The ways credit card debt settlement works

 

 

There are two ways to settle the credit card debt. The first one is to turn to the credit card settlement company, while the other one is to use your own negotiation skills and solve the problem yourself. It’s now really wise to use the service of the credit card debt settlement companies, since they usually collect the dents for months before making an offer to the creditor. Sometimes they aren’t making an offer at all. At the same time you keep receiving the calls from your creditors or collectors and spoiling the credit history. Negotiating by your own you will surely get better and faster results.

Credit Card Debt Settlement Payment Amount

Before going for the negotiation you shall decide how much you will be able to pay. The debt settlement for credit cards in USA can be done from 10% and up to 60% of the balance; this depends on the age of the debt and of course of the creditor policy. Not many creditors are ready to satisfy the debt in case you have the delinquent account.

Lump-Sum or Multiple Payments?

There are two general ways of payment: the single lump-sum payment or the series of payments. The creditors accept the lump-sum or a few payments (like 2 or 3) more willingly than the payments stretched over several months. That is why it’s better for you to gather the significant sun you’re ready to pay as the lump-sum and offer it to the creditor. It is wise to offer lesser sum then you owe, so you can wiggle a little in case the creditor wants to negotiate.

Negotiating a Credit Card Debt Settlement

Once you’ve checked out what you have to offer, you can call the credit card company and contact the manager in loss mitigation or any similar department. The first person you contact is usually not authorized to make any decisions about the credit card settlement. They will most likely tell you “no” instead of taking the close look on the problem.

Write down the name and the extension of the person you talked to and the phone number you called. Sign the date and the time of the call as well as the outcome. Do not give up, make more calls in some days, reach different people and you will definitely get the positive results.

Credit Card Debt Settlement Watchouts

If your credit card is not closed yet, it will most likely be closed after you pay the debt. If it’s still active, the credit limit will be reduces or eliminated totally right after the creditor realizes you’re not going to pay off the debt in full.

For credit card settlement you usually need to have a few months behind on your card payments. This meant your credit history will be spoiled drastically to this moment. So consider this as an easy outcome since it could have been worse if you’re late for more than one single credit card.

Do not forget the taxes the government requires you to pay on the cancelled amount of the debt. The IRS counts this amount as your income, so you will have to pay the taxes.

The final steps

The final settlement of your credit card debt should be done in written form. You can either draft the final agreement or ask the company to send you an agreement. Make sure both you and the credit card company representative signed the agreement. Only after this you can make the first payment.