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What is debt restructuring for credit card holders?

When financial problems are present your life, they tend to impact and extend to all areas of your life. Dealing with debt can be extremely troublesome and worrisome, causing residents in Michigan and elsewhere in the nation to consider their options to deal with this debt that seems to be never ending. Because filing for bankruptcy is sometimes considered as a last resort to obtain debt relief, it is important that individuals consider debt restructuring.

What is debt reconstruction? For consumers struggling to deal with their credit card debt, debt restructuring is a way to address their financial problems. Although credit card companies do not publicize these strategies, a debtor could communicate with their credit card company regarding a hardship program.

Typically, a hardship programs offers the debtor lower interest rates, reduced payments and reduced or waived fees and penalties. In doing this, the credit card company is making major adjustments for the consumer so they are able to manage their debt.

In most cases, these programs fall under one of two categories. First, it could be a short-term program. This means that for a few months or up to a year, the debtor will be able to use this program to get their financial life in order. Second, it could be permanent and last until the credit card is completely paid off.

Consumers should realize that when they seek to enroll into a program such as a hardship program to restructure their debt, consumers would have to explain their budget and make the credit card company aware of their income and their expenses.

While these programs could hurt the revenue of credit card companies, they consider these programs for consumers struggling with their debt and making timely payments a better option. Because is the debtor files for bankruptcy, there is a likely chance that the credit card company will not get any of their money back.

When considering debt relief or debt management options for credit cards, consumers should understand that when implementing a strategy like a hardship program, it is likely that they will lose the use of their credit card until the completion of the program. When restructuring debt, consumers should also consider ways and methods to improve their spending and budget issues in order to avoid similar financial troubles in the future.

Source: Fox Business, "How to Restructure Credit Card Debt," Roman Shteyn, Jan. 9, 2013

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