Monday, August 8, 2022

Can You Settle Debt With Credit Card Companies

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What Percentage To Settle Credit Card Debt

Can You Settle Credit Card Debt If You Are Still Current?

Offer a low amount when settling a debt. Start by offering 10%-20% of the balance.

Debt collection companies only pay between 5%-20% of the total balance when purchasing a credit card account, so offer them no more than 20% when sending your initial settlement offer. If the debt collection company paid 10-cents on the dollar to purchase a debt, by settling at 20% of the balance theyve doubled their money.

Even if the debt collection company rejects your initial offer, at least youve set the anchor LOW. Setting the anchor low is a negotiating strategy that you want to use when trying to settle a debt.

After you drop an anchor off a boat, and the current tries to pull your boat in the opposite direction, the anchor will keep your boat close to where the anchor resides.

Suppose that your creditor offers you a 60% settlement on a credit card debt, now that anchor is set much higher than if you were to make the initial offer at 20%. The anchor in negotiating can be the original offer that sets off secondary, and future proposals. The end result, where you settle at and both parties mutually agree, is going to be somewhere around the anchor.

Most of the time, Golden Financials debt negotiators will start negotiations by offering 10%-20% of the balance, but then end up settling a debt at 30%-45% of the total balance owed.

Make sense?

Call Your Credit Card Company

Consumers can use a settlement company , or they can do it on their own, says Linda Jacob, a financial counselor with Consumer Credit of Des Moines. Theres no need to pay a company to settle for you. Save the fees and do the work yourself.

If youve decided to negotiate on your own behalf after weighing your options, its time to call your credit card company. First, ask for the department that handles debt settlements or collections. You may want to prepare a script beforehand, so that you know exactly how to frame your request.

Clearly and politely explain your financial situation and ask for exactly what you want. The initial answer may be no, but that doesnt mean you cant be persistent even if it takes multiple phone calls.

Document every conversation you have. Write down the names and job titles of anyone you speak to so you can reference them in follow-up calls if necessary.

You cant be afraid to ask for a supervisor or the supervisors supervisor, Sullivan says. The higher you go, the more likely you are to find someone who is willing to make a concession.

Debt Settlement Company Disclosure Requirements

Debt settlement companies are required to make certain disclosures to customers knowing what these are may help you decide if debt settlement is the right option for you.

These disclosures have to be made before you sign up with the company.

They are:

  • Debt settlement companies must explain price and terms, including fees and any conditions on services.
  • The company must tell you how many months or years it will take before the company makes a settlement offer to each of your creditors.
  • The company must tell you how much money, or the percentage of each outstanding debt, you must save in an escrow account before it will make an offer to each creditor on your behalf.
  • If the company asks you to stop making payments to creditors, it must tell you the negative consequences, including how it affects your credit report and credit score possible lawsuits by creditors, collections action by them, and continued fees and interest accumulation that will increase what you owe.

The debt relief company also must tell you:

  • The money you save in escrow is yours, and you are entitled to the interest earned.
  • The account administrator is not affiliated with the debt relief provider and doesnt get referral fees.
  • You may withdraw your money any time without penalty.

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Enroll In A Debt Settlement Plan

This isnt the easiest process and it will hurt your credit scores, but it could be an alternative to bankruptcy if your situation warrants it. A debt settlement plan over a longer period of time will require you to negotiate an agreement with your creditors to pay back some of what you owe, either in installments or a lump sum. In general, a reasonable expectation is settling your debt for 50% less of what you owe if your account is five or more months late. For some, this could mean it could take a couple of years to settle all your debts.

Keep in mind that some credit card issuers are a little more flexible than others, says Bovee. He explains that in his experience helping people settle their credit card debt, Bank of America and Chase tend to be the easiest to work with. Citi, on the other hand, will probably want a larger settlement than some of the other companies. Discover and AmericanExpress tend to be fairly litigious, meaning they might sue you and take you to court, so its something to consider if youre deciding which bills to pay off or settle first.

Myth No : I Have To Pay Upfront For Debt Settlement And The Settlement Company Controls My Money

Can You Settle Debt With Credit Card Companies / 6 Reasons You Deserve ...

The truth: Not anymore.

Debt settlement companies that market their services are banned from collecting advance fees from consumers before settling or reducing a consumers credit card or other unsecured debt, according to a Federal Trade Commission rule that took effect in October 2010.

The rule also specifies that the consumers money set aside to pay debts be maintained in an account at an insured financial institution that the consumer owns the funds and any interest accrued that the debt settlement company does not own, control or have any affiliation with the company administering the account and that the provider does not exchange any referral fees with the company administering the account.

Also, consumers can withdraw from the debt relief service at any time without penalty and receive all unearned provider fees and savings within seven business days.

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How To Settle Credit Card Debt When A Lawsuit Has Been Filed

When considering a service like debt settlement, there can be a fear of getting sued by your creditors.

The truth is in certain states, financial creditors are allowed to sue you over credit card debt.

Now, that doesnt always happen and every persons financial situation can vary based on the creditors.

However, if you do owe any significant amount of debt you still have a chance that your creditors could sue you.

Were you sued for credit card debt?

You still have options.

Heres how to settle credit card debt when a lawsuit has been filed, even if you cant pay!

Settlement Works Best If Your Debts Are Already With Third

Although the average settlement amounts to 48% of what you originally owed, that number is a bit skewed. If your debts are still with the original creditor, settlement amounts tend to be much higher. You can end up paying up to 80% of what you owe if the debt is still with the original creditor.

Settlements tend to be higher with original creditors because they want to recoup as much of their loss as possible. But with a debt collector, they purchased your debt from the original creditor for a small percentage of what you actually owed. So essentially, they can accept a lower settlement amount and still make a profit.

The other reason you want most of your debts to be in collections is to avoid additional credit damage. As we explained above, debt settlement companies will advise you to stop making payments. If your debts are to charge-off status yet, this means youre facing additional credit damage from a fresh round of missed payments.

On the other hand, if your debts are already in collections, the credit damage is already done. You want to get collection debts discharged as quickly as possible, so you can get to recovery and rebuilding your credit faster.

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Negotiate A Workout Agreement

You may be eligible for a workout agreement with a bank credit card. This is when the bank eliminates or simply lowers your interest rate and reduces your monthly payment. In conjunction with this, you may ask the bank to forgive late fees or other penalties as well as reduce your balance. Under this plan, your credit line wont be canceled as it will with a hardship plan, but it may be cut off, so you wont be able to continue to use that card. This loss of available credit may impact your credit score because it will raise your credit utilization ratio .

All About Your Credit Card Lawsuit Settlement

If Credit Card Companies Sue You During Debt Settlement

Lets face it when it comes to debt, there can be consequences involved when you cant afford to make your monthly payment.

As a matter of fact, your creditor can actually file a anytime you default on your debt.

The good news is, you may have rights and you may be able to receive legal representation depending on which debt settlementcompany you are with, which could be a game changer for you.

Concerned about going to court for credit card debt?

We have your back.

First things first, if you are receiving creditor calls it is important to send them your debt settlement companies contact number to have them handle those calls so you dont have to.

When a creditor calls your debt settlement company, they can pay close attention to your creditors complaint.

And depending on how much you have saved up in your dedicated monthly savings account, they may be able to negotiate a settlement for you.

Another word of advice is to be sure that the credit card companys lawsuit is 100 percent accurate.

Thats because your credit account can sometimes be sold to a special debt collection agency.

Either way, you want to make sure they arent overstating the amount that you owe them.

If you do receive a lawsuit for your outstanding debts you could hire an attorney for legal help or have your debt settlement company handle your lawsuit if they offer that option to you.

Although no one wants to take on a big bank in court, you do have certain rights to your assets too.

Youre not alone.

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Option : Try A Debt Management Program Instead

Depending on your amount of debt, a debt management program may be a better choice for your financial situation. Debt management programs help you make a budget and pay off your debt in full. This differs from a settlement, which means you are paying less than you owe. With debt management, you repay the balance you owe in full, but reduce or eliminate interest charges. Since you repay the principal in full, you can avoid the credit damage caused by settlement.

Next Steps If You Want To Go Ahead With Debt Settlement

Do your research. The Federal Trade Commission helps protect consumers by trying to prevent unfair business practices in the marketplace. The FTC has useful information on debt settlement thats worth reading as you consider debt settlement options.

Pick a reputable debt settlement service provider. Before you enroll in any debt settlement program, the Consumer Financial Protection Bureau recommends contacting your state attorney general and local consumer protection agency to check whether there are any complaints on file. The state attorney generals office can also check if the company is required to be licensed and whether it meets your states requirements.

The Better Business Bureau has consumer reviews of businesses that could help you as you research a debt settlement service provider.

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    If You’re In A Temporary Bind

    Considering that the process of debt settlement is a last resort, first consider credit cards that offer no interest and help you pay off your debt. Most balance transfer cards require applicants to have a good credit score to qualify, but they can help you pay off your principal without worrying about interest charges. Just make sure you pay off your balance before the intro period ends. Some of our favorite zero-interest credit cards that offer balance transfers include the Citi Simplicity® Card, the U.S. Bank Visa® Platinum Card and the Wells Fargo Platinum card.

    Dangers & Downsides To Settling Debt

    Can You Pay Off 1 Credit Card With Another? It

    There are potential downsides and risks related to settling a debt. A primary benefit of using a debt settlement company is that they will adequately advise you on how to deal with each potential downside, improving the probability of success.

  • Creditors can serve you with a summons. How to deal with it: Try to settle the summons before the court date or an attorney can fight it. Statistically, 90+% of are flawed in one way or another and can be dismissed if adequately disputed. Whatever you do, dont just ignore a summons and skip your court date. That is what your creditors want you to do. If you dont have a settlement company or attorney representing you, attend your court date and bring proof of your income, expenses and any evidence of your financial hardship to show the judge. Judges are usually lenient towards the debtor, especially if you have a real financial hardship. Also, review the paperwork before your court date to check for inaccuracies of any kind. These inaccuracies can be shown to the judge and can aid in getting the summons dismissed.
  • You could owe taxes on the amount you save in a settlement. The IRS considers the amount of debt that gets forgiven to be taxable income. How to deal with it: File IRS Form #982 to get the debt reduction amount discharged. IRS Form #982 is used to illustrate if a person is insolvent.
  • Paul Paquin CEO, Author, and President at Golden Financial Services.
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    How To Get Extra Help With Debt

    Debt payoff can seem overwhelming and complicated, but there are many resources that can guide you. A good place to start is, again, a nonprofit credit counseling agency, where you can receive a free initial consultation and get help with budgeting and debt reduction strategies. If you’re not only dealing with debt collectors but you’re also involved in a lawsuit related to your debt, a lawyer experienced with consumer debt issues is the best person to work with you can find free local legal assistance through the Legal Services Corporation’s search tool.

    If you’re feeling burdened by debt and you’re unable to pay for basic needs, call 211 to connect with services in your area that may offer rent, mortgage, utility or medical bill assistance. Other types of financial assistance may be available from the federal or state government, and you can take a look at the programs you qualify for at Benefits.gov.

    Don’t forget to engage with organizations that work with specific populations you might be a part of, such as Military OneSource, which serves military families and offers financial and legal resources.

    Debt Settlement Is A Service Offered By Third

    Although it may be tempting to use a debt settlement service to reduce your debt, its important to keep in mind that you could end up deeper in debt or with a negative impact to your credit.

    Heres some key information you should know about how debt settlement works, its pros and cons, and how it could affect your credit.

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    How To Start Paying Off Debt

    You have many options to pay off debt that isn’t already in collections. Start out by getting clear on how much you owe and how much you’re paying in interest on each debt. If you have the money to pay extra on your accounts to reduce their balances, try paying down the debts with the highest interest rates first you can also pay off the smallest debts first if that will help keep you motivated to pay off your debts.

    If you’d prefer to simplify your debts and potentially reduce their interest rates, look into a debt consolidation loan, which lets you combine multiple accounts into one and make a single set monthly payment to pay them off. A balance transfer credit card may also be an option if you qualify. These cards allow you to consolidate credit card debt with a single card and pay it off at 0% interest for a period of time.

    Debt already in collections requires specific payoff strategies. First, contact the lender and explore your options for making a lump-sum payment to settle the debt or creating a payment plan to pay off the debt. If the creditor has sued you to get back the amount owed, it’s a wise choice to hire a lawyer to help. A nonprofit credit counselor can also give you advice on the best way to handle a debt in collections, and on which payoff strategies make the most sense for your finances.

    Negotiating Debt: Know Your Credit Card Settlement Laws

    How To Settle Credit Card Debt Yourself

    Credit card debt can be overwhelmingespecially if funds are tight. Often, the first option people think of is to settle debt through debt settlement services or debt relief providers. However, we suggest consulting a professional, like an attorney, who knows the ins and outs of credit card settlement laws.

    A professional debt attorney can be an ally who protects you through the process of settling debts with creditors. Compared to debt settlement services and non-profit credit counseling programs, lawyers are legal experts who are familiar with common unfair practices and can advocate for your rights and protections as a consumer.

    That said, you can try to negotiate with credit card companies on your own. While we dont recommend this route for everyone, here are the steps:

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