If you’re drowning in credit card debt and struggling to find a solution, it may be time to contact your credit card company to discuss your situation. While not available to every consumer with debt, there may be a settlement option that works well for both parties.

Before you proceed with credit card debt settlement, it’s critical to first learn more about your many options. These typically include the following:

  • Workout agreement: With this approach, you’re asking your credit card company to remove late fees, lower your interest rate and/or reduce your monthly payment. Any or all of these actions will reduce your debt while helping you pay off your balance sooner than expected.
  • Lump-sum payment: This calls for you to negotiate a lump-sum payment that’s less than your total balance. If your credit card company agrees, you must be able to make the payment in full on the spot.
  • Hardship plan: Your financial difficulties could be the result of a hardship, such as a job loss, demotion, divorce or serious illness. Your credit card company may have a hardship plan that allows you to lower your minimum payment until you get back on your feet.

Once you discuss these three options with your credit card company, you’ll have a clear idea of whether any of them will work for you.

Should you proceed?

It makes sense to learn more about credit card debt settlement, but that doesn’t necessarily mean you should go down this path.

There are pros and cons of all forms of settlement. For example, if you opt for a workout agreement, you can expect your credit card company to reduce your available credit. Subsequently, this will drag down your credit score, as your credit utilization ratio is affected.

Also, if your credit card company reports your debt as a charge-off or settlement, your credit score will take a hit.

Along with credit card debt settlement options, learn more about Chapter 7 and Chapter 13 bankruptcy. For example, a Chapter 7 bankruptcy filing may allow you to discharge your credit card debt, among other types.

Understanding your debt, options and legal rights in Tennessee will help you make the best decision for you, your finances and your short-and long-term goals.