Credit Card Debt Settlement to Reduce Debt

by on February 11, 2011

Credit card debt settlement is a procedure to pay less credit card debt than the actual amount. Though, it is not considered as a good option on the list of preferred debt solutions, but still it is a very effective way to avoid bankruptcy as it allows you to pay lesser amount.

Basis of Credit Card Debt Settlement

You can approach your credit card company for settlement either through a credit card debt settlement company or directly by yourself. You should try to avoid taking help of credit card debt settlement companies as they continue to collect payments from you for months before they actually make a settlement offer. At the same time, you will be continuously called for making the payment and your credit report will display negative payment marks. So you should better approach the credit card company on your own for rapid and convincing results.

Calculation of Debt Settlement Amount

Before cracking a settlement deal, you need to decide the payment amount that you are capable of paying off. This amount usually ranges in 10% to 60% of the total outstanding balance which depends on the creditor history and period of the debt. The older your debt, the lower will be the settlement amount.

Payment Modes

You can pay the settlement amount either in multiple instalments or in the form of a single lump-sum amount. Creditors like to settle on a lump sum or very few payments like 2 to 3. They hardly agree to receive the settlement amount in multiple payments for several months. Try to arrange the maximum amount that can be paid immediately and then offer that to creditors. Keep a room for negotiation by offering an amount lower than your actual limit.

How to Negotiate for a Credit Card Debt Settlement

After getting a credit card debt settlement offer, make a call to Credit Card Company and inform a manager or somebody in similar department regarding your intent. Customer service representatives are not having the power to take credit card debt settlement offers so they can’t give their consent for same even if they wanted it.

Keep a track of the names, phone numbers, and extensions of the persons you exchange thoughts with along with the date and time of the call and response. You may get variegated responses from different people and sometimes from same person so keep trying as a single call will not work wonders for you.

Things to be Taken Care of While Debt Settlement

Your credit card will be closed after the settlement if you are not paying the full balance. Settlement is made only if you have delayed the payments by few months but at the same time it leaves a worst effect on your credit score. Along with this, you will also have to pay taxes on cancelled debt.

Making The Final Deal

Make sure that you have received final credit card debt settlement agreement in writing before sending the payment. Moreover, agreement should have the signs of both you and somebody from your credit card company.

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