Credit Card Debt Negotiation

When most people think about their difficult debt situation, they don’t immediately think about the many ways out. Because of the nature of debt, most folks start thinking about the devastating consequences well before they ever begin to brainstorm the solutions. The fact of the matter is that there are some ways to get out of debt and those people who are willing to focus their efforts more on these solutions will ultimately have an easier time. So what is the best way to get yourself out of debt when the walls seem to be caving in? Some might say that negotiating through the settlement process is right up there at the top.

The credit card companies have become more open to this kind of deals, as they have to choose between being paid a percentage of what they had to be and not being paid at all. Of course, they will try to negotiate for a sum as large as possible, but usually settlement companies manage to reduce their customer’s debt down to 40-60% of what it initially was. It is a convenient deal for all parts involved: in less than one year, the customer gets right of debt, together with the annoying phone calls from the debt collectors; the settlement company gets a certain fee, usually a percentage of what they help the customer save in the settlement process; the credit card company gets a part of their money back, in a shorter timeframe, which is better than waiting for the customer to fill bankruptcy.

This is how the system works. If a credit card user files for bankruptcy he gets legal protection. His debt is cleared by appointing an official to take charge of your assets. The assets are auctioned and converted into liquid cash. Thereafter the creditors are paid. In some cases the creditors may not be paid at all. So the credit card company stands a big risk in case of bankruptcy. However they can recover some money if they decide to go in for a Debt Negotiation. This debt settlement process can help them recover some money at least.

Why is debt settlement a good idea?

The best way to get out of debt is to do it quickly. The quicker you eliminate your past due accounts, the quicker your credit score will go up and then you can get about the business of restoring your financial future. That is why toiling away with minimum payments is just a bad idea in almost every case. With debt settlement, you are putting an offer out there and you are paying off the debt in full with one payment only. This takes all of the pressure off of you and it gives you a chance to breathe a little bit without having to worry about collection calls and things of that nature

With all debt negotiation, get it in writing. Phone calls aren’t enough. Always get a copy of your agreement in writing. Correspond with your credit card company through registered mail, so that you have a record of everything sent and received. Credit card companies are not always trustworthy, and you might have to provide evidence of the settlement if it ever comes down to it.

When you approach the credit card company to negotiate a settlement, your best chance for success will be to have a lump sum equal to about half the balance available. Very few credit card companies will accept payment terms in negotiated settlement. At our law firm, we generally advise against raiding a retirement plan to come up with the lump sum since retirement money is usually considered an “exempt” asset in a bankruptcy and not reachable by any creditors.

What to Negotiate

In a credit card debt negotiation, you should ask your creditors certain things in order to lower your debt. You can ask your creditors to reduce the interest rates by at least 2% if you are making the payments on time. Even if you are delayed in making the payments, you can negotiate a reduction in the interest rate. You can ask your creditors to waive charges for making late payments. You can negotiate with your creditors to set up a manageable repayment plan. Most companies will accept a change in plan if you are not making payments on time. If you choose the lump sum payment option, you can negotiate up to a 25% reduction in total debt. Once you have successfully done your credit card debt negotiation, you should get the agreement in writing. You are more likely to be able to get a better deal to repay your debt in case your enrollment for the program is caused by factors that are beyond your control, such as medical issues, loss of job and divorce.

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