Credit Card Debt Settlement

You may want to try credit card debt settlement as a strategy to reduce excessive debt when you are at a point where you unable to meet your payment obligations now or in the foreseeable future. Debt settlement is a negotiation with individual credit card companies. You talk to a collections department representative and ask for a reduction in the total amount you owe.

However, be aware that a debt settlement can have an adverse affect on your credit score. It has the same negative impact as a bankruptcy, so use this approach after you have tried other options.

For example, you may want to visit a certified credit counselor before you attempt to negotiate a settlement. The counselor will help you create a re-payment plan that may include debt consolidation, at a lower interest or lower monthy payment.

You can find a qualified credit counselor by visiting the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. The counseling session should be free or low cost. Your credit score will not be affected.

There are companies that negotiate debt settlements for you for a fee, but be careful. Many of these companies may mislead you. Ask your credit counselor for a referral if you want to have someone else negotiate for you.

Here is how to make the call yourself to your creditor in order to ask for a credit card debt settlement:

Preparation

As you get ready for to discuss credit card debt settlement, you will need:

Your current bill or statement
Any letters from the credit card company offering to settle or make changes to your account
An idea of what you want to pay (a lump-sum payment or monthly payment)

Otherwise, suggest a settlement that would be about 30 to 40 percent less than the total amount due. For example, if your credit card balance is $25,000, you might offer to pay $15,000 on the bill, if you can manage it. That would be 40 percent off the total amount due.

Making the Call

As you make the call, be aware that your credit card company is in business to make money. So don't expect the collection department to offer or agree to give you a settlement right away.

When you explain that you want to negotiate a settlement on your balance due, the representative will likely begin by asking you questions and verifying your information.

Then, he or she will talk with you and try to get you to pay the full amount.

So, here's what you should do.

Again, politely say you are seeking a credit card debt settlement. You should not raise your voice or become emotional.
You want to keep records while you are talking. Make notes. Record the date, time, and the name of anyone you speak with. You might need this later.
If you reach an agreement, ask for confirmation in writing. Ask the representative to address any settlement amounts, including monthly payments or lump sum agreement, in the document you receive.
If the customer service person refuses to send a letter, ask to speak to a manager.
If you accept a settlement that the company offers and a letter has aready been mailed to you, then you may not need another. However, if you have negotiated any change in terms, you should ask for confirmation in writing.
Next, ask that the creditor delete your account from your credit report after you have paid off the debt. If the company does not remove it, it will remain on your credit record for seven years.

If You "Hit a Wall"...

If the person you are speaking with will not work out a credit card debt settlement, or is unreasonable, then:

You may ask to speak to a manager, superior, or other person in charge. You may have to explain your whole situation again, but these people should want to help you.
If that is not satisfactory, or no manager is available, end the call. Be courteous and do not use bad language or otherwise do anything to make yourself look bad. Remember the call may be recorded.
After you end the call, you may want to write a letter to the president of the company. Explain your circumstances and make your offer to pay your debt. Be specific about dollar amounts and dates you will pay.

If you still do not receive a settlement offer that you can live with, your best move may be to wait. The company may send you a settlement offer in the next few weeks.

Pay the Debt

If your negotiations are successful, then it is time to pay up. You do not have to have the payment automatically debited from your account. You can make the payment online or over the phone. If your creditor insists on a bank account number, ask for a manager.

It is important that you make your payments as agreed. If you miss a payment, your credit card debt settlement may be recalled.

Credit Card Debt Settlement

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