When you are drowning in debt it sometimes feels like there is no solution to your problems. Do not despair. You may find that your lenders have a policy of credit card debt forgiveness.

What does this mean? When you've a credit facility in place, you'll be obliged a specified sum of money made up of what you originally borrowed or spent, interest and other expenses. If you fall behind in your contractual payments, the company will normally charge you a late payment charge. They may even increase the interset rate you're paying. The effect is that you can discover your debts rising at a very rapid rate.

Some companies will accept a lower amount than you have a loan from in settlement of the account. So if your declaration shows an outstanding balance of $6,000, they may allow you pay $4,500 and close the account without taking any further step to claim the balance. If you do negotiate a settlement like this, you have to ask the company to confirm in writing that they're accepting it on a "full and final" basis and that they will not try to to claim any more money in relation to this debt in the future.

You do have to be alert that if they accept a lesser amount and the difference between what you owed and what you paid was $600 or more, you should declare the figure on your tax return. You may be accountable to tax on this figure as the IRS may treat it as extra income. If they do or not will depend on your personal situation, your earnings, deductions and overall economic situation.

You also should know that if your lenders accept reduced amounts, your credit record may be adversely affected. This can make it very hard for you to obtain new borrowing facilities in the future.

So before you take any step you must ensure that credit card debt forgiveness is the right way for you. It might at first seem like the easy way out but things aren't always as they first appear. It appears obvious but the best way to get out of debt is to attempt to raise the cash to pay back your debts in full either by selling assets or working extra hours. This isn't always possible.

It is imperative that you compile an economic budget which proves that you can afford to pay any settlement figures offered while simultaneously ensuring that you are not swopping a debt for a tax bill and a damaged credit rating!

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