Can I Negotiate Credit Card Debt Settlement On My Own
Yes, you can, but that doesn’t mean it’s the best idea. If you are an expert negotiator with knowledge of how debt settlement works and loads of time and patience, you can contact your creditors directly, one-by-one, and obtain written agreements covering all the legal terms of your settlement deal. Or you can work with a trusted debt settlement company like ClearOne Advantage and let it do all the work on your behalf.
A debt settlement company has more clout than an individual debtor, not to mention more experience, so they can negotiate from a better position than individual debtors.
You May Face Legal Action From Your Creditors
This is another potential byproduct of the fact that your creditors arent looped in on this type of settlement agreement early in the process as they are with a consumer proposal.
If you are not making the required payments on your debts or communicating with collectors, then they may decide to take you to court. You could face lawsuits as creditors and collectors attempt to try and force you to pay.
In court, collectors and creditors could get judgments that lead to wage garnishment and liens on a property you own. Something like wage garnishment will make it even more difficult to get a creditor to settle because they can garnish your wages to recoup everything they are owed.
By contrast, entering a consumer proposal provides an automatic stay of proceedings. This prevents collectors and creditors from taking you to court. It also stops wage garnishment orders that are already in place. Thus, you have protection from legal actions when you use a consumer proposal that you dont enjoy with a debt settlement program.
Getting Your Own Debt Defense Attorney
There is a cottage industry of consumer attorneys who have been having good success in defending people against debt buyer lawsuits. They are succeeding by raising challenges to the claims made by the debt buyer and the collection attorney. It seems their claims cannot be easily substantiated by the excel spread sheet they purchased from the original creditor or another debt buyer. There is a whole lot more to it than that, but thats detail that you can discuss with a creditor defense attorney.
Hiring an attorney to defend you against a credit card lawsuit costs money. You will have to weigh that cost against what it may cost to settle the account. The smaller the balance you are being sued for, under say $2500.00, the less sense it may make to defend the suit from a pure economic basis. Also, many attorneys who are not familiar with debt buyer lawsuits will just tell you pay the bill, or I can settle it, or get payments set up for you. Well, you or I can do that too. Sometimes, what you really need, is an attorney already familiar with defending against debt collection lawsuits, and there just arent that many of them out there.
If your financial situation has deteriorated to a place where you are being sued for unpaid debt, and you have multiple debts that you are unable to pay, it may be time to consider bankruptcy as an option to manage the situation, and even get a fresh start in a chapter 7.
Not sure where to start? Click on the big blue Get Debt Help button.
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Getting A Lawyer For Your Court Summons
So, when should you even get a lawyer for your court summons?
If you really have a lawsuit on your hands, then youve often reached the last effort of the debt collection process.
On the other hand, some credit card companies can decide to give up on their efforts and forward your account to a legitimate collection agency.
Once it reaches there, your account will be viewed by debt collectors that will start contacting you as soon as they can.
The craziest part is that your account can potentially be sold over and over again to different collection agencies.
And if its never taken care of, youll be involved in a lawsuit before you know it.
Dont want this to happen to you?
The answer is simple make sure that you respond to your lawsuit request.
Because if you miss your day in court, the odds will automatically be stacked against you, resulting in you paying the maximum amount.
For the uninitiated, credit card debt is unsecured, which means that you dont need to have any collateral like a car or a home to be approved for one.
That means that your creditor wont have that many options when its time to collect their debts.
Offer A Lump Sum Payment
When negotiating a payment amount, only offer a lump sum rather than regular payments. The debt collector may try to tack on fees and interest that will make your amount owed higher than what you agreed upon.
If you dont have enough cash on hand to make a payment or at least a partial payment, you will need to start saving up for one. You can also try to negotiate a payment plan with them.
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What Exactly Should You Say To Your Credit Card Company
If the thought of negotiation with your credit card company is intimidating, dont worry there are scripts you can use for reference. If you know what to say ahead of time, youre more likely to be persuasive and come to an agreement.
Ask a customer service representative to connect you to the department that oversees debt settlement or hardship.
If you want a lower interest rate, Dunn suggests saying something along the lines of the example below.
Hello, my name is ____ and my account number is _____. Ive been reviewing my finances and I have come across some other companies offering lower interest rates . Ive been a loyal customer, so I wanted to reach out to you first to see if you can help reduce my interest rate.
NOTE: You could also utilize a financial hardship typescript with an interest rate reduction .
If you want to settle your debt, Dunn recommends saying the following:
Its important to be patient, persistent, and careful when you decide to negotiate, Black says. Each creditor is different, so dont let one poor experience discourage you from negotiating. If your credit card company isnt willing to work with you, it may be time to get help from an outside source like a credit counseling agency.
Be proactive and talk to your card issuers before theres a problem, because they realize people are going through difficult times and theyre more willing to offer you solutions than they maybe have been in the past, Black says.
Remember That The Other Side Is Motivated To Settle
If youâre at a point where your credit card company is threatening to file a lawsuit for nonpayment, they probably recognize the odds of getting payment in full are fairly low. Going to court would only increase their expenses.
These companies recognize that agreeing to a settlement earlier, rather than later, can save them a lot of time, expense, and headache. Most would rather get some of the money you owe them, than face a long, drawn-out court battle where they might get nothing. Itâs much cheaper to have a few phone calls and move on to the next person.
Credit card debt, in particular, is non-priority, unsecured debt. This means that, if you end up filing bankruptcy, they will get paid last, with whatever is left over after you pay back priority debts, like back taxes and child support, and secured loans, like your mortgage and car.
For these reasons, the other side will probably be motivated to settle. After all, collection agencies would rather get a piece of the cake than crumbs.
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What Is An Unbundled Service
When it comes to hiring a debt settlement attorney, you have the option of hiring them to handle everything involved in the negotiation process, or you can hire them to handle specific tasks throughout the process.
You may decide that you would prefer to handle the negotiations, but you would want the lawyer to handle a specific task, like drawing up the settlement proposal. That is called an unbundled service.
The lawyer would charge a fee only for the service they perform, and that fee will vary depending on the complexity of the task they handle.
Since you would be handling the negotiation, the unbundled service will cost less than hiring an attorney to handle the entire negotiation.
Should You Negotiate Credit Card Debt
When there’s no reasonable way to repay what you owe, negotiating credit card debt can be a good solution. But you should think carefully about whether there are any alternatives available. Go into debt negotiation with open eyes and an understanding of what will happen to your credit. Then you can make the most informed choice about what’s right for you.
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Refunding International Transaction Fees
Some credit card companies will refund international transaction fees charged when you use your card while traveling internationally. These fees can quickly add up, so if you forgot to check your policy and get a surprise on your next statement when you return home, call and see if they will waive those fees.
Balance Transfer Credit Cards
A balance transfer means moving burdensome balances to low-interest or interest-free credit cards. Credit card companies typically require you to have a credit score of around 700, so this might not be the debt relief solution for you if your credit is struggling. Plus, a transfer fee of around two to three percent usually applies.
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How To Get Credit Card Debt Relief In Canada
If youve been using your credit cards as a financial lifeline, its now catching up with you and you want to know how to get credit card debt relief, here are Canadian options, plans, programs, solutions, and advice in short, straight answers.
When your credit card debt is so high that it doesnt feel like the minimum payments actually pay anything down, taking steps to get relief from your credit card debt will ease your money worries. With the right help and advice, you should be able to put together a plan to get your finances back on track and get out of debt.
Depending on your situation, you may be able to negotiate a better interest rate for yourself, but you may also need someone to negotiate relief from credit card debt for you. Heres how to do both.
Debt Settlement: How It Works And Risks You Face
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Debt settlement means a creditor has agreed to accept less than the amount you owe as full payment. It also means collectors cant continue to hound you for the money and you dont have to worry that you could get sued over the debt.
It sounds like a good deal, but debt settlement can be risky:
Debt settlement can destroy your credit.
Reaching a settlement can take a long time to accomplish often between two to four years.
It can be costly.
Even if you are successful at debt settlement, it can take years and you may discover you owe tax on any forgiven debt. And if you use a debt settlement company, youll pay fees. It is a last resort.
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Be Familiar With Your States Laws
If the debt collector attempts to charge you fees or interest, check your state usury laws. These laws put limits on how much interest a creditor may charge.
Make sure the debt collector is in line with state law. Otherwise, its time to let them know that youre aware of your rights and that the agency is violating them.
Preparing Yourself For Debt Settlement
Youll start the process by putting away money in preparation for debt negotiations. Your settlement company will tell you the total amount you need to save in advance. Youll make a monthly payment into a dedicated bank account for several months or years, depending on your monthly budget and anticipated amount to be resolved. The account will be in your name and should be insured by the Federal Deposit Insurance Corporation . It will be overseen by a trustee or account administrator.
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Debt Relief Options For Insolvency
Depending on your circumstances and the types of debts you have, you may need legal help to resolve your debt problems. Two options are available to all Canadians, a Consumer Proposal and Bankruptcy.
Once it is agreed to, a consumer proposal is a legal agreement between you and your creditors to settle your debts. The process in Canada is governed by the Bankruptcy & Insolvency Act and allows you to repay a portion of your unsecured debts over a period of no more than 5 years.
A lot of debt relief companies and agencies have heavily advertised and over promoted the benefits of consumer proposals vs bankruptcy you can learn more about the differences between the two here.
Bankruptcy is a legal process that someone can enter into when they are not able to pay their debts, and they do not have any assets they can sell to pay their creditors. Someone in this position is said to be insolvent. The legal process for bankruptcy in Canada is governed by the Bankruptcy & Insolvency Act.
Declaring Bankruptcy or filing a Consumer Proposal does not always provide debt relief from all of your debts. Before you choose an extreme solution to deal with your debts, make sure that you have considered all of your options. Even if you think that you are completely insolvent, you should look at alternatives to bankruptcy first to make sure that you have considered all of your options. A certified credit counsellor can help you do this.
What Is The Credit Card Settlement Process
The following is the process to initiate credit card settlements.
Visit the issuer or a debt settlement agency
Explain your inability to make payments via a credit card settlement letter and mention that youre open to negotiating other repayment terms
Offer a lump sum or inform the issuer of your plans to file for bankruptcy
Following these steps, the issuer may either deny or approve a settlement. If approved, the issuer may offer a repayment plan based on your current income, or grant you a temporary forbearance agreement.Additional Read:
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Myth No : If I Dont Settle The Debt Stays Forever
|DEBT SETTLEMENT REMINDERS|
The truth: There is a statute of limitations for collecting on debt.
Many collectors, whether the issuer or a person or entity who has purchased old credit card debt, attempt to collect debt that is often time-barred meaning the statute of limitations has run out, Ayers says.
The statute of limitations laws vary from state to state, but if a debtor has not made a payment on an account for enough years, the debt is no longer enforceable in court.
Some companies buy old and time-barred credit card debt and then send out letters trying to collect or, without actually trying to collect, offer to settle for, say, 10 percent, Ayers says.
Some courts have ruled that these non-collection letters do not violate the Fair Debt Collection Practices Act, but the United States Court of Appeals for the 5th Circuit has ruled that some actions can violate the FDCPA, he says.
Other Debt Relief Options
Working with a debt settlement company is just one option for dealing with your debt. You also could: negotiate directly with your credit card company, work with a credit counselor, or consider bankruptcy.
Talk with your credit card company, even if you have been turned down before. Rather than pay a company to talk to your creditor on your behalf, remember that you can do it yourself for free. You can find the telephone number on your card or your statement. Be persistent and polite. Keep good records of your debts, so that when you do reach the credit card company, you can explain your situation. Your goal is to work out a modified payment plan that reduces your payments to a level you can manage.
If you don’t pay on your debt for 180 days, your creditor will write your debt off as a loss your credit score will take a big hit, and you still will owe the debt. Creditors often are willing to negotiate with you even after they write your debt off as a loss.
Contact a credit counselor. Reputable can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
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