How to Settle Your Credit Card Debts

February 12, 2009 by  
Filed under Credit Card Debt, Debt

Credit card debt settlement is something you might be able to do if you have a list of credit card debts from failing to make payments per month.

Sometimes, if the company realizes from its records that you have no means of paying your credit card debts with interest due to the fact that you have not paid your credit card debts in a while, they may send you a discounted debt settlement instead.

A discounted debt settlement pertains to a written offer where you can pay only half of the debt and the rest will be written off. Normally, they will want the payment in one go, but if it turns out to be an insanely large amount, they may let you pay in a couple of installments.

The letter will usually come from an agency that collects debt. The original lender will probably sign over this debt to the debt collectors, or the agency may be working to get a percentage from your debts that they still hope to receive.

Some finance companies opt to offer debt settlements because they realize that you are in financial trouble. They might opt to take you to court in order to avail of the entire amount; but even if they do that, you could just declare bankruptcy, so they don’t.

The choice of the finance companies is to incur the cost of the court and possibly get nothing or offer you a debt settlement to get half, which is clearly a better deal for them compared to appearing in court.

Whether or not you should accept the debt settlement is up to various things.

First of all, you must be aware that accepting the debt settlement will negatively affect your credit score since you did not pay your full debt. It would be much better for your court record, f you are able to pay off the entire debt. However, if you could do so, you wouldn’t have received the debt settlement in the first place. Accepting the debt settlement is much better than going to court, though.

Secondly, you will need to find out how to make the payment that they need. Will you have to make other debts for a few months to do so? What consequences are there? Will you have to miss paying for rent and losing your home? Think long and hard about how you can come up with the money.

Thirdly, before accepting the debt settlement, it would be smart to try negotiating for an even lower one. Call them and say you cannot make the payment; you can only make 35%. This is worth trying since it can save you a lot of money.

During the call, find out the person’s name that you are speaking to. If they accept the offer, have them write it down and send you a new debt settlement before you actually pay. Then write a letter with your check stating that the agreed debt has been paid for and ask for acknowledgement that the debt is settled.

Make sure you know that if you decline the debt settlement, you will have to appear in court where the judge might make you pay the entire debt, plus extra costs.

If you accept the debt settlement, ensure you read even the smallest print in the offer to ensure this is a full debt settlement without any additional debt. This will ensure that they do not come after you in the future for more money.

When the debt has been paid, check if this has been noted on your credit record. If there is a mistake, have it corrected immediately and send out copies to all of your correspondences. Every time you agree to a debt settlement, also always remember to keep all of the paperwork.

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