Loyal Lending Says You Can Legally Write Off Credit Card Debt Reviews and Complaints
Loyal Lending wants you to invest in your future. The best way to do that: live debt-free.
A Loyal Lending unsecured debt consolidation loan is one of the best investments in your future you can make: get out of debt faster, likely pay less interest than you are currently paying, and start saving more immediately.
And remember, you are not alone: Loyal Lending reviews prove that they are ready to help you along your path of paying off your unsecured debt.
Loyal Lending Explains How To Legally Write Off Your Credit Card Debt
Credit cards can be convenient and they are also a source of plentiful rewards.
Used irresponsibly, though, and credit cards can also lead to large amounts of debt and the need for even more debt consolidation loans.
When you’re looking to reduce credit card debt, you might be hoping for a legal way of writing off your debt
Whether or not you can achieve this, though, is in the hands of your credit provider. You most likely will end up with a bad credit score.
What Does Writing off Credit Card Debt Really Mean?
You obviously can’t just decide you want to write off debt so you don’t need to pay it.
When a card issuer writes off debt, they have simply accepted the balance as a loss. This is true for credit cards and debt consolidation loans.
This could seem like good news at the time, but it could trigger many complications you’ll need to deal with before you’re fully free of the debt.
The Mechanics of Writing Off Debt
Specifics vary from state to state, but writing off debt occurs when the debtor fails to make payments and the card issuer declares the debt uncollectable.
Missing 6 months of payments leaves the company with little to no chance of ever collecting the debt. This process is sometimes called charging off debt or a charge-off.
The credit card company can then report the debt as a loss to reduce its own tax liability. The account is declared a worthless asset and deducted as a loss.
The length of time before the account is written off will vary according to the card company, your payment history, and your assets.
Selling Your Debt to a Collection Agency
The next step is usually that the card provider sells the debt to a collection agency. The agency will attempt to collect any outstanding balance.
Card companies sell these debts for much less than the value of the outstanding balance in an attempt to recoup at least a portion of the debt. The agency then has the latitude to pursue collections. If the agency is able to get the debt paid off, it will normally make money by collecting more than it paid for the account.
Can You Take an Active Approach to Have a Credit Card Debt Written Off?
Aside from failing to make payments for 6 months or more, there’s not much else you can do to accelerate the process of credit card debt being written off.
If your aim is to eliminate all monies owed, bankruptcy or debt consolidation might be better options.
Filing bankruptcy will rid you of your credit card balance, and you won’t need to repay it in the future either. You’ll need to meet certain criteria, and you could end up responsible for a portion of the debt.
With debt consolidation, you’ll make one monthly payment to a debt consolidation company. They make arrangements with creditors and distribute money between creditors. This will not write off your credit card debt, but it allows you to streamline that debt.
The Debt Is Not Erased
Even if the credit card provider writes off the debt and sells the account, this doesn’t mean the debt is erased.
You will still owe the outstanding balance so debt collectors can call you, and they can sue you if you don’t make payments.
Impact on Your Credit Score
Writing off debt can impact your credit score.
The charged-off debt will be reported, as well as the collection account appearing on your file if your debt is sold. This can have a negative effect for up to 7 years.
Late payments make up 35% of your credit score, so a charged-off debt implies you’ll already have noticed a drop in your credit score by the time it reaches this stage. Late payments can cause your score to drop by up to 80 points. It can take a couple of years for your score to start rising again.
Even worse than a tumbling credit score, you could end up owing the IRS, too.
The debt will be reported as lost income by the credit card company. The IRS will look to you to collect tax on this sum. The amount you owe will be considered as gained income.
If you have a debt of more than $600 written off, the card issuer will send you Form 1099-C so you can report the amount as income when you file your taxes.
Here are the cases when you do not need to report the charged-off debt as income:
- Non-business debt that was canceled before 2007 due to Hurricane Katrina
- Canceled student loan
- Cancellation or write-off as a gift
- Discharged debt through bankruptcy
- Insolvency before agreement to write off the debt
Tips for Dealing with Charged-Off Credit Card Debt
Try to set up a payment arrangement before the debt is charged off. This could save you the headache of dealing with collection agencies.
You could also try to:
- Negotiate superior interest rates
- Negotiate lesser repayments
- Never ignore credit card companies or collection agencies
It’s not always easy to juggle credit card debt with other responsibilities, especially if you’ve been confronted by unexpected hardship like job loss or a medical emergency.
It will not usually be an option to charge off debt. Even if you persuade your creditor to write off the debt, you’ll still need to deal with debt collectors, and you’ll need to face up to the hassle of collection agencies, too.
You could even wind up owing the IRS, as well as impacting your credit score.
Take heart, though, because this is not an impossible situation. Many consumers have successfully negotiated and got back on track after suffering what seemed like insurmountable debt.