Ohio consumers with overwhelming credit card debt may have questions about the Credit Card Debt Forgiveness Act, particularly if they are unsure whether it will be a suitable remedy for their circumstances. Pursuing this as a debt relief option may be best for consumers who have debts outstanding on multiple credit cards, and want to get reduced monthly payments. It is also a method of avoiding bankruptcy but comes with adverse consequences.
Typically, the only time a credit card company will consider forgiving a portion of a cardholder's debt is when it suspects the client may file for bankruptcy if some of the debt is not forgiven. By forgiving a portion, the lender may get some of the money owed, while bankruptcy will usually discharge the entire amount, leaving the credit card company with nothing. However, any forgiven debt over $600 will be taxable because the IRS will treat it as income.
Other consequences include the impact it will have on the consumer's credit score. In general, a credit card company will only negotiate payment relief once the payments are three months behind. By that time, one's credit score will already be adversely affected. Even if some form of payment relief is granted, credit card companies may still go ahead with lawsuits. If a monetary judgment is obtained, wage garnishments and a further drop in credit scores may follow.
Consumers in Ohio seeking to resolve their credit card debt may find the right answers by consulting with an experienced bankruptcy attorney. Although bankruptcy will also impact a consumer's credit score, it will also result in an automatic stay that will stop all collection actions by creditors. Bankruptcy will usually discharge unsecured debt such as credit cards and medical debt, and the consumer will be protected against wage garnishments, repossessions and more.
Source: goodcall.com, "Debt Forgiveness: Deal or No Deal for Consumers?", Patricia Sanders, Jan. 25, 2017