bankruptcy.

Michael Bovee founded Consumer Recovery Network, which offers self-help and full service tools to assist those experiencing financial challenges. He is an expert in debt settlement and negotiation.