How to Pay Credit Card Debt During the Pandemic – Experts say a debt settlement should be a last resort


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By Alina Machado • Published November 10, 2020 • Updated on November 10, 2020 at 7:04 pm

Elvira Maldonado may be employed, but she says the pandemic did not spare her finances.

“The major impact has been monetarily,” she said.

The long-time flight attendant says her seniority of 33 years with an airline has helped her avoid the furloughs that have hit the industry.

“But the hours were reduced,” she said. “The trips were not there or they were canceled.”

As a result, Elvira says she has seen her income drastically shrink in recent months.

Even though she has been able to pay her mortgage, Elvira says she asked her credit card companies for help.

“And two of them were very helpful,” she said.

A third company, she says, would only offer her a deferral of her monthly payments, while she continues to rack up more than $150 a month in interest rate charges.

“It’s a lot of money,” she said.

She says her offer to pay a portion of the balance up front, as a way to settle the debt, was denied.

“My biggest fear is that if they don’t come to an agreement for a settlement, that I may have to do bankruptcy,” she said. “And I really don’t want to do that.”

But according to Ted Rossman, an industry analyst for, a debt settlement should be a last resort.

“It’s very bad for your credit score,” Rossman said. “It’s actually almost as bad as bankruptcy. It could trim 100 points potentially off your score and that could last for many years.”

That’s why Rossman says if you’re struggling to pay your credit cards and have been unable to get relief on your own, a better option would be to reach out to a non-profit credit counseling agency for help.

“They can come up with a debt management plan, often lasting three to five years,” he said. “They can try to work within your income to make it affordable. They can negotiate on your behalf with the card company to try to get a lower interest rate.”

If you want to connect with a credit counseling agency, Rossman recommends going with one that is accredited by the National Foundation for Credit Counseling.

To learn more, click here:


Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

530 W Allegan Street, 7th Floor
Lansing, MI  48909-7720

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