Debt relief for those who can’t pay the minimum

Friday, April 24, 2009

For cardholders whose debts have become too much to bear and are no longer able to make their minimum monthly credit card payments, there is a new debt management plan (DMP) designed to make it more affordable for consumers to meet their obligations. The National Foundation for Credit Counseling (NFCC) has worked with the nation's top ten credit card issuers to provide additional relief to consumers struggling to repay their debts.

For consumers who are seeking to avoid bankruptcy, but who do not have sufficient income to qualify for a traditional repayment plan, or DMP, the top credit card issuers have agreed to provide a more affordable “Standard” DMP and a “Hardship” DMP.

If a consumer qualifies for a hardship repayment plan monthly payments would drop down to 1.75% of their outstanding balance for the next 60 months. To make the five year plan work, creditors have agreed to immediately waive penalty fees and reduce interest rates. However the principal amount of debt owed will not be reduced.

NFCC estimates that more than 400,000 people could be helped to avoid bankruptcy with these new debt repayment plan reductions. NFCC says that the average cardholder who sought help through them would save approximately $120 a month. The typical indebted cardholder who comes to NFCC for help owes about $24,000.

Creditors involved in these new repayment plans are American Express, Bank of America, Capital One, Chase Card Services, Citi, Discover Financial Services, GE Money, HSBC Card Services, U.S. Bank and Wells Fargo Card Services.

Another feature of the new DMP plan is an emergency fund that is part of a consumer's monthly budget. NFCC has worked with card issuers to allow consumers to include up to $200 a month in their budget for unexpected events.

For further information on eligibility in the new debt management plans consumers should contact the NFCC nonprofit credit counseling agency in their area by calling (800) 388-2227 (en Español (800) 682-9832) or visit www.nfcc.org or www.debtadvice.org or the Association of Independent Consumer Credit Counseling Agencies (http://www.aiccca.org, or call 866-703-8787).