Debt Forgiveness

• Credit card companies offer credit amnesty to settle accounts with credit card holders who are mired in debt. Several leading institutions in the credit industry, including Bank of America, American Express and the American Bankers Association, settle some debt accounts with credit card holders for less than the outstanding balances to get back some of the money owed to them. Credit amnesty through debt forgiveness is treated as taxable income by the Internal Revenue Service and can show up as a negative factor on your credit report.
  
  

Credit Counseling

• Credit counseling is an alternative to debt forgiveness for those who cannot reach an amnesty deal with their credit card providers. In-person credit counseling services can help individuals manage debt, create budgets and get training or at least educational materials that show them how to get themselves out of credit card debt. A credit counselor can enroll you in a debt management plan (DMP) program if your debt is very high or you're experiencing great difficulty in repaying your debts.
  
  

Debt Negotiation Programs

• Debt negotiation programs are private companies that collect monthly payments from people in debt and use that to pay off those people's creditors on their behalf. Many states have laws regarding how a debt negotiation program may legally operate. Debt negotiation programs can be expensive and are sometimes unreliable in making monthly payments, which can add to your debt through penalties and fines.
  
  

Scams

• The idea of credit card amnesty is so appealing to debtors that some unscrupulous businesses take advantage of them by advertising credit amnesty programs that end up doing more financial harm than good. Illinois Attorney General Lisa Madigan sued two Chicago-area car dealerships in 2008 over misleading customers with credit card debt to take on credit amnesty loans that were more than customers could handle. Other consumer reports indicate credit card amnesty is used as the bait in a "bait-and-switch" routine in which fees keep rising but amnesty allows the loan to go through regardless of poor credit. Before doing business with a company that promises credit card amnesty, contact the state's Attorney General's office, the Better Business Bureau and any local consumer protection agencies to assess the company's reliability.